Modest, steady growth has characterised Aotearoa New Zealand electricity demand over recent decades. The response has been a regulatory and investment system that incentivised just-in-time investment, not overbuilding to protect consumers that bore the costs of investment.
The need to meet legislated emission reduction targets, as well as emerging technologies and changing consumer preference, has led to a rapid acceleration in the electrification of transport and industry.
Our electricity sector is currently served by a large asset base, with substantial upcoming renewal requirements. Decarbonisation, through electrification, has created a meeting of tides from a network investment perspective. New Zealand’s current way of enabling investment is no longer fit to meet a challenge of this scale.
In this report we cast a spotlight on a range of solutions, involving both the public and private sector, to address emerging challenges for network finance.
Financing investment in
New Zealand’s electricity networks
Investment frameworks for consideration.
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Possible options to stimulate network investment
We consider three overall themes of possible intervention to promote greater investment:
Within system changes
The system must support the step change in energy use. Changes to the current settings may involve permitting greater allowable revenue, or greater flexibility to change revenue allowances.
Private capital
Private capital could take a larger role in electricity distribution to alleviate the risk of underinvestment. Greater involvement could take the form of traditional debt or equity raises by existing providers, or a blend of these options using Special Purpose Vehicles.
Public capital
Public finance may offer a bridge across the uncertain future, with various tools available to government. The form of Crown support would depend on the extent of control the Government wishes to have over the electricity networks of the future.
Get in touch
Istvan Csorogi
Partner - Deal Advisory
KPMG in New Zealand
Joey Shannon
Director, Government and Infrastructure
KPMG in New Zealand
David Gates
Partner - Audit
KPMG in New Zealand
The transition to a low carbon economy holds many opportunities for New Zealand, as well as industry collaboration to meet the challenges ahead.
KPMG New Zealand is well positioned to assist organisations in navigating the path to net zero and the complex issues facing the energy sector.
