Long-duration firming: ensuring New Zealand's electricity system can weather the long haul

New Zealand's electricity system is in the middle of a significant transition.

We're seeing unprecedented levels of investment in renewable electricity generation. That's good news overall. Onshore wind and grid-scale solar are the cheapest forms of electricity generation and renewables will play a crucial role in supporting economic growth, electrification and New Zealand's emissions reduction goals. At the same time, it isn’t always windy or sunny, our hydro lakes hold a relatively limited amount of water, and domestic gas availability has declined, reducing the role thermal generation has traditionally played as a backstop for when renewable generation is unavailable.

This changing generation mix raises an important question: how do we ensure New Zealand continues to have reliable electricity supply even during extended periods when nature doesn't cooperate?

Long-duration firming is the ability to generate electricity, or reduce demand, over periods of weeks or months. Grid-scale batteries are excellent at balancing the system over minutes or hours. Long-duration firming helps manage more prolonged shortages of energy such as dry years, extended periods of low wind generation, or combinations of challenging weather conditions

The first step to solving any problem is to understand it.

The Electricity Authority Te Mana Hiko (Authority) recently commissioned independent analysis from Sapere and also completed its own assessment of future supply and demand. Both pieces of work conclude that the risk of long-duration energy shortage is reducing over time as new renewable generation is built. However, both analyses also indicate that some risk remains, particularly in a severe hydro shortages if demand were to grow more quickly than supply.

The challenge isn't simply about building more generation overall. It's also about ensuring the market provides the right information and sufficient incentives to invest in, maintain and contract for the resources that may not be used very often, but that are essential to keeping the lights on during rare periods of energy scarcity.

The Authority has recently released its Issues and options paper on long-duration firming. Our preliminary conclusion is that changes to the market could help to reduce barriers to investment in long-duration firming.

One challenge is that the value of long-duration firming is not always visible. Assets that provide insurance during a dry year may sit largely unused in an average year. That can make it difficult for average market prices to fully reflect their value.

Another challenge is uncertainty. Firming resources often rely on revenues that arise only during periods of scarcity, making investment decisions difficult. Participants must make decisions today about events that may not occur for several years.

The market is also relatively small, with few buyers and sellers of firming products. Many arrangements are bespoke and commercially negotiated, which can make price discovery difficult and reduce market transparency. There may also be capability gaps, particularly for smaller participants trying to understand and negotiate complex bespoke firming arrangements.

Our consultation seeks feedback on whether these barriers are real, whether we've identified the right issues, and what should be done about them.

We're particularly interested in views on five potential options, which we present in the paper as possible ways forward for debate.

• Regular reporting on New Zealand's long-duration firming needs using an established methodology. Better information can help market participants understand future risks and make more informed investment decisions.
• Improving transparency around firming contracts, including considering whether more information could be disclosed while still protecting commercially sensitive information.
• Developing practical guidance or "building blocks" to help participants understand and negotiate firming arrangements more effectively.
• Working with industry to develop more standardised long-duration firming contracts. Common products could improve liquidity, support price discovery and make it easier for participants to access firming solutions.
• Finally, we're seeking views on whether a small mandated sell-side auction for firming products could help reveal prices and improve market participation if liquidity remains limited.

None of these options would fundamentally change New Zealand's energy-only market design. This consultation is not about picking winners or deciding which technologies should provide firming. Instead, we are looking at targeted measures to improve information, strengthen contracting arrangements and support more effective market outcomes.

As New Zealand's electricity system becomes more renewable, understanding how we manage reliability over the long term becomes increasingly important. The decisions we make now will help shape the incentives for future investment and support a system that remains reliable, resilient and efficient for consumers.

We've put forward our initial thinking and are now keen to hear from industry, investors, consumers and other stakeholders. Good solutions start with good conversations, and we look forward to hearing a wide range of views on how New Zealand can best manage long-duration firming in the years ahead.

Submissions close at 5pm, 13 November 2026.

View consultation