Government plans to use Health NZ, Defence, Corrections power demand to fuel new electricity investment
Wednesday, 25 February 2026
The Government hopes to leverage the buying power of Health New Zealand, the Defence Force and the Department of Corrections to encourage new investment in electricity generation, Energy Minister Simon Watts has announced.
Watts said the three agencies were the Government’s biggest power users and the goal would be to offer independent and new electricity suppliers the chance to secure long-term contracts to supply them with power.
“Locking in long-term supply will give developers the certainty they need to invest in new generation, while securing better value and price stability for taxpayers,” he said.
Law firm MinterEllisonRuddWatts said in 2023 that such “power purchase agreements” could play an important role in encouraging new renewable electricity generation, in particular if they gave lenders the confidence to lend money for new projects.
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The common challenge for customers or potential suppliers is often in securing the contracts they need to ensure power is always available at the times customers need it, which typically involves buying cover from existing generators of hydro or thermal power.
The announcement came on the same day that that Meridian Energy joined Mercury, Genesis and Contact Energy in reporting a steep increase in its profits for the six months to the end of December.
John Harbord, chairperson of the Major Electricity Users Group, said some of its members, including NZ Steel, Amazon Web Services and Fonterra had entered into power purchase agreements.
It was positive the Government was following suit, he said.
“It gives potential new entrants another big customer from which they could potentially get a long-term contract, to underwrite investments.”
There was currently little appetite among MEUG’s members to enter into more such agreements because “there's not a lot of credible offers you get”, he said.
“More often than not they come from someone who wants to come in and build a solar farm or a wind farm. They may not always have a sufficient credit rating or the volume of electricity members need, and because it’s intermittent renewable, they can’t actually guarantee supply of electricity ‘24/7’.”
“But not everyone in central government works 24/7 so that’s, I think, less of a concern.”
The Government had also instructed officials to explore ways to make it easier for government agencies to install solar generation on their own properties, Watts said.
A streamlined procurement model could allow solar installations to be brought online faster, reducing peak demand pressures on the grid, he said.