Briony Bennett, Energy Innovation Manager at Ara Ake, speaks in more detail with MinterEllisonRuddWatts Partner, Scott Thompson, on how flexibility can make our energy transition more affordable and enable consumers to participate.
It’s impossible to listen to Briony Bennett, Energy Innovation Manager at Ara Ake, without feeling positive about New Zealand’s energy transition. Bennett’s passion for energy extends beyond decarbonisation – she recognises the importance of bringing every New Zealander on the journey. While Bennett doesn’t shy away from the challenges, she is excited by the opportunities for individuals, businesses and communities that will flow from a more flexible energy system. MinterEllisonRuddWatts Partner and Energy Sector Lead, Scott Thompson, sat down with Bennett to zero in on how Ara Ake, the country’s future energy centre, is living up to its name [1] and helping to shape decarbonisation in New Zealand, despite a few legal hurdles along the way.
Ara Ake was established by the Government in 2020 to accelerate the demonstration, commercialisation, and deployment of energy innovation to support Aotearoa New Zealand's transition to a more sustainable, resilient, and equitable energy future. Headquartered in Taranaki, Ara Ake works with energy innovators to help them commercialise and enter the market, including providing funding and investment support, energy research, as well as project development support.
An equitable and flexible energy future
Central to the remit of Ara Ake is the need for New Zealand to transition to a sustainable energy future, but not at the expense of security and equity. There’s no doubt of the need for large scale, grid connected, renewable energy generation. Yet, to balance the three parts of the energy trilemma – sustainability, resilience, and equity – a diversified, smarter, and more flexible energy system is needed. There are a few barriers to work through to achieve this, and that’s where the work of Ara Ake comes in.
Multiple Trading Relationships
Bennett leads the grid flexibility work at Ara Ake, including its Multiple Trading Relationships (MTR) pilots. MTR encompasses the idea of an “unbundling” of services to allow more than one electricity service provider to contract with a household or business.
Currently, the Electricity Industry Participation Code 2010 (the Code) allows consumers to contract with only one electricity retailer. With increasing levels of distributed energy resources, such as rooftop solar, this has implications for consumer choice and control over generation and consumption, and competition. By allowing consumers to transact with more than one retailer, MTR would enable access to services that may not be available from their existing retailers, like off-peak EV charging or the ability to sell or donate excess solar power (and potentially get a better price for it). It would potentially enable entities that are not retailers to offer energy services, behind-the-meter [2]. MTR could also provide system-wide benefits: increased flexibility to manage the strain on the grid during peak demand (including via emerging business models like virtual power plants), increased resilience, and lower costs for local distributors. More information on the MTR pilot is available here.
The real benefit of MTR, according to Bennett, is that it will encourage more uptake of distributed energy resources by households, businesses, and community groups, including hapū and iwi. MTR will allow these groups to get more value from their investment in solar or batteries. Bennett is also excited by the prospect of MTR generating competition in this space: “if you could split [the import and export of your power] and you could get the best consumption tariff possible and the best solar tariff possible, that's a place where arbitrage can happen.”
However, the one-to-one relationship between a customer or a meter (at a single installation control point) and a single retailer is embedded throughout the Code. To split the import and export registers, for example, would require either Code changes or exemptions.
The Kāinga Ora MTR pilot
In 2022, Ara Ake and Kāinga Ora, New Zealand’s largest social housing provider that manages a portfolio of over 70,000 properties, established an energy sharing pilot whereby Kāinga Ora homes in Lower Hutt and Porirua fitted with solar panels would be able to share the benefit of excess solar with tenants whose roofs are unsuitable for solar installations. The concept includes the separation of the import and export registers at selected installation control points (where solar exists on social housing), so that Kāinga Ora, as the solar asset-owner, can monetise the exported electricity and use these funds to benefit other customers in energy hardship. During the trial, the Kāinga Ora tenant with solar on their roof can continue to buy their electricity from the retailer of their choice and self-consume as much rooftop solar generation as they like, while the excess generation is exported and would be managed by a retailer contracted to Kāinga Ora.
To enable the pilot, Ara Ake, Kāinga Ora, and other partners successfully obtained Code exemptions from the Electricity Authority which allow Wellington Electricity Lines Ltd (as distributor) and Intellihub Ltd (the metering equipment provider) to participate in the pilot.
Learning by doing
Bennett shares that there are coordination challenges involved with setting up MTR trials. These challenges - to set up new businesses and processes - will be writ large if MTR is implemented across New Zealand. Conducting trials, as Ara Ake is doing, will help identify these and any other potential challenges.
Yet, meters, for the most part, already have the capability to have the two loads split. An analysis undertaken by Jade Software at the request of Ara Ake suggests the costs associated with changes in market reconciliation through the electricity registry are not onerous. Retailers may have to adjust their internal customer management systems which some have argued would be burdensome. This might favour smaller and more agile newcomers and encourage incumbents to innovate and evolve customer offerings.
The case for regulatory change
So just how easy was it to set up the Kāinga Ora pilot? Bennett is positive about the process. She estimates it took about 18 months from starting the project to obtain the regulatory exemptions. The Electricity Authority is now evaluating the process used with the Kāinga Ora MTR pilot with a view to producing guidelines on the Code exemption process by early 2024.
We were the first. An innovation - when you are the first - can sometimes take a little while. This is the first “in market”, not “out of market” Multiple Trading Relationships trial of its kind in New Zealand. So, I'd say 18 months was pretty good.
The aim is to provide sufficient evidence of the benefits of MTR to make a case to the Electricity Authority for a permanent regulatory change. This would not be the only regulatory change necessary to respond to the pace of New Zealand’s energy transition. One role of Ara Ake is to advocate for system level changes – including to electricity regulation – and to demonstrate the benefits of those changes through innovative trials. With the sheer volume of consultations taking place in the energy sector, Ara Ake has had to consider where its efforts are best deployed.
Ara Ake has identified MTR as a priority. It is involved in other trials such as the recently publicised solarZero virtual power plant pilot. That pilot has been enabled by, and is the first to use, the new real-time pricing changes introduced by the Electricity Authority in April 2023. The real-time pricing enables solarZero to bid and offer the aggregated excess solar power from its 11,000 residential solar installations into the wholesale market with more certainty.
In the constantly evolving flexibility space, there are a lot of unknowns. However, it is clear there is a role for the flexibility offered by distributed energy resources in New Zealand’s decarbonisation journey. To unlock the full potential of New Zealand’s future energy system the regulatory settings need to be right.
Footnotes
[1] Ara Ake means new pathways, a journey forward - most simply, onwards and upwards.
[2] Behind the meter refers to anything that happens onsite, on the energy user's side of the meter. Conversely, anything that happens on the grid side is deemed to be in front of the meter.
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