Windless and dry years a risk for the New Zealand energy system

Periods of dry and windless weather test New Zealand’s ability to keep the lights on. The Boston Consulting Group’s (BCG) latest recommendations and New Zealand’s government’s recent plan diverge on how best to strengthen energy infrastructure.  BCG calls for accelerated investment in firming capacity, long-duration storage, and gas market resilience, while the current policy focuses on near-term affordability. 

What is the dry and windless year risk, and why does it matter for us?

New Zealand’s electricity system is highly renewable – over 80 percent of our power comes from renewable sources such as hydro and geothermal, but recent events have revealed its vulnerabilities. In 2024, hydro lake levels fell to their lowest in years while wind generation was also weak. The lack of renewable energy supply led to a surge in the wholesale prices, affecting households and undermining industrial competitiveness. 

What energy investment is required?

Infrastructure investment in New Zealand has failed to keep pace; the Infrastructure Commission estimates a shortfall of more than $100 billion across public infrastructure over the next decades, including gaps in energy infrastructure as well as transmission upgrades. Without strategic investment, we remain exposed and vulnerable to dry-year shocks like those of 2024, with wider economic implications.

The trade-off across time

BCG describes the challenge as a trade-off between short-term management of energy affordability and long-term capacity investment. The government currently prioritises affordability; however, focusing on the short-term will push risks into the future. With global warming and climate change likely to increase the frequency of extreme climate events, including windless and dry years, that in turn risks tightening energy supply and raising prices. As renewables grow, our energy system will become more vulnerable to extreme climate events.

The roles and responsibilities of government and energy suppliers

Inadequate investment in energy infrastructure risks higher future costs and weaker energy security, which could undermine New Zealand’s industrial competitiveness. At the heart of the issue lies the balance of responsibility between government and energy suppliers in funding the system. The government’s role is to set clear policy direction and ensure timely investment to support a resilient energy future for New Zealand.