Electricity prices will keep rising

I just saw a talk by  Carl Hansen, the Chief Executive for the NZ Electricity Authority. He made a comment which is retrospectively obvious.

Electricity is a natural resource, and follows natural resource economics. So investors in electrical generation will build the the lowest price solutions first, and as time goes on the cost of delivering a power plant in c/unit terms will increase. So sadly, baring another gas discovery, we will rising real costs of electricity supply in the future. He estimated the marginal cost will be $90/MWh (9 cents per unit) by 2020, based on the prices to build and fuel the next up stream of power generation projects.

The Electricity Authority has 3 mandates – to increase competition (and thus reduce the chance of excessive margins), to promote reliability of supply (no blackouts) and to push for lower transaction and regulatory costs and thus increase efficiency. I asked Carl about feed in tariffs after he spoke – for now they are off the agenda, but it seems that making it easy for small businesses to get a fair price for their generated power is part of their mandate.

Published by Lance Wiggs


One reply on “Electricity prices will keep rising”

  1. An way things could work out differently would be if cheaper electricity sources became available. So 20 years ago nobody was building wind-farms because the technology was at a stage where it couldn’t compete on price.

    Today wind-farms compete on price but the technology isn’t getting better as fast and some of the best locations are taken. So the price of wind-delivered power may increase.

    12 years is a pretty short period away ( especially with the RMA ) but there are a few other technologies getting close to commercial levels of efficiency and with potential to reduce the average price 20 years down the track.

    Obvious candidates would be offshore wind-power, Solar updraft, Photovoltaic and wave.


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