Distributor involvement in flexibility services market

We have developed draft guidance for distributor involvement in the flexibility services market. The draft guidance compriess 7 principles and provides examples for how we expect distributors to implement them.

In June 2024, we held an online workshop where more than 80 attendees discussed the draft guidance and shared their views. The workshop included presentations from the Authority, as well as SolarZero and the ENA, and opportunities for attendees to ask questions and discuss the draft guidance in small groups.

Workshop recordings and summary of feedback

• Introduction and summary of the Authority’s position (Daniel Griffiths – Manager, Networks and Retail Policy)
• Overview of draft guidance, its development and objectives (Rob Bernau –
  Programme Manager, Market Policy)
• Guest presentation (Richard Le Gros, ENA Policy and Innovation Manager)
• Guest presentation (Eric Pyle, SolarZero Director, Public Affairs and Policy)
• Summary of attendees' feedback

This work was paused while we focused on higher priority projects in the later part of 2024.

We are now completing our analysis of the feedback and identifying the next steps. We intend to finalise the guidance for mid-2025.

The evolving flexibility services market has an important role in supporting an affordable, sustainable and secure electricity system. Flexibility services draw on consumer flexibility and distributed energy resources – such as home battery systems, controllable EV chargers and water heaters, or solar generation – to provide support services to distribution networks, the transmission grid and energy markets. This can avoid the need to build more network infrastructure, meaning lower overall costs for consumers.

We recognise that distributors have an important role to play in the development and use of flexibility services. However, as with any monopoly business, there is a risk that distribution businesses use their unique position, or are perceived to do so, affecting other businesses wanting to provide flexibility services, inhibiting competition in the flexibility services market.

This project seeks to address this potential risk and is part of our broader work on updating regulatory settings for distribution networks.

In October 2023, we indicated in our work programme that we would look into developing a threshold for applying ‘arm’s length’ rules to distributor involvement in the flexibility services market to minimise this risk. We have since determined that a principles-based guidance is a more suitable approach given the flexibility services market is still developing in New Zealand, and the limited evidence base regarding how that risk is materialising.