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New Zealand's energy crisis - how it happened and who's to blame

Publish Date
Fri, 10 May 2024, 1:04pm

New Zealand's energy crisis - how it happened and who's to blame

Publish Date
Fri, 10 May 2024, 1:04pm

New Zealand's energy production is in crisis and fingers are now being pointed at who is to blame after the country was asked to voluntarily cut its power usage on the coldest day of the year so far.

Power cuts were averted as Kiwis cut back on electricity use this morning, despite some parts of the country experiencing sub-zero temperatures. Christchurch, Twizel and Mt Cook Airport all dropped to a bone-chilling -6.4C around 5.30am, according to MetService.

The cutbacks came during a week in which the Government revealed a drop in New Zealand's energy production - figures released from the gas industry showed a 12.5 per cent material plummet in production based on forecasts for this year.

In the first three months of 2024, that figure now sits at nearly 28 per cent.

On Newstalk ZB this morning, Minister for Energy Simeon Brown was asked whether he knew how bad a shape the sector was in when took over the energy portfolio.

"I knew it would be challenging and tight, but the reality is we've been reaping the outcomes of six years of not sending the right messages to our electricity sector to make sure we have the generation that we need," he said.

Brown lashed out at the former Labour Government's six-year management of the country's energy supply, as he had done during his earlier interview on Wednesday. He has consistently claimed that the country's lack of energy production is the result of constant decision-making errors.

This morning, he proceeded to rant about several initiatives the Jacinda Ardern-led Government had introduced that he believed created the problem New Zealand is encountering today.

"I'm grateful New Zealanders are heeding the message [of saving energy] this morning. It's unfortunate that we're in this position, but it happens when the last Government says 'we'll build Lake Onslow in 2040', and that put a chilling effect into the electricity generation sector," he said.

"It's what happens when you say 'by 2030, we're going to be 100 per cent renewable' - which is completely impossible to meet, but it disincentivises the modern fast-start gas packers that we need. It's what happens when you ban oil and gas exploration and disincentivise upstream gas investment.

"And also it's what happens when you don't get the regulatory barriers out of the way so you can actually build the renewable faster - which is ultimately what this Government wants to do."

In 2018, the Labour Government froze all oil exploration permits and essentially shut down operations in districts such as Taranaki. Then-Prime Minister Ardern told the media at the time that the transition to a zero-carbon economy "must start somewhere" and promised no jobs would be lost.

Brown had pointed this out on Wednesday and stated gas was a necessary transition fuel that is critical to the country's supply when the sun and wind cannot be relied upon for renewable energy sources.

This morning, he focused on the former Labour Government's attempts to reach 100 per cent renewable energy efficiency. The Government was warned about its objective by two reports from the sector, which stated the country could reach 95 per cent renewable, but any further would cost too much.

Yet, the Government at the time still spent $30 million on yet another report and in the meantime, according to Brown, the energy industries believed the Government would solve the problems.

"The industry said this is having a chilling impact on investment by the Government saying 'we're going to do it all'," said Brown.

"That is what the last Government was doing by stepping in and saying we're going to invest and build [Lake Onslow] at the bottom of the South Island costing billions of dollars, [but] we haven't seen the investment we needed into our electricity system."

Brown said that, as a result, New Zealand has old thermal generation rather than fast-start peakers and the gas supply is running low.

"We're reaping what the last Government sowed."

However, Labour's Megan Woods has defended her former Government's decision to ban gas exploration and called the claims that it resulted in a drop in energy production "absurd".

As the Energy Minister at the time who made the decision to ban new exploration and permits, Woods told Newstalk ZB Plus it takes 10 years for the gas exploration process to result in production - which she said ruled out the move having anything to do with the drop in productivity.

She lashed out at Brown and accused him of "childish political games".

"It was the right thing to do. It was necessary and the correct thing to do," she told ZB Plus.

"What we have today is production permits for gas in New Zealand that will run into the 2030s and 2040s. None of those permits were touched. What we said is we cannot be planning to keep using gas forever, and that is what issuing gas exploration permits is about."

Woods noted that gas production levels within New Zealand have been dropping since 2012, which she said obviously predates any decisions her Government made. With New Zealand only having access to a finite amount of natural gas, the transition needed to be carefully approached.

She said the coalition Government needed to show a smarter approach towards storing energy.

"The way we do that at the moment is in the form of gas and coal. That is simply going to become unaffordable for New Zealanders," she said.

"What the minister needs to get his head around is the cheapest form of energy is actually renewable energy. If he wants to keep using gas and burning coal forever, he's consigning New Zealand to unaffordable energy and electricity - and from what we've been hearing from Brown, he has no vision and leaves us very confused."

Transpower's chief executive Alison Andrews told Newstalk ZB this morning that the country is in an energy transition and as it moved to more intermittent generation such as wind, New Zealand has demanded more peaking support from Transpower for particularly peak demands.

"That would be things like more batteries, more gas fire plants, those quick-start firming plants that can help us meet these short, sharp peaks and, over time, we're looking for a more active response market so that we can manage through these areas," she said.

"It's a transition issue and I think the industry will get through it. We actually have a lot of generation coming onto the system which will all help but we do need more firming capacity."

Andrews said a lot of countries around the world were experiencing the same problems as New Zealand when it came to energy supply, with some nations actually in a worse state.

"It's not ideal ... I don't think people should be having to be thinking about not having power available when they need it, but it's very rare and New Zealand has only had one power outage since the market was put together in 1996," said Andrews.

"We did want to warn Kiwis so they could do their bit to help us, so nobody was going to have power unwittingly turned off."

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