Parliament has passed legislation to repeal a ban on the building of new coal and gas-fired power stations.
The Government bill passed under urgency on Thursday by 63 votes to 58, with backing from support parties ACT and United Future.
Labour, the Greens and the Maori Party opposed it.
The 10-year moratorium on coal or gas-fired power stations was introduced by the previous Labour-led government, and was welcomed by environmental groups but did not find favour with the business sector.
It aimed to reduce the impact of fossil-fuelled electricity generation on climate change, by creating a preference for renewable electricity generation.
Energy Minister Gerry Brownlee said while the Government strongly supports renewable energy, the moratorium put the country's security of supply at risk.
Former Energy Minister David Parker said legislation already in place had allowed for an exemption if security was at risk.
Green Party co-leader Jeanette Fitzsimons said the government had decided against a brighter future on renewable electricity.
She said the logical way to significantly reduce emissions from the electricity sector is to build renewable energy facilities not thermal power stations.
Contact in no rush
Earlier this week Contact Energy, the country's biggest energy company, said it had no plans to build fossil fuel power stations despite the Government's move to permit such a step.
Spokesperson Jonathan Hill said the company would not rush in to build gas-fired generating stations just because the Government says it can.
Contact's view is shared by the other big affected company, Genesis Energy.
Prime Minister John Key said power supply needs to be increased and that the previous government is responsible for price rises affecting consumers, such as those announced by Genesis Energy.
He said supply issues are a reflection of previous poor government policy.
