Editorial: There will be life after Maui

For more than 20 years, New Zealand has been spoiled by the Maui gas field. Not only did it supply gas cheaply but it was always available for increased production when hydro-electric power began to dry up. Maui's sheer size also bred complacency, especially when discoveries of new gas pockets seemed always to be extending its lifespan. Now, however, the brightest of this country's energy flames is fading.

A fresh analysis of Maui's reserves is being done but everything points to the field running out by 2007, two years earlier than previously thought. With electricity demand growing by 2 per cent a year, it is, as the Minister of Energy indicated on Wednesday, time for serious thought.

Pete Hodgson's warning was based on briefing papers for the incoming Government. In addition to the unhappy information about Maui, these included an estimate by Transpower, the national grid operator, that by 2005 existing generation will not enough to meet demand in a dry year. This all prompted Dr Keith Turner, of Meridian Energy, to suggest that a shortage of energy would constrain economic growth over the next five years. The cost of supplying electricity would increase and a critical competitive advantage for this country would disappear, he said.

Dr Turner's gloom is based in large part on the lack of an obvious successor to Maui. The first gas from Pohokura is scheduled to come on stream in 2005 but that field is a third of the size of Maui and unlikely to offer a Maui-scale backstop during dry spells. There is also Kupe, another Taranaki field, but it will be difficult to develop.

High hopes are held that more gas will be found, and many explorers are active. But most are relatively small players and, in any event, there is a lead-in time of at least five years between discovery and production.

It would be wrong to be unduly pessimistic, however. Once the date of Maui's depletion is confirmed, there will be moves to fill the gap. Already there have been signs. Genesis' proposed combined-cycle gas plant at Huntly could be ready by 2005. Such plants are considered the cheapest method of generating electricity. More will surely follow.

Additionally, Meridian has plans for a $1 billion hydro-power scheme in Canterbury, although it would not produce power until 2008. And, as with all hydro projects, it will be susceptible to dry summers. Many other generators are hesitant, pointing to the difficulty of securing a committed, and cheap, gas supply. The obvious solution is a short-term return to coal.

If alternatives are not developed, electricity will clearly be in shorter supply and considerably more expensive. We would either pay up, thus encouraging the building of new power stations, or learn to use power more efficiently. That, in itself, would be no bad thing, given the Energy Efficiency and Conservation Authority's contention that New Zealand wastes millions of dollars of energy every year.

It is not, however, a state of affairs that a Government would happily contemplate. Thus, Mr Hodgson wants an assurance by the end of the year that new power stations will be built. And if electricity is not generated when required through the auspices of today's competitive structure, power companies will be regulated, he says.

In all likelihood, that will not be required. The minister should, however, cast an eye over the monopoly ownership and management of the national grid. Government intervention may just be required to eradicate bottlenecks. Overcoming our vulnerability to Maui's demise will require all links in the electricity chain to come to the party.

Feature: Electricity

Energy Efficiency and Conservation Authority