MARKET UPDATES
How the Energy Sector Works in NZ and What This Means for Businesses
New Zealand's energy landscape is undergoing significant challenges. With electricity prices hitting record highs and gas shortages on the horizon, businesses and households are under pressure to manage escalating costs. Understanding what's happening and taking proactive steps to secure the best energy deals is more critical than ever.
New Zealand is facing unprecedented increases in electricity prices, driven by a combination of policy decisions and market dynamics. Since 2021, some businesses have seen electricity costs rise by as much as 600%, leading to production halts and financial strain. Compared to Australia, New Zealand's wholesale electricity prices are now among the highest globally, with these costs soon expected to impact households.
The current energy crisis in New Zealand stems from a combination of factors, most notably the previous government's ban on offshore gas exploration, which caused a significant decline in investment in new gas projects. Although the new government has lifted the ban, investors remain cautious. There is widespread concern that if the Labour government returns to power, they may reinstate the ban, further exacerbating the problem.
Compounding the issue is the rapid depletion of existing gas fields, which is happening faster than anticipated. This has created a severe shortage of gas, which, despite accounting for only 10% of New Zealand's overall energy generation, plays a critical role in providing peaking power. Peaking power is essential because it can be quickly activated during times of high electricity demand or to balance out low hydroelectric lake levels. Without sufficient gas to generate this power, wholesale electricity prices are prone to dramatic increases, as the market loses a crucial mechanism for controlling price spikes.
The future of New Zealand’s energy market remains uncertain. The government is currently exploring the feasibility of importing liquefied natural gas (LNG) to alleviate gas shortages, but this solution will require significant infrastructure investment and time. In the meantime, energy prices are expected to remain volatile, with businesses and households continuing to face rising costs.
In light of these challenges, it's essential to take steps to protect against rising energy costs:
Don't let rising energy costs strain your budget. At Reliance Utilities, we specialise in helping you find the best energy deals in New Zealand. Whether you're a business owner or a homeowner, we’re here to assist you in navigating the complexities of the market and securing savings. Reach out to us today and start reducing your power costs now. Your best energy deal, on us.
