Ensuring an Orderly Thermal Transition

Last updated: July 28, 2023

Energy

Ensuring an Orderly Thermal Transition

Published: July 28, 2023

Submitting To: Electricity Authority

Issue for Business: The EA has assessed the risk of an disorderly exit of thermal electricity generation. The Authority considers the risks to be low. Based on their assessment with modelling done by Concept Consulting, thermal generators experience net-cash flow volatility, depending on the type of generator. But overall they remain positive. They believe current market settings provide sufficient signals to existing thermal to remain in the system. This submission outlines BEC's response to several issues and matters raised. Among the several considerations mentioned in the submission, below are a few: 1. BEC believes this assessment should be ongoing because is the risk is ongoing. 2. BEC recommends that the Authority's analysis should be broadened to encompass a more comprehensive, contestable and open assessment. 3. We agree, in theory, a decrease in demand may not necessarily lead to a disorderly phase-out of thermal generation. However, at present, market participants express their deep concern about the lack of incentives and returns to justify the investment into a fast start peaking plant. This is concerning. 4. Gas supply in the broader conversation about sufficient thermal capacity must be considered adequately. 5. Existing policy uncertainty, including proposals like the NZ Battery Project and the 100% renewable electricity target, is severely damaging the investment feasibility of building new peaking plant. Abandoning the proposal would restore much needed certainty and investor confidence.

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