Promoting competition in the wholesale electricity market in the transition toward 100% renewable electricity

Last updated: December 14, 2022

Energy

Promoting competition in the wholesale electricity market in the transition toward 100% renewable electricity

Published: December 14, 2022

Submitting To: Electricity Authority

Issue for Business: The Electricity Authority (EA) decided to investigate competition in New Zealand's wholesale electricity market after sustained high prices since 2018. The EA launched this investigation in 2020. The Authority wanted to know if there was a problem with competition in the wholesale market, and if there was a problem, they wanted to know what extent does anti-competitive behavior led to insufficient generation and high prices.

Action: BEC has written a submission generally supporting the Authority's findings -- that higher prices were caused by underlying supply and demand conditions, not competition. We supported the vast majority of the Authority's recommendations which included actions to invite other Ministries to act on policy uncertainty, capital investment

Outcome: The Authority concluded that sustained higher prices over the observation period, between 2018 to 2021, was likely explained by underlying supply and demand conditions. The Authority concluded that there was insufficient evidence to justify significant intervention and structural change. The Authority believed substantial changes would create uncertainty , and most likely lead to lower levels of generation and thus higher prices. BEC supported the EA's conclusions. However, BEC acknowledges the significant higher prices paid by users in the last three years. This is a large risk for New Zealand's competitiveness. We are also open to investigating additional market structures, such as capacity mechanisms, as sufficient capacity is increasingly becoming a problem, as the price of carbon and thermal increases into the future.

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