Warning on potential energy crisis must be listened to

A warning there may not be enough natural gas to keep the lights on and ensure security of supply for electricity by 2026 must be listened to, according to Energy Resources Aotearoa.

The new report by the industry co-regulator the Gas Industry Company (GIC) warns that constrained gas supply could lead to energy shortages, higher prices and job losses.

“We need to ensure we have enough affordable and reliable energy to meet our needs as we transition,” says Energy Resources Aotearoa chief executive John Carnegie.

“New Zealand has enough natural gas in the ground to meet demand until 2035 and beyond, but this won’t happen without major investment by producers. Regulations can’t make it rain or develop more gas.

“This is a strong and clear warning on the need for the right settings to encourage much-needed investment.

“We agree with the report which finds a lack of predictability in policy settings is hampering investment at every level of the industry.

“This year for example we’ve been surprised by new proposals to phase out natural gas from process heat by the Ministry for the Environment, when MBIE has separately consulted on this topic and the Climate Change Commission are still preparing their final recommendations.

“These changes, along with the 2018 exploration decision and plans to phase out natural gas from the electricity system by 2030 have unsurprisingly created massive uncertainty for gas producers and users. They are faced with new market conditions at the same time as gas fields are reaching mid to end of life.

“We strongly agree with the call for the ETS to be the main mechanism for reducing emissions, now that it has a cap on total emissions. This would provide far more certainty than unpredictable ad-hoc interventions such as bans and subsidies, and is the least cost way to transition.

“An Energy Accord between Government and industry would be an excellent step. This would be a joint commitment to work together on lowering emissions and ensuring a sustainable and prosperous energy resources sector that delivers affordable energy.

“It’s also pleasing to see virtually all respondents agree the market, commercial and regulatory settings for gas work well, and that tinkering would create more uncertainty and worse outcomes.

“The GIC have done an excellent job on this report. We look forward to working collaboratively with them and officials on the process going forward.”

The full report is available at https://www.gasindustry.co.nz/work-programmes/gas-market-settings-investigation/developing-2/consultation-3/