Confidence across New Zealand’s manufacturing sector has been severely dented by the current energy crisis and recent plant closures in Auckland and central north island.

The Minister for Energy Simeon Brown has moved quickly to set up an energy competition task force, committing to setting up import facilities for LNG, and freeing up lines companies to own more generation.  The critical next step is to deliver the long-awaited strategy that will secure New Zealand’s energy future.

Both manufacturers and overseas investors need confidence to continue to invest in local manufacturing and to be confident that the electricity market will deliver globally competitive electricity.  A failure to do so will see more New Zealand manufacturing  moving to more competitive energy markets.

The current electricity/energy crisis appears to have its origins in New Zealand doing what it always does, (since last reforms of the late 1990’s) and expecting the market to provide.  Circumstances have changed radically in the past two decades – natural gas supply has declined considerably, government has committed to carbon zero by 2050, with population growth at 1% per anum and new electricity consumers in data centres and EV’s never envisaged at the turn of the century.

Promises promises

MBIE, the ministry responsible for the energy markets regulatory system provided this advice to the incoming Minister of Energy in 2023:

“Energy is fundamental to economic activity and the conduct of much of our daily lives. New Zealanders and businesses depend on affordable and secure energy, and increasingly expect their energy to be renewable. New Zealand’s energy system has served us very well to date and our long-term energy outlook is positive. Compared to many other countries, New Zealand’s energy supply is highly reliable, renewable, and affordable”.

Way, way back in August 2011 the acting Minister of Energy & Resources, Hekia Parata released the New Zealand Energy Strategy  prepared by the then Ministry of Economic Development along with the Energy Efficiency and Conservation Agency (EECA).

Thirteen years later we still don’t have an Energy Strategy to deliver the framework for energy for future New Zealand.

We also have the Electricity Authority, which is an independent Crown entity established under the Electricity Industry Act 2010, and is responsible for regulating the electricity market.  The statutory objective of the EA is to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers.

Both MBIE and EA’s websites have a plethora of consultation documents, reports, presentations but still New Zealand lacks an Energy Strategy and delivery which will provide confidence to manufacturers and investors. MBIE’s website suggests that an energy strategy will be finalised and published “late 2024”.

Four strategic pillars

To succeed in charting New Zealand’s future energy pathway, while providing confidence for manufacturers and investors, an energy strategy will need to address the four key components – energy generation, national transmission, local distribution and improving energy efficiency in our businesses and our buildings and homes.

The strategy cannot be a business-as-usual approach.  Business as usual has let manufacturers and NZ consumers down badly.  Strategy needs to deliver on our international climate change commitments.  It needs to maximise the natural resources we have in abundance – sun, wind and rain to generate electricity, and it needs to deliver at a price that gives New Zealand competitive advantage.  Fast track approvals will incentivise generators to invest in new generation.

  • Our transmission network was designed for last century when most renewable power was hydro generated in the South Island for a significantly smaller population.  21st century transmission networks need to have flexibility to distribute from multiple locations in multiple directions and to cater for major growth in demand and supply.
  • Local distribution networks need to deliver competitively priced new infrastructure connections for new plant and for existing manufacturers wanting to transition from fossil fuel heat to electricity.
  • Improved energy efficiency must be a critical component of the energy strategy.  Existing business need to be supported to upgrade plant and equipment (through accelerated depreciation.   Households need to be incentivised to insulate and become solar generators on their roof.  Net metering will incentivise households to invest in roof top solar.

Bipartisan support will be critical for successful delivery.  New Zealand cannot afford to change direction every time we have a change of government – given as MBIE says “Energy is fundamental to economic activity and the conduct of much of our daily lives”.

Minister Brown and the coalition government have the opportunity in delivering an energy strategy and delivery plan to lay the foundations for an internationally competitive manufacturing environment for our future.  It will need support from all major political parties in order to deliver.