New Zealand has been hailed as “a world-class success story for renewables” by the International Energy Agency.

But the IEA has stressed that “security of supply cannot be taken for granted” and can be strengthened through a strategic reserve auction.

In a new report on New Zealand, the IEA says that the country’s unique hydro-based power system brings challenges for maintaining physical security of supply and the IEA believes that a purely market-based system may not provide a fully-effective response to low water levels at all times.

“Government policies, including targets and standards, are needed to open up the potential of energy efficiency in industrial heat, buildings and transport,” said IEA executive director Dr Faith Birol.

“Strong standards and policies will guide technology innovation and growth. New Zealand is a world-class success story for renewables and has excellent opportunities for using even more renewable energy in heat, but also in power supply and for the electrification of transport.”

New Zealand’s growing energy needs have outpaced improvements in energy efficiency – mainly because of its expanding economy and growing population.

The government has set ambitious goals to cut greenhouse gas emissions to 30 per cent below 2005 levels by 2030. However, the IEA notes that to be in line with the Paris Agreement, it will have to adopt policies “supporting the energy system transformation, encouraging greater energy efficiency, electrified transport and expanding renewable energy in the buildings, heat and industry sectors”.

The IEA applauds New Zealand’s electricity and gas market reforms and encourages market regulators to continue on this path. Despite ownership changes and partial privatisations, the electricity sector has only a few large players in combined retail and generation markets. However, the retail market is developing with smaller companies gaining ground across the country.

The report notes that “as the energy sector becomes more decentralised and local, with greater shares of wind, solar, battery storage and electric vehicles, the government should make sure that consumers and market participants are encouraged to build a smart system”.

“The widespread deployment of smart metering and the emergence of new technologies in New Zealand provide excellent opportunities for more efficient, innovative and competitive electricity retail and distribution.”