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Gas decline increases urgency for new electricity generation

1 Jul 2025

Depositphotos
Image: Depositphotos

Media release – Transpower | Declining gas availability means New Zealand has to lift the pace at which it is delivering new electricity generation to reliably meet growing demand over the coming years, a new report from Transpower shows.

Electricity generation investment is accelerating but until new plant is delivered, the sector must continue to work together to make the most of existing electricity generation assets through careful maintenance of generation units and ensuring sufficient hydro storage and thermal fuel is available to run them across winter.


These are key findings from an assessment of New Zealand’s electricity generation and supply outlook for the coming decade that has been released by Transpower following consultation with the electricity sector. The final version incorporates views from industry, but findings remain consistent with the consultation draft.

Transpower Executive General Manager Operations Chantelle Bramley said the annual Security of Supply Assessment (SOSA), which covers the decade through to 2034, also highlights a clear solution to these security of supply risks over the medium term.

“New Zealand needs to continue to accelerate the speed at which planned investment is delivered if we are going to stay ahead of growing demand and provide the reliable and affordable electricity New Zealand depends on,” she said. 

“Any delay in new resources entering the market will put more strain on existing resources, impacting the ability to manage energy and capacity challenges, which will impact the sector’s ability to meet growth in demand for electricity across New Zealand.”

The report shows that the sector is already responding to the challenge with a 350 MW increase in newly commissioned generation since the last assessment in 2024. This is around 3.5% of existing installed generation capacity, which is enough to power Wellington, the Hutt Valley and Kapiti on the average weekday.

The quantity of committed projects has also increased by approximately 1,500 MW since the last assessment, or 15% of current installed capacity, as have planned but unconsented projects every year for the next decade.

“These movements indicate the supply pipeline is being developed and continues to expand,” Ms Bramley said.

“However, with so much of the supply pipeline unconsented, there is risk that these projects could be delayed, deferred or dropped. So, it’s essential for New Zealand that we pick up the pace and move planned projects quickly through the financing, consenting, design, build and commissioning phases so that they can start contributing much-needed megawatts.

“That’s a challenge for the electricity sector, but it’s also a challenge for all of New Zealand. We must all pull together to pave the way for this absolutely critical investment in the country’s prosperity.”

Sector coordination the solution to tight supply

Ms Bramley said that New Zealand currently faces two main risks to electricity supply that need to be carefully managed by the electricity sector in the face of declining gas.

“The first is making sure we have enough energy across the winter if it doesn’t rain for an extended period, as happened last year and early in 2025, or if there are faults to key equipment, further declines in gas availability or interruptions to coal supplies,” she said.

“The other is ensuring we can meet demand on the coldest mornings and evenings if the wind isn’t blowing, the sun isn’t shining, and not all other generation is available, either due to maintenance needs, fuel shortages, or faults.

“The market is well aware of the immediate challenges we face due to the sudden decline of gas and is already acting to manage them. This includes working together to make the most of existing electricity generation assets and ensuring there is enough fuel to run them across winter.

“It is good to see the industry advancing arrangements to extend the life of Genesis Energy’s third Rankine unit at Huntly and securing coal reserves at that site to reduce the impact on electricity generation from falling gas availability.”

The assessment assumes all three Rankine units at Huntly are fuelled and operational but factors in the planned retirement of Contact Energy’s TCC gas plant in Taranaki. If there were a plant failure or retirement of a thermal generator like the third Rankine unit, risk would increase and new generation would need to be built even faster.

Firm, flexible resources needed to manage capacity risk

The assessment shows that more than 85% of the unconsented pipeline is intermittent wind and solar generation, with most of the rest being battery projects. While wind and solar add much needed renewable energy to the system, they must be supported by firm and flexible power system resources that can kick in when the wind is not blowing and the sun is not shining.

Batteries are a part of the solution to these short duration capacity risks. New Zealand's first major battery, WEL Network's Rotohiko battery, was commissioned in 2023, Meridian Energy’s 100 MW Ruakākā battery has recently been commissioned, and Contact Energy’s 100 MW Glenbrook-Ohurua battery will start commissioning this year. Genesis Energy’s 100 MW battery at Huntly is expected to be operational by late 2026.

Battery projects account for around 2,500 MW of new capacity in the 2025 SOSA pipeline that is slated to be built over the next decade, compared to just over 1,000 MW in the 2024 SOSA. However, over half of these projects are not yet consented, indicating a higher degree of uncertainty.

Other firm, flexible resources include gas or biofuel peaking generators that can be fired up at short notice. Hydro lakes are a high-class firm and flexible resource with hydro generation able to be quickly ramped up to help meet peak demand if not already operating at full capacity.

Long duration energy support will need to come from thermal plant for some time yet to meet New Zealand’s unique “dry winter” risks, and the arrangements being advanced in relation to Huntly are a good step forward.

Demand response also provides flexibility to the system. This is where industrial customers or electricity retailers working with their customers scale back demand during peak periods, typically in response to higher prices. As part of this, consumer energy resources have a role to play in smarter electricity use, including shifting demand away from peak periods.

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