Conclusions
The international literature on electricity markets is still evolving. Competition and market power in electricity markets have been the subject of a substantial discussion in the international economics literature in recent years. One important conclusion is that market power in wholesale markets should be addressed in a forward-looking manner, focusing on measures such as robust transmission capacity to bolster competition. This paper also explained why achieving a market that sends efficient signals to prospective investors – so that the market achieves optimal levels of generation capacity – is cause for concern. None of these points argue for a fundamental revamping of New Zealand’s electricity policy or industry structure. This paper has pointed toward ways to “get incentives right” for competition and investment, within the broader context of the existing system.
