Un-banning oil and gas exploration may not fix energy supply gaps, minister told

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Reduced hydro generation in dry periods and high demand peaks are among the vulnerabilities for New Zealand’s energy supply.
Photo: 123RF

Repealing the ban on oil and gas exploration may not succeed at extending the future of oil and gas in New Zealand, a briefing to Energy Minister Simeon Brown says.

“It is possible that enabling further exploration will extend our oil and gas future,” the briefing to the new minister says.

It continues, “however there are other impediments that we expect will still restrict investor interest”.

The briefing notes the ban has already changed the landscape for the fossil fuel industry, and urges the minister to come up with a clear plan to both secure energy supply and cut emissions.

It raises fears that if gas companies stop investing in their networks, supply could run short before people and companies have switched to cleaner options.

In good news for businesses and households, the briefing also says making more renewable energy will be an export advantage for New Zealand, and will lower household bills.

“Major international markets like the European Union and United States, as well as large multinationals, increasingly expect imported products to be low or zero emissions,” it says.

The briefing from the Ministry for Business, Innovation and Employment says consumers will be less exposed to the vagaries of imported oil as the country makes a bigger share of its energy.

Although the briefing doesn’t suggest any immediate relief from high electricity prices, it says that, after ten years, prices will ease as the share of cheaper, renewable generation grows.

“New Zealand consumers will also be less exposed to volatile and high engine fuel prices as we switch to renewable electricity, and reliance on imported oil diminishes,” it says.

However, the problem remains of how to avoid power shortages during dry years, and especially on cold winter mornings and evenings.

With investigations into storing hydro power at Lake Onslow scrapped, the briefing notes the government still needs a solution to the ‘dry year problem’.

It says officials are working on options for this, and may be able to suggest ‘staggered’ options.

Questions hang over industrial emissions

Energy makes 40 percent of New Zealand’s planet-heating gases.

Coal is even more polluting than gas, and industry uses lots of both.

The briefing reminds the minister that scrapping the government Investment in Decarbonising Industry Fund (GIDI) has left a major hole in meeting climate targets.

The government has diverted the money that was used for GIDI, which gave grants to the likes of Fonterra and NZ Steel to replace coal furnaces and other polluting kit. The coalition wants to rely instead on carbon pricing under the Emissions Trading Scheme to drive companies to decarbonise themselves.

The briefing raises questions about relying on the ETS alone, saying some companies cannot respond to carbon prices by switching to clean energy.

“While the ETS shapes investment decisions for some companies”, others may face barriers, such as a lack of clean energy infrastructure, it says.

“Some smaller businesses may not make the investments themselves due to capability, capacity and capital constraints,” adds the briefing.

“We note that GIDI was forecast to provide over half of the emissions reductions required from the energy sector in emissions budget two” [from 2026-2030] it says.

“We would welcome a discussion with you on ways to increase the role of ETS pricing, the wider policy consequences, and possible complementary measures,” the ministry told Brown.