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Recent key developments in MAKE│NZ
As mentioned last week – we’ll be spending the next few weeks introducing you to our Directors. Kicking things off, we asked our President, Ben Bainbridge (Associate Director, Repair Operations & Digital Technology, Christchurch Engine Centre), a few questions:
Can you share a quick summary of your background in manufacturing and what got you interested in the field?
The making of and understanding how mechanical things worked always drew me in so it was a natural progression that I started an apprenticeship as a machinist in my hometown of Westport.
During my training I received broad experience across heavy industry, marine and general engineering sectors.
Once I completed my apprenticeship I moved to Europe where I moved into electrical as well as mechanical working for a French construction company.
Apon my return in 2001, I joined the aviation maintenance sector through Pratt and Whitney – Air New Zealand trading as the Christchurch engine Centre where I remain today in management.
Seeing the results of a good design into manufacture is something I find very satisfying, particularly when something you have made is delivering value or a service to an end user.
What got you interested in joining the MAKE│NZ board?
Helping others where possible. After a few fireside chats it become clear that a lot of the conversations were describing challenges faced by business leaders, and their people.
Sometimes the smaller issues (as well as the big) can have a negative impact on the success of the organisation and customer satisfaction. Often the situation could be helped by networking with people in the MAKE community, this was one of the main drivers in joining and something I like to discuss at board level.
What do you think is the biggest opportunity—or challenge—for manufacturing in the next 5 years?
For opportunities I’d say Aerospace technology and any supply chain linked to it is an emerging opportunity in New Zealand, we seem to do it well and get good results. (kiwis do things well)
Within organisations, I feel there is a lot of opportunity in lean manufacturing techniques being adopted to combat cost, drive out waste and bring up the margins. I’d like to see the MAKE community share this across its members to lift each other up where possible.
If I had to land on 3 main challenges I’d say skilled labour force access, cost (in many forms), geopolitical influences which in turn influence the first 2 challenges.
I also believe that kiwis face a lot of challenges not only geographically but also from a “cost of doing business” perspective. We have seen plenty of large / med organisations shut shop based solely on utility costs, electricity being the main culprit.
If you could offer one piece of advice to emerging leaders in manufacturing, what would it be?
Be people centric, they’re your most important asset and make or break your organisation – develop them and be open with them. Bring them along in your decision making where appropriate as quite often they see what you can’t from their level.
Outside of manufacturing, what’s something you’re passionate about that people might not know?
I like to go to the gym, jet skiing & jet ski fishing out at sea, playing golf….a lot, much to the displeasure of my lovely partner.
Recent key developments in New Zealand
In response to high electricity costs, which have contributed to the closure of some large manufacturing businesses, the New Zealand government had commissioned a major review of our electricity sector. It has now decided not to implement key recommendations from that review that were aimed at and necessary for opening up a market that is currently dominated by the four big gentailers.
•The public debate over the past couple of days on unemployed youths and what to do with them could serve as a reminder to manufacturers: There is quite a bit of effort on promoting careers in manufacturing to young people, but are we doing enough to accommodate those that are prepared to follow the call? It looks like there are young people out there who would be an asset to any manufacturer but they’re finding it really tough to get an apprenticeship.
•A key requirement for New Zealand manufacturers is to have secure access long term to energy supplies at prices that allow them to remain globally competitive. In addition, manufacturers that are exposed to demands from their customers to account for and reduce their carbon footprint, or are expecting those demands to be imposed in future, will have an interest in their energy supplies coming from renewable resources to the maximum extent possible.
How does the government’s release from last week, Securing New Zealand’s energy future, stack up in that respect? The release contains a number of initiatives and actions the government has announced to ensure the provision of ‘reliable and affordable’ energy to households and businesses. It is government’s response to recommendations in an extensive electricity sector review (Frontier Report) commissioned by government (MBIE) earlier this year. There isn’t enough space here to comment on all the recommendations from the review, and/or the government’s response to it. A summary of those, provided by government, can be found here.
For today, we’ll focus on two aspects:
- Is there enough competition in the electricity market to meet the government’s own objective of “providing reliable and affordable energy to households and businesses”?
- What – if any – are the barriers to increasing competition in the market?
In response to the first question, and referring to the electricity market, the Frontier Report states that “With respect to generation and storage, our view is that, except for investment to address dry-year risk and access to firming capacity for all market participants on an equal basis, the market is working to deliver new investment in generation”.
MBIE also commissioned a second, independent report by another international consultancy, NERA, to review the findings and recommendations in the Frontier Report. NERA’s review agrees with the fundamental assessment of New Zealand’s electricity market: “We agree with Frontier’s assessment that the current market design provides incentives for investment in renewables.” But it also states that: “We agree that there may be market power risks associated with granting the four gentailers control over dry-year risk.”
Both statements point to the answer to the second question. To put pressure on the market dominance of the four big gentailers will require the investment in additional generation and distribution of electricity from renewable sources made by independent operators.
The main reason such investment has not happened on the scale required to date is simple. Any supply of electricity from renewable sources requires a back-up, called ‘firming’. That back-up will have to be able to provide sufficient amounts of on-demand dispatchable electricity on terms that don’t put independent generators at a disadvantage in comparison to the existing gentailers. At the moment, and not counting geothermal generation, New Zealand’s firming options are:
- Huntly power station, running on gas and/or coal, owned and operated Genesis Energy [Genesis]. The station has five operational units with a combined output of maximal 1204MW
- Two ‘Peaker’ natural gas turbines at Stratford (Taranaki), with a capacity of 105MW each. The site also has a 377MW combined-cycle plant that is at the end of its service life and was scheduled to be retired in 2025. However, Contact Energy [Contact], the owner of the Stratford site, have offered to keep the unit operational as a back-up until the end of 2025
- In May this year Meridian Energy [Meridian] opened its Ruakākā Battery Energy Storage System [BESS] which has a maximum output of 100MW of electricity and storage capacity of 200MWh.
It should be clear from the above that, as far as firming options go, Genesis’ Huntly Power Station is the major resource. Genesis supplies firming electricity through commercial contracts. Others can purchase such firming electricity supply but do not have any guarantees on price or volume unless they purchase forward contracts. At the moment, such contracts are available from Genesis as Huntly Firming Options only, which offer guaranteed volumes, but no fixed prices (“Similar to the electricity spot market, the marginal successful bid price will set the annual premium for all.”). That makes it difficult, if not virtually impossible, for independent operators relying solely on wind and/or solar generation to operate profitably; they simply don’t know at what price they can access firming electricity when they need it.
This also applies to the other three major gentailers (Contact, Mercury and Meridian) but each of them has at least some internal buffers available in the form of their own hydro storage and/or geothermal generation.
Earlier this year, the four gentailers approached the Commerce Commission [ComCom] with a request for approval of a collaborative agreement between the parties to jointly invest in the upkeep of the Huntly Power Station in return for a guaranteed supply of firming electricity at a fixed price over a period of 10 years. In a Draft Determination, the ComCom has indicated it will approve of such an arrangement. Thus, the big four are ‘off the hook’ when it comes to secure access to firming electricity. But nobody else. This ‘special deal’ will serve to widen the advantage gap the existing gentailers have over any potential new entrants to the renewable electricity generation market.
As indicated above, the Frontier Report has identified the above status quo as a major obstacle to further investment in additional electricity generation from renewable sources. Hence it puts these first at the list of its Top 10 Recommendations:
- “For the Crown to take primary responsibility for security and selling on-demand dispatchable capacity and energy
- That independent retailers, generators and large direct customers have priority access to this firm capacity and energy at all times”
In more detail, the report recommended that:
- “The Crown will fund thermal generation resources in New Zealand through either contracting or ownership of assets, with a primary goal of underwriting the sourcing of fuel for thermal generation and other forms of dispatchable generation.”
- “Independent retailers, generators and battery owners will be empowered by ensuring they have priority access to capacity – effectively providing them with virtual vertical integration.”
- “It(*) will also contract like all other generators, noting a portion of contracts will be reserved for independent operators to have first right of refusal.”
*refers to NewCo, the new entity to be established with responsibility for securing and selling on-demand dispatchable capacity of electricity.
In other words, the Frontier Report is essentially recommending that government take control of fossil fuel firming generation to ensure equitable access for all parties for access to fossil fuelled firming capacity.
It is of interest also to note that the Frontier Report, in contrast to the draft ComCom determination mentioned above, recommends “that this agreement does not proceed.” The reason provided is that “the currently proposed Heads of Agreement for Huntly would entrench the potential for market power in the market and would not solve the long-term issues of fuel supply and investment in new capacity.” The report continues that ”Furthermore, to the extent that Genesis recommences the Huntly Firming Option, it is our view that this option will not drive new investment in the market for assets that provide the necessary firming service and also means that independent operators remain dependent on gentailers for firm capacity.”
And the government’s response? It “agrees with the diagnosis” (in the Frontier Report), but not with the recommended solution to fix the problem that keeps new generators from investing in New Zealand. Instead, it will “develop a Regulatory Framework to incentivise the sector to invest in firm generation.” Neither this, nor the government’s Fact Sheet outlining in more detail – without being specific – what such a Regulatory Framework will look like, is providing us with much confidence that the government is willing to take the definitive action required as suggested in both of the reviews it has commissioned.
Apart from the Frontier Report, and the NERA Review, MBIE commissioned another substantial external review of the recommendations in the Frontier Report. The cost for all of these reports has not been published, but it can’t have been a cheap exercise. Was it a good use of taxpayers’ money, if key recommendations are being rejected?
And what did ‘The Market’ have to say about the government’s announcement?
| Company | Price Movement | % Change | Closing Price (Oct. 1, 2025) |
| Contact Energy | +$0.08 | +0.88% | $9.18 |
| Genesis Energy | +$0.05 | +2.13% | $2.40 |
| Mercury Energy | +$0.09 | +1.35% | $6.77 |
| Meridian Energy | +$0.26 | +4.67% | $5.83 |
Recent key developments in the World
•The law of (presumably) unintended consequences in action: The production of Tesla cars for the Canadian market has been shifted from the US to Germany, and the same applies to certain models of CLASS combine harvesters.
•How do we know how the manufacturing sector is developing in key manufacturing centres around the world? Well, one of many sources of information we can use is the number of industrial robots deployed in each country, and how these numbers have changed over the past few years. Such a comparison will only make sense, of course, for countries with significant share of long-run manufacturing operations. Here are some illustrations, provided by the International Federation of Robotics. First if we look at numbers overall – it’s worth noting that the numbers of new installations have been lower than in 2023 for four of the five biggest ‘industrial robot countries’:
When we look at growth in different sub-sectors of manufacturing world-wide, we can see that the big growth areas are Metal and Machinery, and Food – the latter off a low base:
That trend comes even more into focus when we look back further:
And here is the breakdown into sectors for some key countries:
•Away from the limelight, recent developments in global trade are making life hard for (most) US farmers. The sources for the data can be found here:
The drop in agricultural exports is not confined to China, however, and only partially compensated by increases in sales to other countries:
Overall, US exports of agricultural products are down, while imports are up:
At the same time, recent import tariffs are driving up farmers’ input prices:
Farmers will now again look at central government for subsidies. US Farmers have been receiving massive subsidies under varies administrations for decades, so they will naturally put their hand out again this time around. With what success, given the tight financial situation government finds itself in, remains to be seen.
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