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Enabling investment and innovation

Pricing in a renewables-based electricity system

The Government is intent on doubling the supply of renewable electricity generation to help New Zealand become a lower emissions economy. The Market Development Advisory Group has made suggestions to strengthen the operation of the wholesale electricity market with an increase in demand being met from new, mostly intermittent, generation.

  • Generation
  • Low emissions

    • Overview

    The Market Development Advisory Group's final report on Price discovery in a renewables-based electricity system contains 31 recommendations for changes to the wholesale electricity market for the Board of the Electricity Authority.

    The Authority is prioritising completing work on 7 of the 15 recommendations in Tranche 1 and 3 in Tranche 2, which are already being progressed.

    Timeline

    Past activity

    Project background

    New Zealand has committed to achieving net zero emissions by 2050, with the Government intent on doubling the supply of renewable electricity generation to help New Zealand become a lower emissions economy. Over the coming decades it is likely that heating and transportation in New Zealand will need to be electrified, causing a significant increase in demand for electricity. This will need to be met by large quantities of new renewable electricity generation.

    This project, led by the Market Development Advisory Group (MDAG), aims to understand how price discovery would work in the New Zealand wholesale electricity market (including spot and hedge markets), in a renewables-based electricity system. MDAG has developed recommendations for changes to the wholesale electricity market. The aim of these recommendations is to ensure economically efficient price signals (from short to long term) and the efficient operation of the electricity industry for the long-term benefit of consumers. This project has three stages:

    1. Issues discovery (completed 16 March 2022) - understanding how the electricity system is likely to behave and how the market should be designed with an electricity supply that is renewables-based.
    2. Option identification and analysis (completed 6 March 2023) - identifying and analysing solutions for future action.
    3. Recommendations and proposal (completed 11 December 2023) - reporting to the Electricity Authority.
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