Source: Energy Resources Aotearoa
Genesis Energy’s new gas arrangements announced today will strengthen New Zealand’s electricity security, but Methanex’s decision to indefinitely idle its methanol plants shows the economic cost the country is paying for a shrinking domestic gas supply.
Energy Resources Aotearoa Chief Executive John Carnegie says the announcement underlines how important gas supply is to New Zealand’s energy system.
“Genesis has secured the gas it needs to serve its customers, while Methanex has reached the point where gas supplies aren’t sufficient for it to keep producing here.
For the last few winters, Methanex has been an important safety valve for the electricity system, cutting production and making gas available when hydro lakes are low, or electricity demand is high.
That flexibility has helped keep the system running. But if managing tight energy supply means major exporters producing less or leaving altogether, the lights stay on at a growing economic cost.”
Carnegie says the decision highlights the long tail of major energy policy decisions.
“The 2018 exploration ban didn’t make our need for gas disappear. It stopped the search for new supply while existing fields were declining, and we’re now dealing with the consequences.
That leaves New Zealand with a massive supply pipeline gap to bridge to keep industrial users in business. LNG can help us while domestic exploration gets moving again, but both depend on stable policy settings and a clear direction that lasts longer than a political cycle.”
Carnegie says the consequences of that supply gap are being felt acutely by all gas and electricity users.
“Methanex has operated here for more than three decades. When a global exporter decides it can no longer sustainably manufacture in New Zealand because its energy input isn’t available, we need to pay attention.
At its peak, Methanex exports contributed 0.4% to our gross domestic product, around $1 billion, and until recently, that figure was still significant at between 0.15 and 0.25%.
Loss of industrial production isn't something to celebrate, and we expect global environmental impacts to worsen with methanol production emissions moving offshore where environmental standards are lower.
We want an energy system that supports growth, not one that balances itself by losing demand. If major manufacturers and exporters have to step back because fuel isn’t available, New Zealand is poorer for it.
Keeping the lights on is vital, but energy security has to mean more than avoiding blackouts. It also means having enough affordable energy for businesses to keep producing, investing and competing from New Zealand.”