Flick Electric CompanyThe Blog

The cost of clean power: can Kiwis afford it?

The Climate Change Commission’s (CCC) draft advice has swept through Aotearoa in the last few months, and it’s got people talking: over 10,000 submissions were received on the draft report (ours included!) and we reckon it’s great that so many people and businesses are engaged with NZ’s future.

Here at Flick, we’re excited for what the CCC report might mean for New Zealand and our ability to better care for Māmā Earth. A transition to a more electrified economy means less reliance on fossil fuels, and doing better with how (and when) we use our power, too.

But we also have our concerns, particularly when it comes to our electricity industry’s ability to cope with the increased demand for power. It’s estimated that demand will jump 22.5% between now and 2035 - a decent increase which will put pressure on our infrastructure and systems.

But the issue isn’t just about making sure we don’t run out of power (though that is a BIG issue) - it’s also about ensuring we can deliver affordable energy for all New Zealanders. And right now we’re not confident that electricity will be affordable enough in New Zealand to support the transition - and a fair transition for all Kiwis - to a low carbon future.

Why? Well, wholesale market prices are at record highs now, and this eventually trickles down to our power bills. If the market stays the same, and demand increases, unaffordable prices will be here to stay just when we need power the most.

In our opinion, a big barrier to our net-zero transition is the current electricity market design which allows for companies to be both retailers and generators (aka gentailers). Why is that a problem? In short, it doesn’t work in the best interests of consumers.

That’s because gentailers are able to sell themselves power at cheaper prices than they would to an independent company, which ain’t cool for competition (and we all know the more competition there is in an industry, the better it is for customers). It also means those gentailers are profit-driven to keep the price of power higher. And that ain’t cool for the back pockets of Kiwis.

In a nutshell? We’re not confident in the CCC’s assumptions that electricity will be affordable under the current market structure. In fact, we reckon it’s quite the opposite, depriving Kiwis who can’t afford bigger power bills. Those who can’t pay bigger electricity bills will be left behind, either pushed further into energy poverty or unable to afford to make the shift in the first place.

And for businesses who use lots of power it’s likely to be a similar story; electricity costs will go higher (possibly so high they can’t afford to remain in businesss), and those that are able to switch their processes to electric will be unlikely to do so when power when prices are so high.

So what needs to happen? In our submission, we’ve called on the CCC to advise the government to undertake a study that looks at the dominance of gentailers and the current market structure.

In our view, it’s crucial that we know whether we can rely on the status quo to meet those ambitious (and awesome) climate change targets and work in the best interests of consumers - or whether the strain of energy poverty, and high energy costs for businesses, will be felt by even more New Zealanders in the years to come.