As the government prepares sweeping changes to the electricity sector, a potential tool for increasing generator competition is missing from the list.Holding the floor at the Conferenz 4th Annual Regulatory Evolution Summit in Wellington yesterday, C
As the government prepares sweeping changes to the electricity sector, a potential tool for increasing generator competition is missing from the list.
Holding the floor at the Conferenz 4th Annual Regulatory Evolution Summit in Wellington yesterday, Covec director and economist Dr John Small promoted distributed generation as a means of responding to perennial “dry year” supply shortages and lowering electricity prices.
A popular example of distributed generation is the hypothetical farmer who wishes to install a small-scale hydro generator in the creek at the back of his property.
Dr Small would like to see incentives for distributed generation added to the Electricity Industry Bill, currently under closed consultation and incorporating all 25 of the recommendations put forward in last year’s ministerial review.
He praised the government’s move away from guilt-rationing as default solution to dry year risk.
Although reasonably effective, campaigns urging the public to save power “made us look like a third world country from the point of view of investment.”
Dr Small told the conference that distributed generation was able to engage end-users of electricity in a much more effective way than guilt-rationing campaigns.
He pointed out that the easiest options for small-scale generation are renewable, an advantage that will become painfully salient when the Emissions Trading Scheme kicks in on July 1.
According to the Energy Efficiency and Conservation Authority, distributed generation contributes at least 5% of New Zealand’s power.
Dr Small believes incentives for distributed generation were left out of the Electricity Technical Advisory (ETAG) group’s recommendations to the government last year because it posed a threat to the major generator-retailers.
Electricity policy has historically been dominated by the supply side of the equation, he said, and distributed generation could potentially “bring in an army of small competitors.”
A crucial step towards incentivising distributed generation would be to regulate feed-in tariffs for those who wish to sell excess generation back to the grid.
Without regulation, independent generators must accept wholesale electricity pricing or rely on the goodwill of their large-scale competitors for a better deal.
In preparation for the conference, Dr Small asked the major electricity companies to quote prices for buying back electricity.
Meridian was credited with offering one-to-one net metering at the retail price of around 20c per kilowatt. Contact came in second with 17.3 c. Genesis offered the wholesale price of 6-7s per kilowatt, and Mighty River Power "did not appear interested."
In the first years of this decade, New Zealand came close to establishing mandatory feed-in tariffs at retail price.
As part of self-regulatory discussions, the major electricity retailers voluntarily agreed to set retail price as the standard buy-back rate for small domestic generation, on the condition that two meters be supplied at each generation site.
According to ETAG chairman Dr Brent Layton, who also chaired the conference in Wellington, negotiations collapsed due to an insistence from government on formal regulation.
