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Enabling investment and innovation

Pricing in a renewables-based electricity system

The Market Development Advisory Group has made recommendations to strengthen the operation of the wholesale electricity market with an increase in demand being met from new, mostly intermittent, generation.

  • Generation
  • Low emissions

    • Overview

    The Market Development Advisory Group's final report on Price discovery in a renewables-based electricity system brought together significant contributions from industry, international experts and other stakeholders. It contains 31 recommendations for changes to the wholesale electricity market for the Board of the Electricity Authority.

    We publish quarterly reports on how we are delivering these recommendations to strengthen and support the evolution of the wholesale electricity market. View latest quarterly report

    We have updated the market settings for security of supply to ensure they are fit-for-purpose, reflect consumer expectations and improve long-term outcomes for consumers. We published a decision on updating scarcity pricing settings on 14 March 2025. The updated settings will be effective for winter 2025.

    Timeline

    Past activity

    Project background

    New Zealand has committed to achieving net zero emissions by 2050, with the Government intent on doubling the supply of renewable electricity generation to help New Zealand become a lower emissions economy. Over the coming decades it is likely that heating and transportation in New Zealand will need to be electrified, causing a significant increase in demand for electricity. This will need to be met by large quantities of new renewable electricity generation.

    This project, led by the Market Development Advisory Group (MDAG), aims to understand how price discovery would work in the New Zealand wholesale electricity market (including spot and hedge markets), in a renewables-based electricity system. MDAG has developed recommendations for changes to the wholesale electricity market. The aim of these recommendations is to ensure economically efficient price signals (from short to long term) and the efficient operation of the electricity industry for the long-term benefit of consumers. This project has three stages:

    1. Issues discovery (completed 16 March 2022) - understanding how the electricity system is likely to behave and how the market should be designed with an electricity supply that is renewables-based.
    2. Option identification and analysis (completed 6 March 2023) - identifying and analysing solutions for future action.
    3. Recommendations and proposal (completed 11 December 2023) - reporting to the Electricity Authority.
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