Frequently asked questions

Demand forecast modelling

What are some of the initial findings arising from the Commission's new demand forecast model?
Annual growth in demand is forecast to average 2.0% a year over the next 20 years. As a result, by 2025 demand is projected to have increased by 45% to 50%. In the shorter term, average growth is expected to be closer to 2.7% per annum based on currently forecast GDP and population growth, gradually reducing to a level of around 1.5% per annum by 2025.

How reliable is the new model?
No model can predict with 100 per cent accuracy future demand for    electricity but this model is an important step toward a more analytical assessment of electricity demand and risk management in the long term. It has been independently reviewed by the New Zealand Institute of Economic Research.

Obviously over time there are events, such as extraordinary weather and certain economic and demographic changes, which cannot be predicted. The impact of these events can still be quantified by the Commission or other parties by using the forecast for sensitivity analysis.

What impact, if any, will the Commission’s new model have on electricity efficiency?
The model is used as a tool to assist in the forecasting of growth in peak demand, allowing us to identify ‘pressure-points’ in the industry. By doing so, we are able to highlight the benefit of more efficient electricity use – a key duty of the Commission – and make appropriate recommendations for electricity saving and conservation.

Is demand forecasting the answer to risk management in the electricity industry?
No. It is only a tool to assist the Commission and the industry assess the level of investment necessary to meet New Zealand's electricity needs. The Commission's prime duty, as laid down in statute, is to ensure electricity is produced and delivered to all consumers in an efficient, fair, reliable and environmentally sustainable manner. Notwithstanding the challenges of the weather, economy and demography of the country, the demand-forecasting model is an important contribution to the Commission's analytical approach to risk assessment.

What information does the model provide for generation planning?
The Commission’s role is to provide information to help people make investment decisions, including generation development. The demand forecast forms a component of a broader set of industry information available from the Commission.

Will the model guarantee that the electricity industry will meet consumers' needs in the future?
No one can guarantee the level of future demand, but the model should make it easier for the Commission and the industry to assess the level of reserve energy necessary to meet New Zealand's electricity needs in ‘dry’ years. The model can be factored into long-term business plans, but it complements rather than substitutes for risk-management and business-continuity contingency planning.

How relevant will the new model remain over time?
Demand modelling requires continual analysis, based on new information becoming available and the latest modelling techniques. The Commission has a policy of continuous improvement in areas of its work, including demand forecasting and database development. Planning ahead in this industry is obviously critical to New Zealand’s development. The Commission’s forecast model is an important contribution in facilitating the stability of New Zealand’s electricity needs.

How often will you be releasing updated findings on your forecasts and what sort of new information might you include?
The Commission’s recent comprehensive review of electricity demand modelling has resulted in the selection of an updated model structure for forecasting.  The new model also uses updated historical and forecast data that has become available quite recently. We intend to continuously update our model and, going forward, we plan to include information on regional forecasting.