3. Potential Barriers to Investment
Officials have previously engaged in several informal discussions with various lines companies on their assessment of the barriers to investment in generation. The following issues have been cited by the lines companies:
- Time required to get into the generation business;
- Difficulties identifying viable projects (in terms of project economics);
- Difficulties obtaining resource consents under the Resource Management Act;
- Uncertainty concerning a number of electricity market issues, such as transmission pricing and financial transmission rights;
- Uncertainty around gas availability;
- Limited ability to sell the output of the generation lines companies are currently permitted to build.
The majority of these issues are already in the process of being addressed.
In particular, the Government has recently announced:
- A comprehensive package of measures designed to improve the working of the Resource Management Act;1
- A package of measures to boost gas exploration in New Zealand.2
The Electricity Commission is also working on other issues raised by the lines companies, such as those relating to transmission. These potential barriers are expected to gradually reduce over time as the Electricity Commission progresses its work programme.
The outstanding issue appears to be difficulties experienced in selling the output of lines companies' current generation and managing associated risks. The rest of this note, therefore, focuses on this issue.
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