Writing in the latest newsletter from the NZ Wind Energy Association CEO Eric Pyle rebuts the idea expressed by some market analysts that because there is significant excess of electricity generation capacity in NZ and demand is flat there is no need to build new generation. He tackles them on economic ground and it’s interesting that he claims new wind generation is justified in purely market terms, without invoking its environmental benefits.
Markets should encourage innovation and drive least-cost solutions. In the electricity sector this means lower cost generation is used instead of higher cost generation. This happens on an hourly basis in New Zealand’s electricity market. This does mean there will be excess capacity as more expensive generation is replaced over time by lower cost generation.