Vector Annual Report 2017

Combine PowerSmart’s proven portfolio of commercial projects with Vector’s energy network technology, expertise, resources and strong balance sheet, and the whole paradigm for how energy is made, where it’s made and who has access to it is challenged. Charging ahead Until now, the energy generation/retail model has been based on getting power from elsewhere and consumers paying for this in a largely fixed way. Solar and battery systems rewrite that. Not only do they enable a complete rescoping of the demand curve by shaving the peaks, they will also let households and businesses become generators and, through peer-to-peer trading, one day to buy and sell solar energy on their own terms. Households will be able to generate clean electricity on-site, to store it for use at any time and/or as a backup for uninterrupted power, and to convert any surplus from waste to revenue by trading locally. Bringing the changes home so that they become more widely accepted For this to go mainstream though, we recognised that the adoption of these new options had to expand beyond commercial projects. Our biggest national market is residential and being able to introduce smarter solar solutions into that market will deliver more choice for Vector customers and enable greater growth. Solar and batteries will go mainstream as costs continue to reduce and people build or renovate. Our decision to purchase E-Co Products Group, which trades as HRV and EES, will over time enhance Vector’s capacity to deliver solar solutions. While PowerSmart increases our existing expertise and delivers us the knowledge and experience to make solar and batteries work commercially, HRV is well structured to serve the residential energy solutions market. The current HRV offering includes ventilation, heat pumps, retrofit double glazing and water filtration. In addition to the healthy home focus, we anticipate HRV will increasingly target energy-efficient home solutions, including solar, ducted and hot-water heat pumps, and residential batteries. HRV’s other products already help keep people’s homes warm and dry. So it makes sense that HRV should incorporate energy solutions like solar energy and batteries into its product mix. Making it happen As a company, we won’t hesitate to invest in innovation, either by ourselves or through critical partnerships. For example, we began installing solar and batteries on our network more than four years ago. But we’re also not afraid to acquire other like-minded businesses where doing so aligns with our strategy and where it delivers the capability, technology and reach we need to provide our customers with solutions that give them maximum flexibility. Change is killing the learning curve. We don’t have time to learn what PowerSmart already knows, nor to build the customer base and brand recognition that HRV already commands. So it makes complete sense to us that we would welcome them into our business, combine our complementary strengths and work together to realise our vision of creating a new energy future in New Zealand and beyond.

COMMERCIAL IMPERATIVES:// Consumers want to make their own decisions. We are focused on addressing that market need and providing them with viable options. For example, batteries provide benefits for those who wish to maximise their investment in solar or move to a time- of-use tariff where they charge up when prices are at the lowest rates and use the electricity when market rates are high. We must invest wisely. Every dollar we save while meeting Auckland’s growing infrastructure needs is one that consumers don’t have to fund. SOCIAL IMPERATIVES:// We are at the front end of meeting the energy infrastructure needs of Auckland’s growth. We know we must act to move the city forward. It’s about making the right choices and providing customers options to support their long-term interests and needs. We cannot burden Auckland now or into the future with traditional network investment solutions when there are potentially cheaper, smarter options available. We believe it is in the long-term interests of our customers that we invest in and bring new energy solutions to market that enable our customers to access lower costs, and have access to greater control and choice. This initiative aligns with our commitments to three United Nations Sustainable Development Goals: Good Health and Well-being; Industry Innovation and Infrastructure; and Sustainable Cities and Communities.

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Vector://AR 17

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