Gas needed for nation’s energy independence

Neil Holdom New Plymouth mayor

While most Kiwis focused on the US political circus this month, an ominous while somewhat obscure business failure occurred in our backyard largely unnoticed.

Payless Energy, a niche electricity retailer quietly announced after seven years in business it could no longer trade, crushed by the weight of record high electricity spot prices.

New Zealand’s Electricity Authority, headed by seasoned energy sector expert James Stevenson-Wallace, saw the failure coming and worked to quietly transfer customers of the faltering electricity business to one of its more viable counterparts on November 1.

The industry is expecting more businesses to collapse under the weight of electricity spot prices which have surged as high as $500 a megawatt hour over the past month, close to triple historic October highs.

Customers who signed up to cheaper electricity contracts exposed to spot market prices have been hammered for the past few weeks, some seeing weekly power bills double.

Customers are exiting these contracts in droves looking for the security of fixed rate deals.

So why is this happening?

Three key factors have driven up the price of electricity; Tiwai Aluminium Smelter firing up its fourth pot line, low hydro lake levels and Taranaki’s Pohokura gas field being compromised by a leaky pipe – leading to a reduction in gas available to run peaker power stations to prop up the renewable core of our national electricity infrastructure.

Why should we care?

Because as the Government turns its thinking away from gas as New Zealand’s transition fuel to a lower carbon economy, without any alternative plan to keep the lights on, we can expect to see these ‘market anomalies’ becoming an increasing occurrence.

When the lakes are full and the wind blows, all is well in Aotearoa.

But our households and businesses have additional layers of protection from nature’s unpredictable elements in the form of gas fired power stations and Huntly which runs on gas (gulp) or coal... and they are burning coal by the hundreds of tonnes... right now. Genesis Energy, which owns Huntly Power Station, recently signalled plans to import coal, highlighting the widely held view New Zealand needs a longer term supply of gas to maintain national energy independence.

Likely to much distain in the halls of parliament.

Within days of its coal announcement Genesis also announced investment in a windfarm in south Taranaki, surely no political influence at play there for the 51 per cent stateowned business.

So our lights are still on and spot prices don’t impact on most households but wow, do they impact industry.

The issues at Pohokura are estimated to have shaved close to half a per cent off New Zealand’s GDP growth figures in the last quarter. Energy-hungry businesses relying on gas or electricity have reduced activity while Pohokura’s operators scramble to get their pipeline back in service.

When Taranaki’s energy industry blinks, the whole country shudders and the demise of Payless Energy, supplying less than 1000 customers in the lower South Island, is a reminder how fragile New Zealand’s electricity sector is and how the entire country’s economy and standard of living is underpinned by Taranaki energy; the big brother, always available to answer the phone, turn up at the drop of a hat and do the heavy lifting when our renewable generation falters.

With forecasts of less than 10 years of gas in the tank and a nation hungry for energy, unless the Government can stimulate a surge of investments and innovations in reliable renewable electricity, historically hydro or geothermal, we can look forward to a future of all the little players in the electricity market going the same way as Payless, increasing electricity prices and the worst case scenario, electricity rationing or blackouts.

So what is the answer?

A deputation representing Taranaki leaders has requested a meeting with Energy and Resource Minister Megan Woods and Finance Minister Grant Robertson later this year to offer our Government a hand to develop a scientifically and economically sound 30-year plan to keep the lights on, using our energy and engineering know-how.

Underpinned by a reasonable government investment, we can collaborate to grow our capabilities, reduce our environmental impact, retain jobs and expertise in the region and solve problems the entire world is trying to crack. Right now Wellington pulls $3 million a week out of Taranaki in Crown Mineral royalties. Sounds like a logical initial investment to get work under way on achieving our shared goal of a net carbon NZ 2050 with a decent economy and affordable electricity for Kiwis when we get there.

Customers who signed up to cheaper electricity contracts exposed to spot market prices have been hammered for the past few weeks.