Government told to reduce household gas usage to save industry

New Zealand does not have enough gas for our energy needs.

There isn’t enough gas in New Zealand for both households and industry, the Government has been warned, meaning households and industrial users face high prices and shortages for years in the future.

The Green Building Council, which advocates for firms that reduce emissions from buildings, has urged the Government to invest in reducing household gas usage to leave what natural gas is left for industrial users.

In a submission on the Government’s draft Emissions Reduction Plan (ERP), the council argued the Government should help households wean themselves off using gas for heating their homes and hot water. If households reduced their gas consumption, more would be left for industrial exporters which face decarbonisation challenges.

The council compared a recent model for natural gas demand, published by the Ministry for the Environment in the Government’s ERP, with a forecast for domestic natural gas production published by the Ministry of Business, Innovation and Employment (MBIE). The model does not take into account discoveries that have yet to be made, particularly once the Government repeals the offshore oil and gas exploration ban later this year, although it is questionable whether that change will result in significant new supplies of gas.

On that model, in just five years’ time, New Zealand’s domestic supplies would be worth less than two-thirds of expected demand. Importing liquified natural gas (LNG) at a cost of $20-25/GJ would mean the cost of importing gas shortfall would be $11-14 billion by 2035.

Green Building Council chief executive Andrew Eagles warned in a decade, production will meet just 43% of demand.

“That will mean skyrocketing prices for families, businesses, industry, and electricity generators. The families least able to pay will be forced to go without, even if they have no alternative heating.

“It will force more gas-dependent industries to cease production, costing jobs and export revenue. Because gas generation sets the cost of electricity, it will mean higher power prices for homes and businesses,” Eagles said.

Eagles warned new discoveries would not “plug the shortfall”.

“The existing fields are producing less than expected despite billions in investment. Offshore exploration prior to the ban was drying up due to lack of finds. If new exploration is undertaken and if new discoveries are made, it will be at least a decade until they are producing at scale, which likely still wouldn’t be enough.

“Importing fossil gas would require billions of investment in infrastructure, increase emissions, and expose New Zealand to international price shocks,” he said.

Eagles said heating rooms and water was a “significant consumer of fossil gas” that could be replaced with electric heating daily easily.

He urged the Government to boost the Warmer Kiwi Homes programme, which subsidised insulation for some households.

“Improving building insulation will reduce demand for heating and reduce peak electricity demand, which is often met with fossil gas plants. Residential solar energy can be encouraged to replace the need for fossil gas generation. The Government needs to urgently introduce new measures to incentivise both insulation and solar power,” he said.

The current energy crisis has been blamed on low hydro storage and a shortage of gas, which had been used to provide peaking generation when renewable generation was low.

Energy and Resources Minister Simeon Brown has said the Government is looking at importing LNG to help New Zealand through periods of tight demand.

“New Zealand now finds itself in an energy crunch, with dry-year conditions being compounded by a low supply of gas, which is critically important at this time. The high electricity prices … are threatening the viability of New Zealand businesses, many of whom export products to the world, and the jobs they underpin,” Brown told Parliament.

The shortage has seen some industrial users curtail or shut production. Methanol manufacturer Methanex has mothballed its New Zealand operations until the end of October. The company is selling its gas to Genesis and Contact Energy.

Oji Fibre Solutions has warned its Penrose paper recycling plant, which employs 75 people, may have to close due to high energy costs.

Winstone Pulp International’s decided to pause work for 14 days at its two central North Island operational sites due to high power prices.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.