Electricity sector in New Zealand

Renewable energy sources generate much of the nation's electricity, with the New Zealand energy industry for example reporting a 75% share in 2013.[6] The Fifth Labour Government of New Zealand had the goal of increasing this to 90% by 2025,[18] the subsequent Fifth National Government put priority on security of supply.[19]

New Zealand's Labour government introduced a number of measures in the 2000s as part of the vision of New Zealand becoming carbon neutral by 2020,[20][21] and intended to collect levies for greenhouse gas emissions from 2010 onwards, to be added to power prices depending on the level of emissions.[22] However, the incoming National government quickly tabled legislation to repeal some of these measures, such as obligatory targets for biofuel percentages,[23] a ban on construction of new fossil fueled generation plants[24] and a ban on future sales of incandescent light bulbs.[25]

From 1 January 2010, the energy sector was required to report greenhouse gas emissions under the New Zealand Emissions Trading Scheme (NZETS). From 1 July 2010, the energy sector had formal compliance obligations to buy and surrender one emission unit for every two tonnes of reported emissions. As of December 2011, there were 78 energy firms compulsorily registered in the NZETS and five voluntary participants.[26] Energy sector firms in the NZETS do not receive a free allocation of emissions units and they are expected to pass on to their customers the costs of buying emission units.[27]

In April 2013, the Labour Party and the Green Party said if they were to win the 2014 general election, they would introduce a single buyer of electricity akin to Pharmac (the single buyer of pharmaceutical drugs in New Zealand), in order to cut retail costs.[28] The Government responded by calling it "economic vandalism", comparing it to the Soviet Union,[29] but Greens co-leader Russel Norman said it would boost the economy and create jobs.[30] By the following day, shares in privately owned power company Contact Energy had fallen by more than 10 percent.[31]

New Zealand demand-weighted daily average wholesale price of electricity 2009 to 2012. Source: Electricity Authority

Electricity is traded wholesale on a spot market. The market operation is managed by several service providers under agreements with the Electricity Authority.[32] The physical operation of the market is managed by Transpower in its role as System Operator.

Generators submit offers (bids) through a Wholesale Information and Trading System (WITS). Each offer covers a future half-hour period (called a trading period) and is an offer to generate a specified quantity at that time in return for a nominated price. The WITS system platform is run by the NZX.[33] The System Operator (Transpower) uses a scheduling, pricing and dispatch (SPD) system to rank offers, submitted through WITS, in order of price, and selects the lowest-cost combination of offers (bids) to satisfy demand.[34]

The market pricing principle is known as bid-based security-constrained economic dispatch with nodal prices.

The highest-priced bid offered by a generator required to meet demand for a given half-hour sets the spot price for that trading period.

Electricity spot prices can vary significantly across trading periods, reflecting factors such as changing demand (e.g. lower prices in summer when demand is subdued) and supply (e.g. higher prices when hydro lakes and inflows are below average). Spot prices can also vary significantly across locations, reflecting electrical losses and constraints on the transmission system (e.g. higher prices in locations further from generating stations).

The Aviemore Dam, the penultimate hydro station on the Waitaki River hydro scheme.

Hydroelectric power stations generate most of New Zealand's electricity, with 24,066 GWh generated by hydroelectricity in 2020 – 56 percent of New Zealand's electricity generated that year. The total hydroelectricity installed capacity is 5,434 MW as at the end of 2020.[1]

There are three major hydroelectric schemes in the South Island: Waitaki, Clutha and Manapouri. The Waitaki scheme has three distinct parts – the original Waitaki and Tekapo A power stations (1936 and 1951 respectively), the 1960s Lower Waitaki development consisting of Benmore and Aviemore, and the 1970–80s Upper Waitaki development of Tekapo B and Ohau A, B, and C. In total, the nine powerhouses generate approximately 7600 GWh annually, around 18% of New Zealand's electricity[35] and more than 30% of all its hydroelectricity.[36] Manapouri Power Station is a single underground power station in Fiordland, and the largest hydroelectric station in the country. It has a maximum generating capacity of 730 MW and produces 4800 GWh annually, mainly for the Tiwai Point aluminium smelter near Invercargill. Both Waitaki and Manapouri are operated by Meridian Energy. There are two power stations on the Clutha River scheme operated by Contact Energy: Clyde Dam (464 MW, commissioned 1992) and Roxburgh Dam (320 MW, commissioned 1962).

Arapuni Power Station on the Waikato River. Completed in 1929, it was the first major development after the now-closed Horahora on the Waikato River.

The North Island has two major schemes: Tongariro and Waikato. The Tongariro Power Scheme consists of water taken from the catchments of the Whangaehu, Rangitikei, Whanganui and Tongariro Rivers passing through two powerhouses (Tokaanu and Rangipo) before being deposited in Lake Taupō. The scheme is operated by Genesis Energy and has an installed capacity of 360 MW. The Waikato River Scheme, operated by Mercury Energy, consists of nine powerhouses on the river between Lake Taupō and Hamilton, generating 3650 GWh annually.

Other smaller hydroelectricity facilities and schemes are scattered around both islands of mainland New Zealand.

Hydroelectric schemes have largely shaped hinterland New Zealand. Towns including Mangakino, Turangi, Twizel and Otematata were originally founded for workers constructing hydroelectric schemes, and their families. The hydroelectric reservoirs of Lake Ruataniwha and Lake Karapiro are world-class rowing venues, with the latter having hosted the 1978 and the 2010 World Rowing Championships. Other schemes have shaped political New Zealand. In the 1970s, the original plans to raise Lake Manapouri for the Manapouri station were scrapped after major protests. Later in the 1980s, protests were made against the creation of Lake Dunstan behind the Clyde Dam, which would flood the Cromwell Gorge and part of Cromwell township, destroying many fruit orchards and the main street of Cromwell. However, the project was given the go ahead and Lake Dunstan was filled in 1992–93.

Hydroelectricity generation has remained relatively steady since 1993 – the only major hydroelectricity projects since then was the completion of the second Manapouri tailrace tunnel in 2002, increasing the station output from 585 MW to a maximum continuous rating of 850 MW, although due to resource consent conditions, maximum generation is limited to 800 MW.[37] No major new hydroelectric projects have been committed as of December 2011, but there are proposals for further developments on the Waitaki and Clutha Rivers, and on the West Coast of the South Island.

The Wairakei geothermal power plant.

New Zealand lies on the Pacific Ring of Fire, so has favourable geology for geothermal power. Geothermal fields have been located across New Zealand, but at present, most geothermal power is generated within the Taupō Volcanic Zone – an area in the North Island stretching from Mount Ruapehu in the south to White Island in the north. As at December 2020, the installed capacity of geothermal power was 991 MW, and in 2020, geothermal stations generated 7,610 GWh – 18% of the country's electricity generation that year.[6]

Most of New Zealand's geothermal power is generated north of Lake Taupō. Eight stations generate electricity here, including Wairakei Power Station, New Zealand's oldest (1958) and largest (176 MW) geothermal power station, and the world's second large-scale geothermal power facility. Also in this area are Nga Awa Purua, which is home to the world's largest geothermal turbine at 147 MW[38] (although the plant only generates 140 MW); and Ohaaki, which has a 105-metre tall hyperboloid natural draft cooling tower: the only one of its kind in New Zealand. A significant amount of geothermal electricity is also generated near Kawerau in the eastern Bay of Plenty, and a small amount is generated near Kaikohe in Northland.

Much of New Zealand's geothermal power potential still lies untapped, with the New Zealand Geothermal Association estimating an installation capacity (using only existing technology) of around 3,600 MW.[39]

The 255 kW demonstration wind turbine installed at Brooklyn, Wellington

Wind generated 5% of electricity in 2020. This was down from 7% in 2016 and 9% in 2015. As at end 2020, wind power accounts for 690 MW of installed capacity.[40] Consents have been granted for wind farms with a further capacity of 2,500 MW.[41]

New Zealand has abundant wind resources. The country is in the path of the Roaring Forties, strong and constant westerly winds, and the funneling effect of Cook Strait and the Manawatū Gorge increase the resource's potential. These effects make the Lower North Island the main region for wind generation. About 70 percent of the nation's current installed capacity lies within this region, with some turbines in this area having a capacity factor of over 50 percent.[42]

Electricity was first generated by wind in New Zealand in 1993, by a 225 kW demonstration turbine in the Wellington suburb of Brooklyn. The first commercial wind farm was established in 1996 – the Hau Nui Wind Farm, 22 km southeast of Martinborough had seven turbines and generated 3.85 MW. The Tararua Wind Farm was first commissioned in 1999 with 32 MW of generating capacity, gradually expanding over the next eight years to 161 MW – the largest wind farm in New Zealand. Other major wind farms include Te Āpiti, West Wind and White Hill.

Wind power in New Zealand shares the difficulties typical to other nations (uneven wind strengths, ideal locations often remote from power demand areas). New Zealand wind farms provide on average a 45% capacity factor (in other words, wind farms in New Zealand can produce more than double their average energy during periods of maximum useful wind strengths). The Tararua Wind Farm averages slightly more than this.[20] The New Zealand Energy Efficiency and Conservation Authority figures indicate that wind power is also expected to operate at maximum capacity for around 4,000 hours a year, much more than for example the approximately 2,000 hours (Germany) to 3,000 hours (Scotland, Wales, Western Ireland) found in European countries.[20]

Huntly Power Station on the Waikato River. The 1435 MW facility burns coal and gas, and is the country's largest power station.

In 2020, fossil fuels generated 8,154 GWh in 2020 (18.9% of all electricity); 5,938 GWh by gas; 2,159 GWh by coal; and 57 GWh from other sources. Total combined installed capacity in 2020 was 2,334 MW. The North Island generates nearly all of New Zealand's fossil-fuelled electricity.[6]

Until the 1950s, fossil-fuelled stations were small-scale and usually fuelled by coal or coal by-products, providing electricity to cities yet to be connected to hydro schemes and to provide additional support to such schemes. Large-scale coal-fired generation began in 1958 at the 210 MW Meremere Power Station. Oil-fired stations such as Otahuhu A, Marsden A&B, and New Plymouth were commissioned in the late 1960s and early 1970s. The discovery of natural gas off the Taranaki coast, and the oil crises of the 1970s, saw oil-fired stations converted to gas or mothballed, while gas-fired stations proliferated, especially in Taranaki and Auckland, well into the 2000s. Only in recent years has coal made a comeback, as Taranaki gas has slowly depleted.

Today, there are three major fossil-fuelled stations in New Zealand. Smaller gas- and coal-fired industrial generators are found across New Zealand and especially in Auckland, Waikato, Bay of Plenty, and Taranaki. Genesis Energy's Huntly Power Station in northern Waikato is New Zealand's largest power station – with 1000 MW of coal- and gas-fired generators and 435 MW of gas-only generators, it supplies around 17% of the country's electricity.[43] There is a gas-fired power station in Taranaki at Stratford (585 MW). Whirinaki is a 155 MW diesel-fired station north of Napier, providing backup generation for periods when generation is not otherwise available, such as when plants break down, or during dry seasons where there is limited water for hydroelectricity generation.

As of 2021 none of the power generators appear to be committed to the construction of any new fossil-fuelled power stations. There is only one proposed thermal station with resource consent: Todd Energy's 380MW Waikato Power Plant.[44]

As at the end of May 2021, New Zealand had 32,650 grid-connected photovoltaic (PV) installations producing 159 MW, of which 57 MW were installed in the preceding 24 months.[45]

New Zealand has large ocean energy resources but does not yet generate any power from them. TVNZ reported in 2007 that over 20 wave and tidal power projects are currently under development.[46] However, not a lot of public information is available about these projects. The Aotearoa Wave and Tidal Energy Association was established in 2006 to "promote the uptake of marine energy in New Zealand". According to their latest newsletter,[47] they have 59 members. However the association doesn't list these members or provide any details of projects.[48]

From 2008 to 2011, the government Energy Efficiency and Conservation Authority allocated $2 million each year from a Marine Energy Deployment Fund, set up to encourage the utilisation of this resource.[49]

A 1960s Ministry of Works site plan for a proposed nuclear power station at Te Kawau Point on the Kaipara Harbour. The proposed station would have had four reactors with a total output of 1,332MWe.

The greater Cook Strait and Kaipara Harbour seem to offer the most promising sites for using underwater turbines. Two resource consents have been granted for pilot projects in Cook Strait itself and in the Tory Channel, and consent has been granted for up to 200 tidal turbines at the Kaipara Tidal Power Station. Other potential locations include the Manukau and Hokianga Harbours, and Te Aumiti / French Pass. The harbours produce currents up to 6 knots with tidal flows up to 100,000 cubic metres a second. These tidal volumes are 12 times greater than the flows in the largest New Zealand rivers.

Although New Zealand has nuclear-free legislation, it covers only nuclear-propelled ships, nuclear explosive devices and radioactive waste.[50][51] The legislation does not prohibit the building and operation of a nuclear power station.

The only significant proposal for a nuclear power station in New Zealand was the Oyster Point Power Station, on the Kaipara Harbour near Kaukapakapa north of Auckland. Between 1968 and 1972, there were plans to develop four 250 MW reactors at the site. By 1972, the plans were dropped as the discovery of the Maui gas field meant there was no immediate need to embark on a nuclear programme.[50] The Royal Commission on Nuclear Power Generation in New Zealand was set up in 1976 and reported back to the Government in April 1978. The commission concluded there was no immediate need for nuclear power in New Zealand, but may be economically possible in the early 21st century.[52]

The backbone of the grid in each island is the network of 220 kV transmission lines. These lines connect the larger cities and power users with the major power stations. Lower capacity 110 kV and 66 kV transmission lines connect smaller towns and cities and smaller power stations, and are connected to the 220 kV core grid through points of interconnection at major transmission substations. These stations include Otahuhu and Penrose in Auckland, Whakamaru, Wairakei and Bunnythorpe in the central North Island, Haywards in Wellington, Islington and Bromley in Christchurch, and Twizel and Benmore in the Waitaki Valley.[53]

Investments in new transmission are regulated by the Commerce Commission. In a news release in January 2012, the Commerce Commission reported that Transpower was planning to invest $5 billion over the next 10 years in upgrades of critical infrastructure.[54]

Since 2006, Transpower has spent nearly $2 billion reinforcing the supply into and around Auckland. A 400 kV-capable transmission line was completed in 2012, linking Whakamaru to Brownhill substation in Whitford, east of Auckland, with 220 kV cables linking Brownhill to Pakuranga. In 2014, a new 220 kV cable was commissioned between Pakuranga and Albany (via Penrose, Hobson Street and Wairau Road), forming a second high-voltage route between northern and southern Auckland.

The HVDC Inter-Island scheme is New Zealand's only high voltage direct current (HVDC) system, and links the North and South Island grids together.

The link connects the South Island converter station at the Benmore Dam in southern Canterbury with the North Island converter station at Haywards substation in the Hutt Valley via 572 km of overhead bipolar HVDC lines and 40 km submarine cables across Cook Strait.[53]

The HVDC link was commissioned in 1965 as a ±250 kV, 600 MW bipolar HVDC scheme using mercury-arc valve converters, and was originally designed to transfer surplus South Island hydroelectric power northwards to the more populous North Island. In 1976, the control system of the original scheme was modified to allow power to be sent in the reverse direction, from Haywards to Benmore, allowing the South Island to access the North Island's thermal generation during dry periods.[55]

Haywards Pole 2 thyristor valve during maintenance shutdown

In 1992, the original mercury-arc equipment was paralleled to create a single pole (Pole 1), and a new thyristor-based pole (Pole 2) was commissioned alongside it. The transmission lines and submarine cables were also upgraded to double the link's maximum capacity to 1240 MW. The mercury-arc valve converter equipment was partially decommissioned in 2007, and fully decommissioned in August 2012. New thyristor converter stations (known as Pole 3) were commissioned on 29 May 2013, to replace the mercury arc converters. Further work to Pole 2 brought the link's capacity to 1200 MW by the end of the year.[56]

Electricity distribution businesses are natural monopolies, and are subject to regulation under Part 4 of the Commerce Act 1986.[58] There are two main regulatory mechanisms in place from Hong Kong and Korea; information disclosure regulation and price-quality regulation.

Each year, the Commerce Commission requires EDBs to publish financial information including financial statements, future expenditure forecasts and pricing, and performance information including outages and interruptions.[59] The Commerce Commission publishes analysis of the information disclosures to assist industry analysts and members of the public to understand and compare the performance of EDBs.[60]

Price-quality regulations set the maximum revenue or maximum average price an EDB can charge consumers as well as the quality standards they must meet, usually measured in the frequency and duration of power outages.[61] EDBs who fail to meet these standards may be give a public warning, and repeat failures may result in prosecution. In March 2020, Aurora Energy was fined nearly $5 million after four consecutive years where it failed to meet the required quality standards, largely resulting from historic under-investment in network renewal and maintenance.[62][63]

The following EDBs are subject to price-quality regulation for the 2020–2025 period:[64]

The following EDBs meet criteria for "consumer-owned" businesses and are exempt from price-quality regulation:[65]

Dual switched power point outlet

Distribution companies provide supply at a nominal voltage of 230 volts ± 6% for single-phase and 400 volts ± 6% for three-phase supply, except for momentary fluctuations, in accordance with the Electricity (Safety) Regulations 2010.[66] AC power plugs (male) and sockets (female) comply with the harmonised Australian and New Zealand standard AS/NZS 3112 that is also used in Fiji, Tonga, Solomon Islands, Papua New Guinea and several other Pacific island countries.

New Zealand uses a variation on the TN-C-S earthing system known as multiple earthed neutral (MEN). Each consumer premises is required to have its own earth electrode, which connects to the protective earth busbar in the main distribution board. The neutral wire is connected to earth at the distribution transformer, and within each consumer's main distribution board by an electrical connector between the neutral busbar and the protective earth busbar known as the MEN link.[67]

Electricity consumers connected to the grid have a choice of retail supplier. As at 31 July 2021, there were 40 electricity retailers registered with the Electricity Authority, although only 13 retailers had more than 10,000 customers. The top five retailers by number of individual consumer connections were Contact Energy, Genesis Energy, Mercury Energy, Trustpower, and Meridian Energy.[69] These top five retailers are also generation companies. The Electricity Authority funds a price-comparison service managed by Consumer New Zealand, to assist residential consumers to compare pricing offered by different retailers, and evaluate the benefits of switching suppliers.[81] The rate of customers switching suppliers has increased significantly over the past two decades, from 11,266 per month in January 2004 to 38,273 per month in May 2021.[82]

A ripple control relay in a New Zealand household.

Load control, especially of domestic electric water heaters, has been and remains a major tool for electricity distribution businesses. Consumers are offered a lower rate, either overall or only for controlled load, in exchange for allowing the EDB to switch off the controlled load at peak times. Switching off and on the controlled load is normally achieved by ripple control, where an audio-frequency signal is sent by the EDB along the power lines to operate the relay at each consumers' premises. In 2018, it was estimated that up to 986 MW of load could be controlled.[83]

Smart electricity meter

Smart meters have been widely deployed in New Zealand to replace older generation domestic electricity meters. By 2016, over 1.5 million smart meters had been installed, representing 70% of homes.[84] At the early stages of the installation of smart meters in 2009, the Parliamentary Commissioner for the Environment (PCE) criticised the roll-out on the grounds that the capabilities of the metering systems being deployed were too limited, and would not sufficiently enable future benefits for the consumers and the environment. In an update report in 2013, the PCE stated:[85]

The New Zealand roll-out of electronic meters is unusual internationally, in that it has largely been left to the market. In other countries, regulatory bodies have been much more involved in specifying what these meters could do. In New Zealand, the retailers were left to decide on the features the meters contained. The opportunity for these meters to provide a wider range of benefits at little extra cost has been lost.

Most smart meters have been installed by electricity retailers. Retail services that have become available following the deployment of smart meters including time-of-use pricing. Some retailers offer a tariff that follows the spot price in the wholesale electricity market, and other offerings include a free ‘hour of power’ and a web-based prepay service.[84]