Transpower sees ‘increasing urgency’ for more power generation

Monday, 30 June 2025

Grid emergency notices such as these could become more common next year and from around 2032 if the sector doesn’t “lift the pace of investment”.

Electricity system operator Transpower says declining gas supplies mean there is an increasingly urgent need for new electricity generation to meet power demand over the coming decade.

While generators have been increasing investment, much of their intended increase in capacity has yet to be consented and there is risk that those projects could be “delayed, deferred or dropped”, it warned.

The concerns are set out in an annual document that attempts to assess the security of the country’s electricity supply, this year all the way through to 2034.

“New Zealand needs to continue to accelerate the speed at which planned investment is delivered if we are going to stay ahead of growing demand and provide the reliable and affordable electricity New Zealand depends on,” general manager of operations Chantelle Bramley said.

John Harbord, chairperson of the Major Electricity Users Group, which represents large industrial and commercial power users, has long argued that the generators are incentivised to keep the market on the “precipice of shortage”.

Energy Minister Simon Watts told The Post last week that Cabinet had yet to consider the findings of what is speculated to be a far-reaching study that he commissioned from British consultant Frontier Economics into the power market.

But Watts indicated decisions could flow from that by the end of September.

“Ministers are still working through the detail because of the broad scope of the review and the importance that it has in the context of the energy market.

Energy Minister Simon Watts says the Government is not here to “play around at the edges” addressing the cost and security of power supplies.

“We're going to spend appropriate time to do that. I expect decisions will happen in quarter-three of this year,” he said.

It was important the Government dealt with the “underlying root cause problem” that the energy market faced, he said.

“That's primarily what we've dealt with over the last few years around ‘dry years’ and the fact that we need thermal energy to keep the lights on,” he said.

“We're not here to just play around at the edges. We want fundamental changes to deal with the root cause issue of energy affordability and energy security.”

Transpower said its final assessment of security of supply published today was in tune with a draft report it released in May.

That indicated the risk of acute power shortages this winter year had declined, thanks in part to a drop in demand-growth that followed last year’s energy crunch, when some factories cut back production or closed.

But its modelling continues to suggest power firms could have too little generating capacity to meet demand next winter, considering only their existing capacity and power plant developments that were set in stone.

A further crunch was possible around 2032, it cautioned.

“The increased electrification of the economy requires investment in new generation, batteries, and demand response to come online at a rapid rate to ensure the energy and capacity margins are above the standards,” it said.

“Delay in these new resources entering the market will put strain on existing resources, impacting the ability to manage energy and capacity challenges and the affordability of electricity supply for consumers.”

Fonterra said in a submission to Transpower while there were “multiple factors at play, including the decline in natural gas reserves”, the market was not responding adequately through the development of sufficient new generation.

The Major Electricity Users Group said Transpower’s draft report in May had shown “any substantial increase in electricity demand could put the electricity system under greater stress”.

Meridian Energy, the country’s largest power generator, told Transpower earlier this month that the market was “continuing to deliver significant investment”.

“We agree there is a need for considerable investment to enable electrification of the economy and ensure future demand needs are met.

“Market participants are already responding to these signals with significant new investment commissioned and a substantial pipeline of new projects under development.” it said.