Mood of the Boardroom: Genesis chief Malcom Johns concerned about New Zealand’s energy security

Genesis Energy chief executive Malcolm Johns has concerns about New Zealand’s energy security in the next decade. He says: “While we have a lot of wind and solar generation capacity coming on stream, the reality is they are intermittent sources of energy; they come and go when the wind blows or the sun shines.

“At the moment, the majority of that is backed-up by assets like gas turbines which can come on at short notice. The Ministry of Business, Innovation and Employment — MBIE’s assessment of the nation’s gas reserves suggests the 2030s look problematic from that perspective.

Malcolm Johns. Photo / George Heard

“And we’ve yet to identify a customer segment that is looking for cold showers by candlelight. Keeping the lights on is essential.”

This becomes even more essential as the economy becomes increasingly based on electricity.

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Johns sees the question as one of how unstable the grid will be when we push past 95 per cent renewable energy.

He says batteries are, at best, a short-term solution for an hour or even a day, but not beyond that. Hydro lakes are needed for the base-load energy generation and, anyway, about one in five years it is too dry for them to be a reliable answer.

MBIE estimates that generators will need to import gas starting in the second half of the next decade. Johns describes this as “potentially concerning” but there is another option: “Large gas turbines, like the one we operate at Huntly, can run on hydrogen which is a zero-carbon fuel”. Which means gas has a role to play as we decarbonise, but in the meantime, there will be problems with importing gas.

Johns says that when the proportion of electricity generated goes past 90 per cent, the focus needs to go on electrifying the economy. He wants to see policies that encourage this electrification, but he wants the government to go much further and use it to generate foreign exchange.

“We can’t export our electricity because we are too far from any customers, but what we can do is to work hard to bring companies here so they can green themselves off the back of our electricity.

“This has the potential to generate the foreign exchange we need for the next two or three generations of prosperity. I want to see renewable electricity become an economic development platform alongside the production of proteins.”

On this basis, Johns thinks the Zero Carbon Act’s goal of being carbon neutral by 2050 is under-ambitious. He says we have a 10-to-20-year head start on our main trading partners when it comes to renewable energy, and we need to make more use of that advantage.

Johns is concerned about government spending and how that leaves the country vulnerable to future shocks. He says we had a strong balance sheet that allowed us to navigate disasters such as the Christchurch earthquakes, the recent Auckland floods and Cyclone Gabrielle.

“Even if we do everything we can to mitigate climate change, we are going to face major natural disasters in this country. Every time we spend frivolously, or we let spending get ahead of the productivity of the economy, we weaken our ability to be able to respond to those events. I can see the amount the government will need to spend on disasters growing considerably.

“We need to think forward 20-to-50 years in terms of balance sheet management or we risk running out of the capacity to respond.”

Malcolm Johns’ Top 3 business issues

• The inflation monster
• Government and regulatory issues
• Growth