Source: EMA
A lack of available gas supply will force price increases and some very tough decisions across multiple business sectors as today’s release of the Industrial and Consumers Gas Survey highlights .
“We’ve got several members struggling to source supply beyond September or the back end of this year, then they are facing increases of 20%, 30%, 40%, or even more – if they can even source a supply contract,” says EMA Head of Advocacy Alan McDonald.
“Multiple respondents to the survey, and many of the 150 attendees of the Gas Users Forum last week, said that supply issues are already leading to increased prices, reduced production and decreases in the workforce.
“This at a time when the manufacturing sector in New Zealand is under real pressure and, as a country, we are facing current and increasing de-industrialisation of the economy. For a number of businesses, their energy options are limited and their ability to transition to other energy sources is constrained either by cost or geography.
“For example, greenhouse growers of vegetables would face huge transition costs, as would milk powder and baby formula producers for their dryers.
“Another forum attendee, who already has to truck gas to his site, would face the cost of building 50km of lines and poles to the nearest substation capable of supplying the required energy levels for his plant.”
New Zealand’s problem is not unique as the country heads down a path of more renewable energy to mitigate climate changes and shift away from fossil fuels. But other countries have recognised the need to retain gas, in particular, as a transition fuel to achieve and support the shift to renewables.
“The long-term shift to mainly renewables is the right pathway and a laudable goal,” says McDonald.
“But it’s laughable when we’re facing importing more coal than ever and forcing more businesses to switch to either coal or diesel or potentially shut down because of their higher energy prices.
“In the short term, we’re asking big users such as Methanex and others to reduce production to make more gas available, but that’s hardly sustainable.
“Changes to the RMA and fast-track legislation will encourage the building of new renewable generation in the next few years. But wind and solar farms need the backing of thermal generation, building new hydro dams would take a decade or more – if they could be consented at all – and it will also take time to develop more geothermal or the still-theoretical deep-bore geothermal options.”
The survey highlights that many businesses are unable to afford the transition to renewables in the short term, with most requiring 15-20 years or more to be economically viable. The survey also shows that most of those gas users are disillusioned about the long-term future of gas, despite the recent announcement of the $200 million government co-investment fund for exploration announced in the recent Budget.
At the Gas Users Forum, that gloomy future was predicated on the previous government’s decision to ban oil and gas exploration and the opposition’s ongoing rhetoric about reinstating the ban when re-elected.
“Elsewhere around the world, economies have recognised that gas is the optimal, viable transition fuel while renewables are scaled up,” says McDonald.
“Labour’s MPs continue to say there is no gas there to find. Well, there won’t be if you’re not looking.
“In the meantime, it’s likely we’ll see further de-industrialisation of the economy, more factory closures and more job losses.”
