“Gas sets the price of electricity” might just have been the most popular British energy commentary of 2025. This insight offers a simple solution to policy-makers: push gas out of the market to bring down energy bills. But whether gas sets the wholesale price or not is less relevant in a market where an increasing share of electricity has locked-in prices. Contracting so much power may end up counter-productive to reducing cost even if it reduces volatility.
This is a helpful summary, though as you point out, CFD's that are currently in operation reflect auction prices from some time ago. Like you I don't find the 'gas usually sets the price so lets get gas off the network' narrative terribly helpful. Even with some declines in pricing it is hard to justify renewables mainly on cost grounds; the rationale is about decarbonisation and, to a limited extent, reducing exposure to volatility.
It needs a braver government to explain the trade-offs.
Thanks Kevin - yes, the old ones look so expensive. I also think solar, batteries and to some extent onshore wind are cheaper than offshore now but we still focus on offshore wind a lot, and nuclear. I also agree on explaining these trade-offs. I think it is a remarkably good time to be making the case that energy security is important and worth paying for, given all the international chaos at the moment.
None of the AR3/4 offshore windfarms that are operational have yet to actualise their CfDs and can hold on till 2028. So the benefit that was lauded so much at the time is yet to be realised and may never ever be if the owners believe wholesale prices will always be higher
On the capacity market 3.7B is already baked in for 28/29 and thats before they add in the T-1 auction. Then in 29/30 they are proposing to add a new higher priced tier in to incentivise new gas to act as standby.
They way I see it is they are throwing ever more consumers cash in applying sticking plasters to keep NZ afloat because they wont confront the reality of how complicated the system is becoming.
Global warming is real, cumulative and non-reversible by any means that is cheaper than rapid decarbonising. Decarbonising matters. Leaving out the E or the S or the G and relying purely on the unexpected successes of RE will be a serious mistake. Assessing the relative worth via markets where the biggest energy subsidy is to fossil fuels via ongoing amnesty on externalised costs will be skewed. That RE can compete successfully in markets where the biggest players cheat is a remarkable but not good enough.
This is a helpful summary, though as you point out, CFD's that are currently in operation reflect auction prices from some time ago. Like you I don't find the 'gas usually sets the price so lets get gas off the network' narrative terribly helpful. Even with some declines in pricing it is hard to justify renewables mainly on cost grounds; the rationale is about decarbonisation and, to a limited extent, reducing exposure to volatility.
It needs a braver government to explain the trade-offs.
Look forward to reading more from you.
Thanks Kevin - yes, the old ones look so expensive. I also think solar, batteries and to some extent onshore wind are cheaper than offshore now but we still focus on offshore wind a lot, and nuclear. I also agree on explaining these trade-offs. I think it is a remarkably good time to be making the case that energy security is important and worth paying for, given all the international chaos at the moment.
None of the AR3/4 offshore windfarms that are operational have yet to actualise their CfDs and can hold on till 2028. So the benefit that was lauded so much at the time is yet to be realised and may never ever be if the owners believe wholesale prices will always be higher
On the capacity market 3.7B is already baked in for 28/29 and thats before they add in the T-1 auction. Then in 29/30 they are proposing to add a new higher priced tier in to incentivise new gas to act as standby.
They way I see it is they are throwing ever more consumers cash in applying sticking plasters to keep NZ afloat because they wont confront the reality of how complicated the system is becoming.
Global warming is real, cumulative and non-reversible by any means that is cheaper than rapid decarbonising. Decarbonising matters. Leaving out the E or the S or the G and relying purely on the unexpected successes of RE will be a serious mistake. Assessing the relative worth via markets where the biggest energy subsidy is to fossil fuels via ongoing amnesty on externalised costs will be skewed. That RE can compete successfully in markets where the biggest players cheat is a remarkable but not good enough.