Industry overview
- Power is measured in Watts (W), or more commonly, kilowatts (kW) or megawatts (MW).
- The amount of electricity used over a period of time is measured in kilowatt hours (kWh): a 1 kW bar heater operating for one hour will use 1 kWh of electricity.
- New Zealand households use an average of about 8,000 kWh of electricity per year.
New Zealand electricity industry statistics
- Nearly 2 million New Zealand households and businesses purchase more than $6 billion of electricity annually, of these, approximately:
- 1.7 million or 86% are residential consumers
- 160,000 or 8% are commercial consumers
- 75,000 or 4% are agricultural, forestry and fishing consumers
- 40,000 or 2% are industrial consumers.
- About 34% of the total electricity is purchased by residential consumers, 36% by industrial consumers, 25% by commercial consumers and 5% by agricultural, forestry and fishing consumers.
- About 12,000km is the total length of the high voltage transmission lines that make up Transpower's national grid. They are supported by about 40,000 towers and poles.
The electricity system is made up of:
- Consumers - nearly 2 million purchasers ranging from households to large industrial users
- Generators - the power stations (generators) that produce electricity
- Transmission - the wires and cables (often called the national grid) that transport electricity at high voltages from power. stations to distribution networks and to the largest industrial users (called direct consumers)
- Distributors - the local networks that carry electricity from the national grid to residential, commercial and smaller industrial users. Some power stations (called embedded generators) are connected directly into the distribution network rather than the national grid
- Retailers - the participants that buy wholesale electricity and on-sell it to consumers at their individual premises.
Electricity market
New Zealand's electricity market is made up of wholesale and retail functions. Wholesale functions include bidding (purchasers), offering (generators), scheduling and dispatch (System Operator), pricing (Pricing Manager) and clearing and settlement (Clearing Manager). Retail functions include the registration of consumers, enabling consumers to switch easily between suppliers (Registry) and the counting of electricity purchases and sales (Reconciliation).
The electricity market is governed by the Electricity Industry Participation Code 2010 (Code), overseen by the Authority.
The Authority oversees the electricity market by ensuring adherence to the market rules and making recommendations for new Code. The Authority is also responsible for ensuring that the electricity industry and markets operate efficiently on a day-to-day and longer-term basis. To achieve this it has contractual market operation service provider agreements with a number of organisations for managing the operations.
The Authority also oversees industry governance, which includes consideration of any alleged code breaches by industry participants and applications for exemptions to the code.
The spot market - the buying and selling of wholesale electricity is done via a 'pool', where electricity generators offer electricity to the market and retailers bid to buy the electricity. This market is called the spot or physical wholesale market.
Industry structure
Generation
Electricity in New Zealand is largely generated from hydro, gas, coal and geothermal resources, with an increasing development of wind generation. Electricity is produced at generation stations and connected at high voltage to the national electricity transmission network, called the national grid, at grid injection points (GIPs).
The majority of stations are owned and operated by the following main generator companies which compete to supply electricity to retailers:
- Contact Energy Ltd
- Genesis Power Ltd
- Meridian Energy Ltd
- Mighty River Power Ltd
- Todd Energy Ltd
- TrustPower Ltd
Transmission
The electricity transmission system is owned by state-owned enterprise Transpower. The grid is the physical hub of the electricity system, bringing electricity from remote generation sites to customers some distance away. High voltage electricity is transmitted across the grid from the GIPs to the points of distribution at the grid exit points (GXPs). At the GXPs electricity is reduced to lower voltage at transformer substations for distribution on local networks to consumers.
Transpower owns the high voltage national electricity grid. The Authority has a contractual market operation service provider agreement with Transpower for management of the national grid.
Distribution
There are 28 lines companies that own the local distribution networks throughout New Zealand. The lines companies are connected to the national grid at the GXPs. Low voltage electricity is distributed via the local networks to end commercial and domestic consumers. Generally the lines companies sell their distribution or lines services to retailers who manage the electricity supply agreements with end consumers. Some commercial and industrial consumers contract directly with lines companies for electricity supply.
Retail
A retailer is a company that buys wholesale electricity at spot prices from the generator companies (which is transmitted across the grid and transformed to lower voltage for distribution via local networks to consumers). The retailer's charges to an end user include the cost of the electricity supplied to the consumer as well as charges for transmission and line services.
Some of the electricity retailers in New Zealand are:
- Contact Energy Ltd
- Empower Ltd
- Energy Online
- Genesis Power Ltd
- Meridian Energy Ltd
- Mercury Energy Ltd
- Bay of Plenty Electricity
- King Country Energy
- TrustPower Ltd
Consumers
While the extent of retail competition varies across the country, consumers have a choice of retailers. In some parts of New Zealand there are five or more competing retailers. Furthermore, the switching process has become easier and faster over time, and can generally now be done over the phone with the new electricity retailer.
Consumer New Zealand provides a free web-based tool to help residential users to shop around. The tool is available at powerswitch.org.nz and shows the electricity retailers and tariff options available in each area. It also allows user to calculate their expected bill with different suppliers.