The energy shortage is forcing manufacturers to cut production to keep power flowing to households. Will more renewable electricity fix the problem for the future?
Opinion by Simon Bridges
Simon Bridges is CEO of the Auckland Business Chamber and a former Minister of Energy and Resources.
THREE KEY FACTS
Energy prices soared during winter amid record-low hydro-lake levels, a lack of wind and sun, and what was described by the Government as an inadequate supply of natural gas.
Many people reading this will assume that the energy crisis of winter 2024 – where prices soared on the back of low hydro-lake levels and poor solar and wind generation, and three North Island mills were forced to close their doors permanently – is a thing ofthe past.
After all, prices have fallen back to reasonable levels, thanks to easing demand as we move into the warmer months and the hydro lakes now being relatively full and energy issues have largely been out of the public spotlight.
But make no mistake: the problems with the energy sector that were laid bare earlier this year have in no way been resolved.
We will continue to experience periodic crises – and businesses will continue going to the wall – until far-reaching changes are made.
To put it simply, the sector is broken, with weak competition, levels of supply that fall well short of the needs of a growing nation, limited resilience, and prices that are unstable and all too often unaffordable.
I’d argue that energy is this country’s number one economic issue, and many in the business community share that view.
A recent survey of Auckland Business Chamber members highlighted the toll energy issues are taking:
Two-thirds of respondents said they have experienced a large or very large increase in energy costs over the past year
81% saw energy costs as a concern for their business
And 67% saw energy reform as a high or very high priority for the Government
In its current form, the energy sector is a constraint on – rather than an enabler of – New Zealand’s economic potential.
The absence of stable, affordable prices is forcing many larger industrial energy users to ration their consumption, and downsize their activities, instead of expanding their businesses, boosting national employment and GDP.
It is holding back the high-growth, high-value technology sectors that we all want to see, and the energy-intensive data centres that power them. It is an extra source of pressure on already strained household budgets.
Recently the United States elected its 45th and 47th President, Donald Trump. In New Zealand, there will be mixed views at best about him, and it’s fair to say many of his policies could be bad for our country.
On energy, however, he is absolutely correct: strong supply makes a country stronger. Energy is power in every sense of the word.
Contrast the US with Germany, where the lack of energy options and reliance on others (such as Russia) is fuelling negative growth and less business and innovation – the opposite of what anyone should want.
The economic case is simple.
To usher in stable, affordable prices, we need to incentivise investment in supply from all energy sources. This in turn requires an effectively operating market, unleashed from legacy market power, so that new entrants can compete.
With the possible exception of the four generator-retailers, the case for change is well understood across the sector. It’s time for sector leaders to speak with one voice.
Today the Auckland Business Chamber is joining the Northern Infrastructure Forum in hosting a gathering of around 70 key players in the sector, representing generators, lines operators, retailers, investors, and major users.
Record-low hydro-lake levels contributed to the country's winter energy crisis this year.
The focus is on the challenges and opportunities facing the upper North Island in particular, reflecting the fact that this part of the country accounts for the bulk of energy demand nationally, but is situated a long way from the principal sources of supply.
Attendees will hear from Associate Energy Minister Shane Jones, plus a panel of experts, and will work together to come up with solutions to four key questions:
Security of supply: In order for the sector to meet both the short- and long-term energy needs of New Zealand businesses and households, what actions are required?
Stewardship: There is currently a vacuum of leadership around the sector. How should that gap be filled? What are the roles of the public and private sectors?
Climate goals: What role does the sector need to play in assisting the country to meet 2050 climate goals, and to enable the de-carbonisation of the economy in general?
Market reform: How can and should market structures be changed to level the playing field, encourage competition, and keep prices affordable?
Based on the feedback from sector leaders, we will develop a comprehensive action plan. This will be shared with decision-makers, sector stakeholders, and the public following the event, and will serve as the basis for ongoing advocacy efforts.
As a country, we must not bury our heads in the sand and hope that our energy problems will fix themselves. The time for action is now.
