New Zealand Commits Capital to Boost Energy Security and Cut Power Prices

The New Zealand Government has assured its majority-owned power companies that capital will be made available to support investment in critical electricity infrastructure. The move, announced by Finance Minister Nicola Willis and Energy Minister Simon Watts, is designed to strengthen the country’s energy security, improve affordability for households and businesses, and ensure the electricity system can withstand the pressures of future demand.

Crown Investment Commitment

Finance Minister Nicola Willis emphasized that affordable and reliable electricity underpins the nation’s economic future. She confirmed that the Government is prepared to participate in capital funding requests from Genesis, Mercury, and Meridian—the three Mixed Ownership Model (MOM) companies in which the Crown holds a 51 per cent stake.

A recent review by Frontier Economics highlighted that these companies have hesitated to invest in large-scale renewable projects, fearing the Government would not provide equity injections. Willis made it clear that this perception was misplaced:

“We wish to correct that perception. The Government is committed to maintaining its legally mandated 51 per cent stake in the MOM companies, and we accept we would need to participate in any equity raise required for major new investments. We are more than willing to do this, if the proposals stack up.”

This assurance aims to eliminate financial uncertainty and unlock investment in large-scale projects that support energy resilience.

Driving a Renewable Energy Boom

Energy Minister Simon Watts noted that New Zealand is entering a renewable generation boom. He pointed out that more new generation has been commissioned in the last 18 months than in the previous 15 years, largely due to reforms that reduced regulatory barriers.

However, Watts stressed that New Zealand still faces a fundamental challenge: ensuring reliable back-up power during “dry years,” when hydro lakes and wind cannot meet demand. Historically, natural gas has filled this role, but declining supply has made it unreliable and expensive.

The review by Frontier Economics confirmed that the market has failed to adequately invest in dry-year back-up options, contributing to elevated power prices. Watts warned that the consequences of failing to act are long-lasting:

“When we have dry years, like what we experienced in 2024, it can take the economy up to 25 years to recover from inflated electricity prices. That’s why the Government is acting now.”

The Energy Security Package

The Government’s new energy package has two pillars—security of supply and building better markets.

Security of Supply Initiatives

• LNG Import Facility: A procurement process will be launched for a liquefied natural gas (LNG) terminal to stabilize supply during dry years.

• Government-Backed Projects: Whole-of-government contracts may be used to underwrite new energy projects and attract private investment.

• Electrify NZ: Barriers will be removed to accelerate renewable generation, including offshore wind.

Building Better Markets

• Reducing Policy Risk: Options will be developed to give investors confidence in new projects, including $200 million earmarked in Budget 2025 for gas field co-investment.

• Stronger Regulation: The Electricity Authority will be given expanded powers to oversee the market and address anti-competitive behavior.

• Efficiency in Distribution: Electricity distribution businesses (EDBs) will be tasked with improving collaboration, reducing duplication, and avoiding unnecessary costs.

• Transparency in Gas Supply: A new gas information framework will ensure reliable data for all market participants.

• Dry Year Safeguards: New rules will be introduced to ensure the lack of back-up supply does not re-emerge in the future.

Partnership with Industry

The Ministry of Business, Innovation and Employment (MBIE) will today release a Request for Information inviting the energy sector to propose ways to partner with Government. Leveraging government energy demand is expected to unlock investment across a range of renewable technologies.

Economic Impact and Outlook

The package is expected to reduce electricity price volatility, encourage investment, and strengthen consumer protections. The Government estimates that lowering wholesale electricity prices by even 2 per cent annually could make New Zealand’s economy more than $3 billion larger within a decade.

“With our plan in place, we can make this a reality. New Zealand’s future will be powered by renewables with back-up supply when we need it most, and a well-regulated electricity market that is working to deliver for Kiwis,” Watts said.

The combined strategy aims to ensure energy affordability, build resilience against supply shocks, and support New Zealand’s transition to a renewable-powered economy.