Power and Speed ​​« Standard

We are facing an electricity crisis and the government must respond, but what will their response do?

We should make it clear that the electricity supply + price surge is real.

As Minister Shane Jones warned parliament more than a month ago, soaring electricity prices are behind the impending closure of Winston’s Tangiwai sawmill and Karioi pulp mill outside Ohakune, resulting in the loss of more than 200 jobs in the region, while tourism, another cornerstone of the local economy, has been reduced to minimal levels as ski resorts are no longer reliable and the Tongariro winery has closed.

Methanex has temporarily halted all its operations in North Taranaki because it can make more money selling gas to power peakers. It is the world’s largest methanol producer but its future is uncertain as local gas is rapidly running out.

The Tiwai Point aluminium smelter has agreed to further reduce its energy use to help ease the country’s supply constraints. The agreement with Meridian Energy sees the smelter reduce its electricity consumption by a further 20 megawatts (MW) and provide energy to the national grid over a five-week period. The agreement is separate to previous demand response agreements signed with Meridian and Contact Energy.

Last year, another major gas user, Refining NZ at Marsden Point, ceased operations.

Our gas use has been declining for several years. On the exploration side, most explorers have abandoned New Zealand before new offshore exploration has begun because There just aren’t any new gas discoveries.

But MBIE did Massive and rapid downward revisions They think we have enough gas

New Zealand’s gas reserves fell by 335 PJ, or 20%, to 1,300 PJ between January 1, 2023 and January 1, 2024.

44% of the reduction is attributable to gas produced and used during 2023. The remaining 56% is due to revisions in reserve figures by gas field operators. Operators revised their reserve figures because they had a better understanding of how much gas was in the fields and how much could be produced from them.”

Not sure how many New Zealanders still have gas appliances, as they were encouraged to do so after the discovery of large gas fields in the late 1970s and 1980s, but I still have a gas hot water cylinder in my apartment which will take a while to replace.

Prime Minister Luxembourg is doing what he is entitled to do, which is to blame the previous government. In fact, these large-scale short-term crises are caused by very low rainfall and snowfall in the South Island during the winter, which means that our hydro generation is low, the four major generation retailers, especially Contact Energy, cannot generate as much electricity, and investment in new generation of any scale is continuously low.

They are Meridian, Contact, Genesis and Mercury. In August 2023, these companies announced their largest single-year earnings growth ever, with a total profit of $2.7 billion, or $7.4 million out of our wallets every day. Most of this goes to the government in the form of taxes and direct dividends.

Sure, companies like Mercury have invested recently, but generating so much profit is a strong incentive for them to streamline existing generation, insist on getting permits for new generation, and keep maximizing profits. So that’s what they do, and when we complain, they complain to the government and blame the permits.

Contrary to Luxon’s claim that the previous government had stifled energy investment, the electricity authority reported in 2023 that the committed generation This is slightly higher than the generation required to replace the remaining uneconomic thermal generation in the system..

The number of “actively advanced” power generation projects (mostly solar and wind) that could be completed by 2027 also increased compared to the previous survey, from 12,700 GHh to 20,800 GWh, particularly among large utility-scale projects.

of Does not involve pressuring power companies to lower pricesOr invest more money in new generator capacity more quickly.

If you’re wondering why there’s a rush to build an LNG port in Taranaki or Old Marsden Point, look no further than Meridian Energy. The company is already 51% owned by the government, who want to join the consortium that builds the facility. When Meridian’s dam levels are low, it has to hedge against falling lake levels by buying gas and coal-fired power from companies like Contact and Genesis. Cabinet will decide on the investment and site by October this year. That’s fast.

Labor and the Greens should face reality and admit that they do need gas to buy us time to get off oil. Longer than they think. Otherwise Luxon will pin the blame for increasing brownouts and company failures on his own noble energy-saving measures for 2017-2023, and we’ll likely agree with him every time we open our power bill.

On the current trajectory, we are about to see this government fully empowered to form another Think Big organisation, but this time with the full cooperation of local residents, local super funds and international investors, all without the guidance of a national energy strategy.

It will also be very, very difficult to stop a new power station from being built near you. Fast Track Bill It is expected to take effect by the end of this year.

The default consent period for renewable energy projects is 35 years, which is effectively no different because wind turbines don’t last nearly that long, and the same is true for solar.

They will also further concentrate market power by having generators own transmission line companies. If you look at what Vector and Aurora are doing in Auckland and Otago, it’s chilling. It’s the opposite of what should be happening.

They have also introduced a bill that aims to get an offshore renewable energy regime in place by mid-2025, with a plan to launch the first round of feasibility permits in late 2025. This is effectively building on more than a year of work by the previous government, which based its offshore wind regime on the Victorian government’s system. But don’t let anyone be fooled into thinking that offshore wind will be quick or easy. Even if the NZSuper consortium buys the existing subsea networks off Taranaki, those will be very difficult to build and maintain.

Amid this storm of “action-taking” policy pronouncements, some not unreasonable questions remain unanswered:

• Will our electricity prices go down as a result?
• Will our manufacturing plants and the jobs they contain be saved as a result?
• So are utilities actually investing more in generating electricity?
• Will the government use its dominant stakes in the Big Four companies to achieve any policy outcomes?
• What if anything were to happen differently than what is happening now?
• Will New Zealand be significantly more energy secure under this Government than it is today?

Labour and the Greens would be wise to promise the public they will have answers to these questions within a year to test whether this government is actually working.

Finally, should Labour and the Greens agree, as was the case with the zero carbon deal, maybe it’s time to develop a cross-party national energy strategy that we can all live with. Because otherwise, this government holds pretty much all the political cards it needs to play, and can continue to play the political equivalent of a “pop” at every crisis, while the left still searches for a multi-party bridge.

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