VECTOR ANNUAL REPORT 2021 /
Chair & Group Chief Executive Report
The future of gas We were pleased to see the Climate Change Commission’s final advice recognises the complexities of a transition away from the use of fossil gas as an energy source in homes, businesses and industry. In particular, we support the need for careful planning and industry involvement around any transition away from gas. A balanced transition, rather than one that fails to plan sufficiently, is most likely to meet the objectives of Government, customers, and gas asset owners. If a clear transition path cannot be agreed, there are likely to be significant customer cost implications. For example, under the Climate Change Commission’s demonstration transition pathway, the cost to households, consumers and commercial buildings for appliance replacement and building modifications to transition away from gas could total $5.3 billion by 2050. There would also be major disruptions for businesses and households, as the investment requirements of maintaining gas infrastructure are passed to a declining customer base. A managed transition acknowledges the role low- emissions gases such as biomethane or hydrogen could play in the future, using existing infrastructure. This is something that we are exploring, along with others in the industry (page 19). We will continue to engage with New Zealanders and the Government, both together with our industry as part of the Gas Infrastructure Group, and on our own behalf, as final decisions are worked through on the best possible transition plan. Upholding the regulatory compact on gas distribution We note the Commerce Commission is tasked with resetting prices for regulated gas pipelines businesses from 1 October 2022. As part of this process, Vector intends to reconsider and possibly republish our 10-year forecasts for our gas distribution business in December, as we learn more at that time about
to continue to build on what we have established so far, and to further evolve the Vector cyber security capabilities against our cyber security strategy and roadmap. Regulation and policy for a new energy future The Climate Change Commission’s advice for the Government has highlighted a number of opportunities to improve the regulatory and policy landscape to better enable decarbonisation. A number of its recommendations align with views we have championed previously, including increasing recognition of the opportunities presented by distributed energy resources, developing a national energy strategy, and accelerating the adoption of electric vehicles. We look forward to continued positive engagement with our regulators and the Government to find solutions together. We share the Commission’s view that electricity networks should be appropriately equipped, resourced and incentivised to innovate so that they can play their role in helping electrification happen faster, and more equitably. In particular, we agree with the Commission’s comment, in its final advice, that our regulatory framework Businesses to undertake the innovation and investment required to meet climate change outcomes ”. We also note the Clean Car Discount scheme and the National Charging Infrastructure Plan. The uptake of EVs is something Vector has been preparing for over the past few years, most recently with our EV Smart Charging trial. This has underscored the need for EV charging to be smart, and connected to electricity network management systems. We strongly advocate for a standard requiring this for new EV chargers, otherwise our ability to use this technology to benefit EV owners, and all electricity customers, may be constrained. should be “ sufficiently adaptive to enable Electricity Distribution
the Government’s implementation of the Climate Change Commission’s recommendations around natural gas. Vector maintains that an active dialogue between regulators, the Government and industry around this reset is necessary to ensure any regulatory compacts are upheld, especially at a time when confidence needs to be maintained to justify the significant ongoing investments required to maintain the integrity of existing gas network infrastructure. infrastructure, products and services that are increasingly critical for our decarbonisation efforts. We must continue to leverage new technology, and business models, to provide our customers with cleaner, more reliable and affordable energy solutions into the future. In the coming year, while ensuring we deliver essential services efficiently and safely to our customers remains paramount, we are also focusing on delivering growth in our Australian metering business, developing and growing VTS, successfully responding to the challenges we’re seeing around resources, enabling Auckland growth, and ensuring a sensible gas transition. We are strongly positioned to enable decarbonisation and continue delivering strong results to our shareholders. FINAL WORDS Across our group we provide
Jonathan Mason Chair
Simon Mackenzie Group Chief Executive
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