Wellington, New Zealand — (METERING.COM) — July 2, 2007 – New Zealand’s electricity market framework is under review to identify the areas where improvements can be made in the light of past changes in the industry structure and potential future developments.
The review, which has been initiated by the country’s Electricity Commission, is focused on four key aspects, security of supply, level and trends in prices, opportunities for demand side participation and level of competition, with the aim of gathering stakeholder input to defining the problem areas and identifying solutions.
A survey of the market performance by the Commission indicates that the average reliability experienced by customers has been fairly stable through the period 1995 to 2005. If anything, the data indicate an improvement in terms of reduced frequency and lost time from interruptions, and New Zealand’s performance appears to be within the range of international experience, though more like that in Australia than Europe or North America.
Over the past 25 years end-user prices averaged over all customer types are seen to have fluctuated in real terms. However, the price trends differ markedly by customer group, with residential user prices having risen substantially over the period, while commercial prices have generally trended down and industrial prices have been fairly flat.
At the retail level, the market is highly concentrated, with five main parties – all integrated generator-retailers – accounting for over 90 percent of the market by network control point. National retail switching, as measured by control point switches, has run at around 10 percent for the last few years – which appears comparable with many other deregulated electricity markets – but survey data indicates that almost 50 percent of customers had difficulties with switching in the early period when residential customers could choose their supplier, although more recent data suggests that problems have reduced, with 10 to 15 percent reporting problems with switching.
Looking at the investment horizon, it would appear that electricity intensity has been declining over the last ten years or so in which retail competition and an electricity market have been in place. However, it is not possible to judge whether there is a causal linkage, or simply a coincidence of timing.
In terms of medium term demand response, there is evidence that large industrial users have responded to sustained movements in spot prices during extended periods of low inflows. However, the evidence for residential and commercial users is not clear, but it would also appear that the demand response signals for such users are less pronounced than for large industrial customers.
In relation to very short term, close to or in real time, demand response, it appears that large users are able to respond sometimes but not others. Residential load is also able to respond sometimes, primarily through controlled water heating load.
These issues are now open for comment and prioritization in the next stage of the market design review by interested parties.