A new initiative between national grid operator Transpower and businesses will help ease electricity demand pressures in the upper North Island at crucial times, says Energy Minister Gerry Brownlee.

Transpower said yesterday that it had started discussions with interested parties on a multimillion-dollar smart grid initiative in the upper North Island to help defer investment in new assets.

The project, to which about $10 million in initial funding has been allocated, is part of the $110 million programme approved by the Electricity Commission last month to bring greater reliability in the region.

Transpower chief executive Patrick Strange said businesses would be paid to participate, and their non-essential electricity usage could be reduced under certain conditions.

A limited trial of similar technology recently in the South Island was successful, he said.

Mr Brownlee said it was pleasing to see Transpower and business working together on such an initiative.

"This technology can be quick and cost-effective, and it heralds an important step towards how electricity demand might be managed in the future," he said.