Rewarding industrial demand flexibility

We are seeking feedback on a roadmap of 11 proposed actions to appropriately reward industrial consumers for the benefit their short-term demand flexibility brings to the power system.

As the level of intermittent electricity generation (wind and solar) in Aotearoa New Zealand increases and thermal generation reduces, the need for flexibility is becoming increasingly important.

Industrial consumers could be particularly useful in helping to balance the system (by reducing or shifting demand), particularly during times of very high demand and tight supply, such as winter mornings and in the evenings.

We believe this can be efficient, so long as it creates net benefits for consumers by lowering electricity costs over the long-term.

We are currently focusing on existing industrial consumers due to their unique characteristics. However, we also want to lay the groundwork to maximise future opportunities for all consumers. This will give businesses looking to upgrade or connect to the network clear signals to invest and will increase the pool of future demand flexibility providers.

The roadmap includes two actions the Authority is proposing (subject to consultation), which could be in place by winter 2026:

• Establishing an Emergency Reserve Scheme - This is a peak capacity management tool, where industrial demand flexibility could be activated before the system operator instructs involuntary load shedding. Participants in the scheme would be compensated for their activity. We plan to consult on the design of the scheme in July 2025.

• Developing a standardised product for demand flexibility - To facilitate bilateral arrangements between retailers and demand flexibility providers, including industrials and aggregators of residential and smaller commercial consumers. This would be developed with industry, as we did successfully for the ‘super-peak’ flexibility product introduced in January 2025, as part of the Energy Competition Task Force work programme.

We welcome feedback on this proposed approach by 5pm, Thursday 3 July 2025.

Note:

On 13 June 2025, we extended the consultation period, changing the deadline for submissions from 5pm, 26 June to 5pm, 3 July 2025.

We republished the issues and options paper: on 9 June to clarify a reference to the 'Potential solutions for peak electricity capacity issues' decision paper (para 2.22.); and on 12 June to clarify which section consultation questions 12 to 21 refer to (end of section 7, p.42).