From Newsgroup: nz.general

https://www.interest.co.nz/public-policy/135502/energy-companies-don%E2%80%99t-see-sufficient-profit-preparing-dry-year-risks-and-are

This is worth a read. Market forces can not govern under the existing structure.

"rCLThis is because competitors, and industrial customers, can free-ride on the
investment made by someone else that has the effect of suppressing prices.rCY

Added on-demand capacity reduces risk of scarcity and therefore prices for all energy users across the board. Those who do not make the investment benefit alongside those who do.

rCLThis creates an underinvestment problem, as private entities have little incentive to build assets that may be rarely used, and so have limited
revenue opportunities, but are essential during periods of high supply risk,rCY
Frontier said.

So the Government is going to have to build the dry year generation. The
market forces are not governing and this partial public ownership model
looks like a case of unintended concequences. The temptation to sell the
"dry" supply in "wet" years will become a habbit. Pushing the limit and
ending up with no "dry" generation.

There are similarities with the solar and wind generation as they have "dry" periods of generation both on a daily and longer term. It results in the need for a large amount of energy storage.
--- Synchronet 3.21a-Linux NewsLink 1.2

From Newsgroup: nz.general

On 3 Oct 2025 02:35:54 GMT, Gordon <Gordon@leaf.net.nz> wrote:

https://www.interest.co.nz/public-policy/135502/energy-companies-don%E2%80%99t-see-sufficient-profit-preparing-dry-year-risks-and-are

This is worth a read. Market forces can not govern under the existing >structure.

"oThis is because competitors, and industrial customers, can free-ride on the >investment made by someone else that has the effect of suppressing prices.o

Added on-demand capacity reduces risk of scarcity and therefore prices for all
energy users across the board. Those who do not make the investment benefit >alongside those who do.

oThis creates an underinvestment problem, as private entities have little >incentive to build assets that may be rarely used, and so have limited >revenue opportunities, but are essential during periods of high supply risk,o >Frontier said.

So the Government is going to have to build the dry year generation. The >market forces are not governing and this partial public ownership model
looks like a case of unintended concequences. The temptation to sell the >"dry" supply in "wet" years will become a habbit. Pushing the limit and >ending up with no "dry" generation.

There are similarities with the solar and wind generation as they have "dry" >periods of generation both on a daily and longer term. It results in the need >for a large amount of energy storage.

To some extent, this is all true. What is not mentioned though is
that the Government owns a majority interest in 3 or the 4 big
generators. It is also true that the owners of minority interests in
all 3 bought into this - what was in it for them was dividends, even
if they all banded together they could still not over-ride the
Government of the day on anything.

There is no financial incentive to invest in generating capacity that
is normally not needed. When it is needed, they get windfall pricing
from existing capacity, and if they have greater capacity at any time
the windfall revenues from capacity shortfall disappears.

The answer so far is that the Government have offered the 3 generators
access to low-cost capital to fund extra generating capacity - but
this does not solve the problem that the financial situation rewards
shortages.

My suggestion is that the Government empower Transpower (an SOE) to
build its own generating capacity for use when the 4 generators cannot
meet Transpower' projected demand (ie usually referred to as 'peaker' generators, and usually fossil fueled to enable short startup times).
This not only gives the electricity grid security of supply but
ensures the 4 generators are not the only generating resource
Transpower has access to.
--
Crash McBash
--- Synchronet 3.21a-Linux NewsLink 1.2