Energy Competition Task Force Roadmap To Reward Industrial Demand Flexibility

The Energy Competition Task Force (the Task Force) has today set out its proposed vision and roadmap for unlocking industrial demand flexibility. The aim is to better support electricity market reliability and benefit consumers by promoting a competitive, reliable, and efficient electricity industry. The Task Force has also released an update paper on its power purchase agreements (PPAs) work to support more new intermittent generation development, such as wind and solar.

Industrial demand flexibility

The Electricity Authority Te Mana Hiko (the Authority) is seeking feedback on an industrial demand flexibility issues and options paper that sets out the vision and roadmap. The paper seeks input into how best to unlock more industrial demand flexibility. This could include payments to industrial consumers to reduce demand for short periods, where this is efficient and is likely to deliver long-term benefit for consumers. The roadmap proposes 11 actions to better incentivise short-term flexibility in the electricity market from industrial consumers to support both reliability and competition.

"The need for flexibility in our electricity system is becoming increasingly important as the level of intermittent generation - such as from solar and wind - increases and thermal generation declines," says Commerce Commission Chair and Task Force member, Dr John Small.

"Currently, bigger electricity users might adjust their demand to avoid paying high costs for energy, but we believe in certain circumstances it may be appropriate to pay them to provide that flexibility. This could help these consumers to plan and invest with more certainty, while also supporting electricity supply reliability for the longer term," says Small.

Electricity Authority Te Mana Hiko Chair and Task Force member Anna Kominik says: "Industrial demand flexibility can be particularly useful during times of very high demand and tight supply, such as winter mornings and in the evenings. Its potential is expected to grow over time, including as new industrials come online, such as new industries and data centres particularly those optimised for this form of flexibility.

"We know that electricity supply is currently very tight, so we’ve identified two actions that could be in place ahead of winter 2026. We’ll shortly seek input from stakeholders on a proposed Emergency Reserve Scheme and intend to set up an industry co-design group process to develop a standardised tradeable product for industrial demand flexibility.

"We are proposing nine further actions over the next five years to help lay the foundations for efficient use of demand flexibility across the electricity system - and we’re interested to hear stakeholder views on these," said Kominik.

Power purchase agreements

The Task Force has considered submitters’ feedback and determined that its initial proposal to allocate firming for PPAs is not the best way to encourage investment in new power generation projects. The Task Force has identified this option risks distortions to efficient market operations, which could negatively impact investment in new generation and lead to higher prices for consumers in the long term.

Instead, the Task Force considers access to firming is best addressed via ongoing work on standardised flexibility products and the proposed level playing field measures (particularly the non-discrimination obligations), as well as complementary initiatives to encourage PPAs. These options enable new investment without the risks associated with allocation. This new approach is set out in an update paper.

Visit the Task Force webpage for more information about both papers and details on how to have your say on the industrial demand flexibility consultation.

Notes:

About the Energy Competition Task Force

The Energy Competition Task Force was established by the Commerce Commission Te Komihana Tauhokohoko and Electricity Authority Te Mana Hiko in August 2024 to investigate ways to improve the performance of the electricity market.

The Task Force has been considering eight initiatives that will encourage more and faster investment in new electricity generation, boost competition, enable homes, businesses and industrials to better manage their own electricity use and costs, and put downward pressure on prices.

Firming

Firming refers to technology used to store and release intermittent energy, usually either hydro storage or batteries.

PPAs

PPAs are long-term contracts to support generation. They can provide a route to market for entrant generators and an alternative procurement option for electricity buyers or traders.

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