The Other Path: How New Zealand Can Grow by Treating Flexibility and EVs as Infrastructure
The BCG Energy to Grow report usefully describes the challenges facing New Zealand’s electricity system as domestic gas declines and demand rises. It does not, however, fully explore a second path that already exists alongside the incumbent one. This path does not rely on LNG, does not require government capital, and does not preserve scarcity as a design feature. It relies instead on flexibility, abundance, and private investment that is already happening.
This alternative begins with a simple observation. New Zealand households and businesses are already buying the assets the system needs. Electric vehicles (EVs), batteries, solar, heat pumps, and smart appliances are being funded privately because they make sense for consumers. An electric vehicle is not just transport. It is a battery that sits parked most of the time. With the right rules, it can charge when electricity is plentiful and cheap, and support the system when demand is high. The capital cost is paid for mobility. The grid gets flexibility without buying the asset.
At scale, this changes the economics of electricity. Scarcity pricing (current system) works only when demand is inflexible and supply is limited. Flexibility removes that condition. When millions of vehicles and devices respond automatically to price signals, peaks flatten. Price spikes become rare. Coal and gas are not needed to protect reliability. Over time, this pulls the system away from fuel insurance and toward asset abundance.
This does not mean ignoring dry-year risk. Dry years are an energy problem measured in terawatt-hours, not a short-term power problem. Flexibility and EVs solve this by deliberately overbuilding renewable generation and firm renewable supply. Geothermal provides steady, domestic, weather-independent energy. Wind and solar are built beyond average needs. In wet years, surplus electricity is not wasted because flexible demand absorbs it. In dry years, that flexible demand steps back, freeing energy for households and essential services without importing fuel.
Electric vehicles play a specific role in this system. They handle short-duration flexibility. They cover evening peaks, rapid ramps, and contingency events. They do not solve seasonal shortages on their own, but they remove the need to burn fossil fuels for daily balancing. That separation of roles is crucial. Seasonal energy is solved by firm renewables and overbuild. Short-term volatility is solved by flexibility.
This pathway does not require government to fund EVs, batteries, or power stations. It does require government to join the dots across the agencies that currently operate in silos.
The Electricity Authority controls market participation rules. It can enable aggregated flexibility, vehicle-to-grid participation, and dynamic pricing products for willing consumers. That allows private assets to show up as real system capacity rather than being invisible.
The Commerce Commission regulates networks. Its current framework rewards capital expenditure through regulated WACC-based returns. That made sense when poles and wires were the only option. In a flexibility-rich system, it creates bias. Flexibility and EVs require a shift so networks are indifferent between reinforcing infrastructure and procuring flexibility when reliability outcomes are the same. That is not deregulation. It is updating incentives so the cheapest solution wins.
MBIE holds the energy strategy and industry lens. Under Flexibility and EVs, electricity is treated explicitly as an economic enabler, not just a utility. Cheap, stable power attracts value-add industry. Forestry becomes a processing industry rather than an export industry. Engineered timber displaces imported steel and concrete, creating more jobs per unit of resource and reducing exposure to fossil fuel inputs.
Treasury sees the full balance sheet. This is where the trade-off becomes unavoidable. New Zealand spends around $6 billion each year importing fossil fuels, primarily oil. Crown dividends from majority-owned gentailers are around $600 million per year. Protecting scarcity to preserve those dividends is a poor macro-economic trade when flexibility and renewables can eliminate the import bill entirely. Flexibility and EVs accepts lower scarcity rents in exchange for a much larger and permanent gain in national income, resilience, and productivity.
Nicola Willis does not need to pick winners or write cheques to make this work. Her role is to set a clear direction that electricity, flexibility, and EVs are strategic infrastructure. That direction allows agencies to align their advice. It allows regulators to adjust incentives. It gives investors confidence that abundance, not scarcity, is the future profit model.
The risk of not taking this path is subtle but serious. LNG infrastructure, once built, becomes permanent. Scarcity pricing, once defended as essential, becomes self-justifying. New Zealand remains exposed to global fuel prices it cannot influence, even as domestic alternatives become cheaper every year.
Flexibility and EVs is not radical. It is already underway in fragments. World EV uptake is rising. Renewables are being built. Flexibility technology exists. What is missing is coordination and intent. Joining the dots does not mean more government spending. It means recognising that the transition has moved from scarcity management to abundance management, and adjusting the rules accordingly.
fig.1 NZ BEV uptake has been stalled by government policy
If Energy to Grow is taken seriously as a title, then this is the path that most directly serves it. Growth comes not from managing decline carefully, but from redesigning systems so that private investment, consumer participation, and domestic resources replace imports and volatility.
References
EA Trading Conduct Reports – 21 Dec 2025, hydro lakes spilling, coal/gas operating https://www.ea.govt.nz/data-and-insights/trading-conduct-reports/