Electricity price fall 'positive signal' for switch from fossil fuels

Falling wholesale electricity prices could give some businesses more confidence to switch from fossil fuels to renewable power, an electricity sector advocacy group says.

Electricity Retailers and Generators Association chief executive Bridget Abernethy said wholesale prices were sitting at some of their lowest winter levels in more than a decade.

She said July wholesale prices were averaging about $75 a megawatt-hour, making it the lowest average July price in more than 10 years.

Electricity Authority forward price data also shows Ōtāhuhu futures prices for 2027, 2028 and 2029 have fallen by about 30 percent over the past year.

Abernethy said the fall was partly due to strong hydro storage but also reflected a bigger shift as more renewable generation and batteries came into the system.

"We've seen a lot of renewable generation come online recently, so there's been a big upswing in renewable generation build, including batteries," she said.

Abernethy said lower prices were a positive signal for businesses looking at switching process heat or upgrading transport fleets.

"Businesses are not looking for short-term fluctuations, they're looking for those long, sustained, lower prices - that's what will give them confidence," she said.

Not all businesses could easily electrify, but the best candidates were light transport and low-to-medium temperature process heat, she said.

That included parts of agriculture, food and beverage, manufacturing, textiles and clothing, where electric heat pumps could meet businesses' needs and lower costs.

Abernethy said some well-known businesses were already moving, including Whittaker's Chocolate and Speight's Brewery.

Abernethy said dry-year risk had not disappeared but the electricity system was in a much stronger position than it was in 2024.

"You can never remove all the risk, but we've come a long way since 2024 when the system was facing fuel shortages across multiple sources in one go."

She said stable policy settings were now critical to give investors' confidence to make large, long-term investments in renewable generation.

"What matters more than anything is stable policy settings that give investors the confidence to make these long-term and very large investments in renewable generation," she said.

She said New Zealand Steel's electric arc furnace would soon account for roughly half of New Zealand's domestic steel production and reduce NZ Steel's emissions by more than 45 percent.

"I think that speaks to the potential of electricity to power entire industries in New Zealand," she said.