Electricity prices should rise at a more moderate pace over the coming years, NZIER says.<\/p>\n
It has released a paper that notes while household electricity prices increased 11 percent in the year to March, the rate of change is likely to be slower into the future.<\/p>\n
“The increases should be more moderate than they were over the past couple of years,” lead economist Mike Hensen said.<\/p>\n
“The driver will shift from increases in generation costs to increase in distribution transmission costs for the next two or three years.”<\/p>\n
He said there was a risk of prices rising more quickly if there was a dry year or an unexpected loss of thermal capacity.<\/p>\n
The issue for electricity was that it had to be produced and delivered in the quantity demanded by consumers at the time they needed it.<\/p>\n
“The assets used to generate and deliver electricity require a lot of investment, take a long time to build and last even longer. This mismatch between fluctuating demand and fixed capacity in the short term has two effects on electricity prices: When demand gets close to generation capacity, a small increase in demand can cause a large increase in price. Transpower and EDB networks’ costs reflect a long history of past investment and a need for future investment to ensure peak demand can be met.”<\/p>\n
He said the average electricity generation spot price last year was about 14c to 16c per kWh compared to 9 to 10c in 2021.<\/p>\n
That was driven by a steady increase in gas prices since 2018 after a production outage and the declining output, which Hensen said ended the era of cheap thermal generation. There was also an increase in wind generation.<\/p>\n
Some commentators have called for any incoming government to work to reduce the cost of power to help New Zealand businesses and households. Hensen said that was hard to do.<\/p>\n
“Certainly there is potential for lower generation costs as we stabilise during the transition to renewable costs and then there’s a challenge for EDB and Transpower costs to investment to be made as efficiently as possible so that the cost impact is minimised. But basically expanding a network is expensive to do, requires a lot of capital and to some extent that occurs, that has to occur a little bit ahead of demand so that creates a little bit of pressure on costs particularly in the short term.”<\/p>\n","protected":false},"excerpt":{"rendered":"Electricity prices should rise at a more moderate pace over the coming years, NZIER says. It has released…\n","protected":false},"author":2,"featured_media":649264,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-649263","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/649263","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=649263"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/649263\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/649264"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=649263"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=649263"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=649263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}