Sector-in-waiting while urgent issues heat up

Insight

Associate Partner Marg Joiner attended the electricity sector’s annual conference this week and discovered an air of uncertainty.

With the threats of sea-level rise, more extreme weather events and energy hardship becoming a reality for some New Zealanders, those who make and enforce the rules for our energy sector are still working out what to do.

That’s one outtake from the Downstream conference in Auckland this week.

The Government is adamant it has a plan to tackle the major issues.

It will introduce the Zero Carbon Bill to establish the politically independent Climate Commission and make it a statutory goal to have a net-zero emissions economy. The Commission is expected to build on the work of the Productivity Commission’s report on our transition to a low carbon economy.

It’s not clear yet whether the Commission will be unfettered by political interference and the power of the Cabinet, but the smart money will be on a Commission with limited powers.

The Government is also working on reforming New Zealand’s Emissions Trading Scheme and will consult the public later this year.

Meanwhile, the Government’s electricity pricing review is still in its early days, as is its approach to the beleaguered transmission pricing methodology review.

The flavour of all these issues can be summed up in a word: uncertainty.

Though the electricity sector has talked a lot about self-disruption, the pace of change hasn’t kept up with the rhetoric, or the urgency of issues looming. Pity the regulators trying to grapple with the impact of technology and the blurring of regulated and non-regulated parts of the sector.

Fast forward to 2019 and some of these uncertainties could be addressed as the Government advances its legislative agenda, but the Energy Minister is hoping for better performance from energy providers.

In her conference speech, Dr Megan Woods said the $1.6 billion electricity industry had only invested $8 million in R&D. This is unlikely to improve with the number of regulatory balls up in the air.

Climate Change Minister James Shaw acknowledged this and promised to deliver certainty for investment via the Zero Carbon Act, which he hopes will be passed by mid-2019.

Until then, New Zealanders should expect an electricity sector buffeted by regulatory uncertainty, technological disruption, and a wider economy impacted by extreme weather events, floods and droughts.

Key decisions/milestones expected in this government financial year include:

  • electricity pricing review terms of reference released (early April)
  • Electricity Authority Board to provide an update on TPM
  • Productivity Commission low emissions economy report to Government
  • interim Climate Committee established
  • Ministry for the Environment advice to Government on ETS review (including how to implement in-principle decisions made in July 2017)
  • consultation begins on the design of Zero Carbon Bill
  • Electricity Authority update on distribution pricing.