But the path to get there is not as tough as some think, Bridges says.
It’s about taking action on the two big structural issues facing the country, he says, the first being the concentration in the generation market, with the four generator-retailers or gentailers (Contact, Genesis, Mercury and Meridian) controlling 85% of the country’s generation and 95% of the back-up supply, and the model whereby generation and retail arms act as a single, integrated business.
The fix?
Break up the gentailers and establish Long-Term Energy Supply Agreements (LTSEAs) for generation, which would allow independent projects to bypass the firming barrier, leading to a massive increase in renewable generation.
Bridges has previously called for the Government to go harder on the “big four” gentailers.
Northern Infrastructure Forum executive director Barney Irvine.
The Northern Infrastructure Forum’s Barney Irvine says separation would be operational rather than structural.
“Each gentailer would be required to operate its generation and retail businesses as legally distinct entities, with separate boards, management and commercial decision-making,” Irvine said.
“This is not a structural break-up. There are no forced asset sales. It simply means the internal deal-making that currently keeps the contracts market illiquid is replaced by real market trading.”
Bridges says the market doesn’t incentivise competition.
“Asking the status quo to deliver energy abundance goes against commercial logic and fiduciary duty to shareholders,” the policy says.
New generation projects need a long-term agreement that promises a return on investment, but the intermittency of renewables means a back-up supply of generation is needed (thermal, hydro or large-scale batteries).
That’s known as firming.
But almost all of that ability sits within the gentailers, meaning independents need a firming contact with one.
“At the moment, if you’re sitting and you’re saying, I’m going to do a lot of solar, I’m going to do a lot of wind, the problem is you actually need access to firming, that back-up to underwrite and to have the finance really to do these projects,” Bridges told the Herald.
“The gentailers control it, all of that, and I’m not being critical of them. If I was them, I wouldn’t either. They’re not handing over the keys of the kingdom the independence.
“And so LTSEAs allow those independents to come in and have the security and the ability to say, you know what, we are going to build a whole lot more solar, a lot more wind and so on.”
LTSEAs are used in parts of Australia and give a project the option to sell all or part of its generation to the Crown-backed entity, at a competitively bid fixed price.
“This is not a subsidy or a case of corporate welfare,” Irvine said.
“The project is required to repay the Government for any net support received.”
Energy companies are investing big in renewable projects, with estimates of up to $10b worth of plans out to the market.
New Zealand First is already campaigning on a policy of splitting up the big energy companies.
Energy Minister Simeon Brown has outlined proposals for a new “Winter Energy Reliability Obligation” requiring major power companies and large electricity users to secure enough back-up energy before a dry year.
But Irvine says recent steps by the Government to force gentailers to treat competing retailers the same way they treat their own retail arms when supplying hedge contracts will not achieve the same thing as operational separation.
The Green Party last month released its energy policy, calling for the creation of a $980 million public energy company called KiwiPower that would invest in renewable generation and electricity security.
Bridges says the call has gone out to all political parties to jump on board.
“This has gone out to every political party in parliament and the one or two there that may get in. No more discussion documents, no more chat, no more rhetoric.
“How about you do these two things, commit to them pre-election, and then make them happen, if you have the privilege of being in government after November 7th.”
While the policy was big, bold and brave, Bridges said, it wasn’t “stupid” or “reckless”.
He believed power prices could be cut quite quickly if the reforms were achieved, as the current system has led to independent retailers being shut out and a lack of competition.
“The inevitable result is scarce supply and high prices, which is exactly what we’ve seen for the last six or seven years, which is crippling businesses and households alike.”
Katie Bradford is a Senior Correspondent at the Herald. She has been a broadcast journalist for over 20 years and was based in the press gallery for 10 years. She specialises in politics, business and Auckland issues.