New Zealand serves as a model for effective energy markets and secure power system operation, says the International Energy Agency.

New Zealand serves as a model for effective energy markets and secure power system operation but the country needs to invest in energy efficiency and security measures in order to meet its climate goals, the International Energy Agency (IEA) has said.

In its latest review of energy policies in New Zealand, the IEA has praised the country’s electricity and gas market reforms. Its market structure – with only a small number of large players in combined retail and generation markets – gives the country a unique opportunity to deploy smart grid technologies and implement innovative policies in the retail and distribution markets.

Deploying more smart grid and energy efficiency measures should be a key pillar of New Zealand’s efforts to meet climate targets, says the IEA. “Government policies, including targets and standards, are needed to open up the potential of energy efficiency in industrial heat, buildings and transport. Strong standards and policies will guide technology innovation and growth,” Dr. Fatih Birol, the IEA Executive Director said.

Other issues faced by New Zealand’s energy system include security of supply, according to the IEA report. The country’s unique hydro-based power system brings challenges for maintaining physical security of supply, and the IEA has recommended that the government implement a strategic reserve auction.

Security of supply will also be strengthened by boosting investment in the country’s large oil and gas resource base. The role of gas has grown in the residential sector, in power generation, and industry. However, New Zealand is not connected to the global LNG markets and does not have long-term visibility for natural gas demand and supply, the IEA said.

New Zealand has set a target of cutting greenhouse gas emissions to 30 per cent below 2005 levels by 2030.