Former Electricity Authority chair Brent Layton received the Editor’s Award at Wednesday night’s New Zealand Energy Excellence Awards dinner in Christchurch.
This award recognises an individual who has made a significant and long-term contribution to the New Zealand energy sector.
The sector has changed a lot in the past few decades, and Layton played a major role in guiding and managing many of those changes.
His long, distinguished and diverse career included major contributions to regulatory economics, and to the structure and regulation of electricity markets.
Layton studied economics at Victoria University, earning a series of degrees, culminating with a PhD in economic history.
After finishing his studies, his first job was at the University of Canterbury, from 1980 to 1984, which was followed by several years as a commodities broker.
After that came 12 years as a full-time company director on a wide range of boards.
In the 1990s, his directorships included the Electricity Market Company.
There he helped develop the rules for New Zealand’s first competitive wholesale electricity market.
From 1997 to 2000, he also sat on Transpower’s board.
This wide-ranging background was good preparation for the next phase of his career – seven years with the New Zealand Institute of Economic Research, five as chair and another two as a consultant.
At NZIER, a significant part of his work involved analysing energy sector issues.
These issues included:
- proposed rule changes
- generators’ applications for RMA consents
- developing futures products
- regulation of lines companies
- industry governance
- market design
Layton learned a lot and his work attracted attention.
Guiding reform
In 2009, he was surprised to find he had been appointed to chair the Brownlee Review of the electricity market.
This review was largely intended to help resolve some big issues then plaguing the market.
The decade leading up to that time had seen steep rises in power bills.
Dry-year vulnerability also needed to be addressed.
At the time, Energy Minister Gerry Brownlee noted that over the previous decade the country had undergone four one-in-60-year dry spells.
The Brownlee Review was thorough. Its recommendations were far-ranging.
The main one was replacing the Electricity Commission with a far more independent body that would have Code-making powers.
The following year, Layton was appointed as chair of this new regulator – the Electricity Authority.
He went on to hold this role for 10 years.
The Authority’s achievements over that decade include:
- establishing a viable hedge market for electricity
- introducing Financial Transmission Rights to enable hedging of transmission charges
- providing an environment in which generators could continue to make substantial investments, overwhelmingly in renewables
- increasing the number of retailers in the market
- working with lines companies to foster distribution price reform
- formulating a transmission pricing methodology compatible with a full energy-only nodal price wholesale market
Platform for further change
Regulating a small market like New Zealand isn’t easy.
The regulations must protect consumers, but they must also enable profits that foster investment and innovation.
The electricity sector and the technologies available to it are continuing to change, and the sector now has significant climate change-related responsibilities.
Gas supply is constrained; New Zealand has introduced the Zero Carbon Amendment Act; and the Government has said it wants to squeeze thermal fuels from its generation mix.
The price and energy security problems that Brownlee identified have returned.
Therefore, market regulations must continue to evolve to enable further decarbonisation and electrification.
But the reforms Layton helped develop have served the country well, and have laid a foundation for further reform.