We applaud the Authority for beginning the consultation process with a green paper, allowing for early input from stakeholders, and we appreciated the opportunity to meet with the Authority to discuss the consultation. SUPA also welcomes the fact that the Authority is considering inter-generational impacts and the risk that some consumers could be left behind, rather than viewing the issues solely through a narrow economic efficiency lens. Electricity reform, when done well, should benefit all consumers.
SUPA exists to support communities through decentralisation. As a supplier of solar solutions that turn large buildings into energy generation hosts that share power locally, SUPA’s activities sit at the heart of decentralised energy solutions. We help schools, clubs, and businesses use vacant roof space to lower power bills and generate revenue by selling power to their local community. We are a leading provider to schools, operating under a Ministry of Education–approved Energy Services Agreement, and we enable host sites to monetise their roof space by selling power to local community members. This results in lower power bills and a more democratic sharing of the benefits of distributed energy resources
SUPA supports and promotes the establishment of commercially scalable, market-ready Community Energy solutions that enhance both energy resilience and flexibility through innovative technology. Our Community Energy solutions significantly improve the unit economics of decentralised energy systems. We are democratising the benefits of decentralised energy assets by enabling participation by end users who might not otherwise be able to access solar and battery investment.
As a forward-looking organisation that sees itself as part of the solution, SUPA emphasises the following views in response to the green paper.
- Good regulation needs to enable, not stifle, innovation. Regulation can and needs to be done smarter. The Authority has an important facilitative role in New Zealand’s energy future. As industry regulator, the Authority should make sure market rules and vested interests don’t impede competition from non-traditional sources.
- Decentralisation is not an “if” or a “when”, it’s a current reality. Change is happening now. The industry does not have the luxury of time to adapt.
- Different market participants have different capabilities and are at different stages of adaptation. The emergence of distributed energy resources (DER) will require electricity distributors to adopt a totally different mindset to the historic ‘poles and wires’ investment approach.
- A decentralised system isn’t just about “Making full use of our existing electricity system” but breaking dependence on traditional supply sources. The likes of AirBnB and UBER don’t utilise existing supply chains. They disrupt and replace existing supply chains with a more economically efficient model.
- DER needs to be rewarded for the benefits it offers at each part of the supply chain for doing so. We need to see the benefits of peak-usage reduction reflected in network pricing (both transmission and distribution) and spot prices that efficiently reflect supply and demand on a half-hour-by-half-hour basis. We consider spot price volatility to be an incentive for innovation, not a threat.
- SUPA welcomes the work the Authority is doing to ensure the retail and distribution parts of the supply chain are pulling their weight towards “reducing system-wide peak demand and increasing infrastructure utilisation” through greater TOU pricing and reward for solar/battery injection back into the grid. The missing piece of the puzzle is transmission pricing, where the TPM Guidelines prevent Transpower from rewarding reductions in peak demand.
- We appreciate that the Authority is mindful that the position of different consumers, for financial reasons and due to their particular circumstances, means not everyone will be able to (directly) take advantage of the opportunities provided by new and emergingtechnologies, including solar and batteries. If reform is done poorly, some consumers could be disadvantaged or made worse off.
- A core focus for the Authority should be on the value of market disruption and competition from both traditional sources, which is a focus of the ECTF initiative, and non-traditional sources, which should be the focus of the Authority’s decentralisation initiatives.
- A highly competitive market that doesn’t rely on a small number of large, incumbent players is key to successful, affordable electrification. Markets work best when there are a large number of suppliers – with different business models and different product and services offerings – with competing views on what consumers want and need. • There doesn’t need to be “A collective understanding of consumers’ and stakeholders’ likely future needs, aspirations, choices and behaviours”. There will be contestable views about the future system and the pathways to achieve it.
- Individual market participants will form their own individual views about what consumers want or need and target that. Some suppliers will take the BETA route, and some will choose VHS. If a supplier gets their understanding of consumer needs right, they will succeed. If not, they will fail. Not everyone will get it right. That’s a strength of a decentralised system, not a weakness.
Ensuring a just transition is critical. SUPA welcomes the Authority’s recognition that there are barriers to funding and finance, noting that these can prevent some people, including low-income households and renters, from adopting distributed energy resources. We also welcome the Authority’s acknowledgement of the importance of equitable access to benefits, and its commitment to taking an intergenerational perspective in decision-making. We agree that shaping a future electricity system that delivers long-term benefits to consumers requires an intergenerational lens.
It is important to remain mindful that not everyone will be able to take advantage of the opportunities created by new and emerging technologies, including solar and batteries. If reform is poorly designed, there is a real risk that some consumers could be disadvantaged or even made worse off. This concern was evident in the Authority’s assessment of ACOT payments, which it considered were overly generous and advantaged distributed generation at the expense of other consumers. Similar concerns have also emerged in submissions to the Authority’s recent consultations on new connections and solar injection rebates.
Submitters recognised the benefits of encouraging new connections and the efficiency gains associated with solar injection rebates, such as reducing or deferring network capacity investment. At the same time, they highlighted the potential efficiency and distributional risks where charges or rebates are set too high or too low. SUPA considers it important that regulatory and commercial settings avoid cross-subsidies in either direction and ensure efficient pricing. For example, solar injection rebates should reflect the extent to which injection back into the grid can genuinely reduce or delay investment in network capacity.
Differing views about what the future electricity system will look like are an inherent feature of decentralisation. In fact, this diversity of views is one of the system’s strengths. A decentralised system will naturally involve contestable perspectives on future outcomes and the pathways to achieve them. Markets function best when there are many suppliers with diverse, competing views on what consumers want and need. A lack of alignment about the future simply reflects market disruption and innovation.
There does not need to be a single, collective understanding of consumers’ and stakeholders’ future needs, aspirations, choices, and behaviours. The Electricity Authority should not be concerned about a lack of alignment or fear that it may lead to inconsistent decision-making. Inconsistency is a natural feature of decentralised markets and periods of disruption, and it should be expected rather than avoided. Different market participants will inevitably assess the future with varying degrees of accuracy. The Authority’s role is to ensure that market rules and settings do not unnecessarily impede competition, particularly from non-traditional sources.
In closing, SUPA welcomes the Authority’s proactive approach to considering New Zealand’s energy future and how the industry will need to adapt and evolve. We look forward to continuing to engage with the Authority as it progresses workstreams relating to decentralisation and meeting the future needs of consumers. This consultation has implications across several areas of the Authority’s work, including the ECTF. While there will inevitably be a diversity of views on the future direction and pathways forward, a well-functioning and competitive electricity market with many diverse participants is more important than ever. New Zealand still has some distance to travel to reach this goal, and a strong focus for the Electricity Authority should be on removing barriers to competition from both traditional and non-traditional sources of supply.
