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EECA report shows how flexible electricity use could save the country billions now
Moving more electricity use off-peak could save the country up to $3 billion* and transform the energy system in the process, according to new research from EECA (Energy Efficiency and Conservation Authority).
The detailed, first-of-its-kind analysis found New Zealand could, through fully exploiting modern technologies, lower electricity use at the busiest times by up to 25 per cent.
The report highlights the huge potential to make better use of existing power poles and wires by encouraging the use of easy tools to smooth electricity demand, without impacting lifestyles or business productivity.
“Lowering peak demand on the network, especially as more of our lives are electrified, means we won't need to build as much new infrastructure to meet electricity needs at peak times. Reducing the cost to build the network should flow through to lower costs to electricity users,” says EECA chief executive Dr Marcos Pelenur.
“This ability to shift load on the network is up to five times more than we expected.
“With many industry observers estimating electricity network upgrades will cost tens of billions of dollars, this shows we could save billions as a country just by moving when we use power.
“Not only can flexibility save the country billions, it can also give people and businesses more choices and control over their energy use, helping them save money themselves as well as lowering costs for others.”
A cost-effective tool for the country
EECA’s report on the national potential of flexible electricity use – commissioned from independent consultancy Jacobs – concludes that up to 1,800 MW of demand across New Zealand could be shifted away from peak times and into demand “troughs”.
Because poles and wires and electricity generation are built to cater for relatively short demand peaks, busy times of high demand such as winter evenings play an outsized role in driving power bills up.
The report found up to a quarter of peak demand could be shifted to quieter times, often at a lower cost than alternatives (for example, boosting generation at peak times using peaking plants).
The modelling shows much of the roughly 1,800 MW** of “shiftable” demand available would be cost-effective to access, compared with upgrades across our lines networks and/or generating more electricity.
The modelling shows that flexible electricity use could supply 922 GWh, the same volume supplied by peaking generators in 2023, at an average cost of $77 per MWh – an annual cost of $71m, or $116m cheaper than the estimated cost of operating gas peakers. ***
The report says the potential savings will grow as the country electrifies and generates more of its energy from intermittent sources such as solar and wind.
Putting savings in the hands of electricity users
The report found people and businesses need incentives to encourage them to shift when they use electricity.
A survey of major electricity users for the report found the majority would be willing to shift some of their electricity demand in return for financial incentives.
“To unlock the full potential, people and companies should be encouraged to shift their load – as the new research tells us where to start to tap into the benefits at the lowest price. Based on the findings it’s clear how crucial it will be for electricity lines companies to be thinking about how they can enable this and share the benefits of deferred upgrade costs with their customers,” says Dr Pelenur.
“Lowering peak demand on the network would put downward pressure on power bills by delaying the need for costly upgrades to the country’s poles and wires.
“It would also lessen the need for high-cost electricity generation to supply demand at peak times, for example gas-fired generation or other alternatives.
“Not only would this ease pressure on wholesale gas prices, it would lower carbon dioxide emissions by shifting more electricity demand to when clean, low-cost wind and solar power is most plentiful.”
Early movers can save now
Some savings on household bills are already available now by taking advantage of intelligent technology – for example, retrofitting home appliances such as heat pumps and hot water heaters with low-cost devices that optimise electricity use.
“Retrofitting smart, connected kits to manage when household appliances use electricity can be low-cost and has been under testing by EECA for some time,” says Dr Pelenur.
“This is a very low-effort way to shift some household electricity use off-peak, without impacting people’s lifestyles.”
Early EECA testing in household settings shows smart systems can deliver immediate efficiency gains and reduce bills by around 16%. ****
For households with solar, existing savings on bills can be above 50%.
These potential savings will be much bigger if flexible energy use is enabled at scale and people are paid directly for shifting electricity use off-peak.
“EECA is also looking at how different systems and devices can communicate in a common, transparent way to avoid consumers being ‘locked-in’ to proprietary systems and enable them to freely shift between systems and providers,” says Dr Pelenur.
“This opportunity is not just for people with EVs and solar panels – we’ve been exploring low-cost controls on hot water cylinders, a major energy user in most households, so it’s accessible for everyone.
“The early results from the pilots show households are saving on their bills right now – and that doesn’t include the system benefits of deferring network upgrades.
“We know flexible energy use is taking off internationally and we want to make sure New Zealand is also positioned to make the most of this savings opportunity as demand for electricity grows.”
ENDS
*$3 billion potential savings based on Transpower's estimate of $1.5 billion in system cost reduction for each GW of peak demand reduction.
** The total potential of around 2300 MW in the report is made up of 1,700 to 1900 MW shiftable electricity use (e.g. EV charging, heating, appliances, commercial HVAC) and ~500 MW curtailable load (e.g. industrial processes).1800 MW is the approximate estimate ofelectricitydemand that could be shifted in time and doesn’t include potentially curtailable or ‘shed-able’ load.
*** Estimate based on 2023 peaking generation data from the Electricity Authority with a 2025 gas price of $15/GJ, giving a total cost of $187m per year for gas peaking. While flexibility would be unlikely to displace existing peaking generation, it might defer construction of new peaking capability.
**** Preliminary results from the Flextalk pilot by EECA and the Electrical Engineers Association have found an average 16% reduction in energy use and costs for homes with smart hot water, heat pump, and an energy management system.Savings were upwards of 50% for households that also had solar panels.
BACKGROUND FOR EDITORS
- The Full Potential of Flexible Electricity Use in NZ report is the first analysis of the full potential of demand flexibility on a national scale to use real-time electricity demand data. Previous estimates were based on assumptions about the shape of peak electricity demand, for example the FlexForum’s 2025 demand flexibility estimate: 250901-FlexForum-article-flex-in-the-system-today-2.pdf
- The report looked at potential to lower both national and regional demand peaks.
- The report pinpoints which industrial activities have the most potential to change when they use electricity – and where they are located. Farming in Canterbury, food processing in Waikato and Bay of Plenty and metals manufacturing in Southland and Auckland, all offer low-cost, high-impact opportunities.
- The report identified barriers to reaching the full potential of flexible electricity use, including limited deployment of smart devices and a lack of interoperability.
ABOUT FLEXIBILITY AND DEMAND PEAKS
- Being more flexible with our electricity use means shifting or reducing electricity use to better match supply, relieve grid stress, and avoid costly infrastructure, especially during New Zealand’s winter morning and evening peaks. Smart home energy management kits, rooftop solar and batteries can help with shifting demand, as can clever use of new technology by businesses and industries.
- Periods of peak demand are important for driving electricity bills because generators and lines companies invest billions in ensuring the network can cope with relatively short periods of maximum demand. Electricity generation at peak times is also often relatively expensive.
- While some activities such as cooking are inconvenient and undesirable to shift, others, such as heating hot water and some industrial processes can be shifted without any negative impact.
- Lower-cost, renewable sources of electricity such as wind and solar are often less available at peak times such as winter evenings – but can be more fully harnessed when more power is used during the day or when electricity or heat is stored during the day for use later, for example in a battery or hot water cylinder. Battery and/or heat storage can be part of unlocking flexible electricity use.
- Deploying and enabling flexibility can put downward pressure on the future electricity prices by reducing expected peak demand and deferring or reducing the need for high-cost peaking generation and lines upgrades.
- It also helps keep gas affordable by reducing reliance on gas-fired generation during peak periods, easing pressure on wholesale gas prices.
Expert Reaction
These comments have been collated by the Science Media Centre to provide a variety of expert perspectives on this issue. Feel free to use these quotes in your stories. Views expressed are the personal opinions of the experts named. They do not represent the views of the SMC or any other organisation unless specifically stated.
Dr Le Wen, Senior Lecturer in the Department of Economics, University of Auckland, comments:
“For families, this is a massive equity issue. While high-income households can invest in 'capital-heavy' solutions like solar or batteries to lower their individual bills, the real win from shifting peak demand is the systemic cost reduction. Demand-side flexibility allows us to defer billion-dollar grid upgrades and avoid paying $187m per year to cover peak demand with gas, lowering the baseline cost for everyone. The more efficient market directly combats energy inequality, protecting those who can't afford the upfront cost of new tech from rising infrastructure levies.
“It’s easy to ask a household to run the dryer later, but for a dairy factory in Waikato or a steel mill in Auckland, it’s not that simple. In economics, we describe this as inelastic demand, the idea that some users will not significantly change their behaviour even if the price of electricity triples. Heavy industries, such as food processing in Waikato, farming in South Canterbury, or metals in Auckland, are prime examples. For them, the opportunity cost of shutting down a production line far exceeds the cost of expensive peak electricity. Output takes priority over electricity price, because stopping production puts jobs and supply chains at risk.
“The report suggests addressing this by shifting from reliance on price signals to automated flexibility. By using smart energy management systems to manage storable or curtailable loads, factories can continue operating while technology quietly optimises when electricity is drawn. When implemented well, this approach transforms what was once an inflexible industrial load into a national asset, stabilising the electricity market for everyone, effectively acting as a ‘virtual battery’ that helps keep exports competitive and household power bills stable.”
Associate Professor Michael Jack, Director of the Sustainable Energy Programme and Co-Director of the Otago Energy Research Centre, University of Otago, comments:
"It is great to see this systematic study of the national potential for demand flexibility across the residential, commercial and industrial sectors and the quantification of the economic benefits. Independent research carried out at the University of Otago supports these findings and has highlighted the potential of demand flexibility for optimizing the efficiency and value of New Zealand’s existing electricity grid infrastructure.
"Our research has also shown that demand flexibility will become even more important as the electrification of other sectors, like transport, accelerates and the percentage of variable renewable supply increases in the future. There is huge international interest in this area, and with our high percentages of renewable electricity, NZ could be a world leader in demand flexibility if we embrace this opportunity early enough."
Professor Barry Barton, School of Law, Politics and Philosophy, University of Waikato, comments:
"The study shows that we have alternatives to consider before committing ourselves to expensive network upgrades and gas peakers. We can be flexible in how we use energy. This is especially important now when the foreseeable increases in power prices will mainly be driven by network maintenance and upgrade costs. The report shows that the Electricity Authority, the Commerce Commission and companies need to make sure that everyone profits from non-network solutions, whether at home, on the farm or in industry."
Professor (Ahorangi) Nirmal Nair, Waipapa Taumata Rau - University of Auckland, comments:
"Strategies like ‘demand-side flexibility’, as proposed in this report, have been widely touted as ways to increase value for electricity retailers and industrial customers in Aotearoa New Zealand for a couple of decades now.
"However, it’s extremely difficult for a retail customer to benefit from demand-side flexibility when the majority of what they are paying is for almost fixed costs, like transportation, retail, regulatory, and GST charges. Expecting them to invest in more technologies to give value to other upstream agents like electricity retailers and distribution companies appears unreasonable, if not unfair.
"Electricity transmission and distribution will increase as we plan for a 2050 New Zealand with more electrified transportation, digitalization and AI. If the main intent of demand-side flexibility is to manage electricity price-hikes for customers, the charges that each customer pays to the various entities of this critical infrastructure need to be revisited.
"For example, New Zealand Aluminium Smelter, the largest electricity customer in NZ, got a great deal when they renegotiated their latest 2023 long-term contract with NZ’s largest gentailer, Meridian Energy, for a supply side demand response during low-lakes and energy insecurity. One could say that this is also a demand-side flexibility product, but for a large-scale electricity customer.
"It will be prudent for EECA to take into account the work already done on demand-side flexibility over the years by the Electricity Authority and its various working groups (another regulatory entity supported through electricity levy), lest it become another ground-hog exercise."
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