Richard Harman: Government left praying for rain as it tries to solve energy crisis

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Resources Minister Shane Jones wants to reprise the old Maui gas contract.
THREE KEY FACTS:
Richard Harman is a respected political journalist and analyst, a life member of the parliamentary press gallery and editor of the influential Politik newsletter.
OPINION

The Government is caught in a trap
over the energy crisis because there is realistically nothing it can do to solve the immediate problem.

It is a supply crisis, and there is nothing the Beehive can do that will, in the short term, generate one extra watt of electricity.
That makes it a huge political challenge, and the politicians are left with only the consequences of the supply crunch to address.
So, while New Zealand First quietly talks about imposing price controls, the Act Party has no answers to the immediate crisis but instead is proposing a cross-party accord to enable onshore and offshore gas exploration.
The Government can legislate to do that on its own.
Act energy spokesman Simon Court’s logic in proposing the cross-party accord is that investors in gas exploration are likely to require certainty they would not face a ban on exploration when Labour next gets back into power.
NZ First’s Shane Jones, the Resources Minister, believes the issue can be fixed through long-term contracts with exploration companies. “I think it’s time we reprise the old Maui gas contract,” he says.
“Who is going to invest in New Zealand’s gas industry in the absence of a solid contract on the other side?
“In the recent past, users of gas have been disincentivised from relying on gas.
“So, if you’re a big investor on the supply side and you’re going to spend hundreds of millions, you want an ironclad guarantee that there will be 20 to 30 years’ worth of utilisation.”
Jones says any contract could go out to 2050.
“That is a long-time contingency measure, so that as electricity demand grows, the lights don’t go out.”
But that is a medium-term solution. In the here and now, there are two pathways forward in the immediate future.
One has had the Government set up three working parties to look at how liquefied natural gas might be imported.
However, any gas is unlikely to arrive until 2026, possibly later.
At the same time, Aotearoa Energy Resources CEO John Carnegie argues that as an alternative it could be quicker for petroleum companies to extract the previously uneconomic contingent gas reserves from existing wells.
“In terms of speed, it’s likely to be onshore, but there is gas both on and offshore.
“With natural gas in the Taranaki region, we have the skills, the workforce, and the infrastructure.”
But before the companies can do that, the Government needs to pass amendments to the Crown Minerals Act that would reverse Labour’s 2018 bans on offshore exploration and accessing onshore conservation land for gas extraction.
That legislation has been promised for the second half of this year, but has yet to appear.
However, the only realistic short-term solution is that we get rain.
In its Security of Supply report, Transpower sums up the situation as follows: “A combination of below-average inflows in Aotearoa’s hydro generation catchments, constraints in the gas market, high electricity demand in May, and recent low wind generation has contributed to a rapid decline in hydro storage.
“By early August, hydro lake levels were just 55% of the average for the time of year, which is among the lowest levels we have reached in around 90 years of historical records.”
Transpower is expected shortly to use its system operator powers to allow Genesis, Contact and Meridian to lower some of their South Island lakes to levels that would breach their water resource consents in an effort to get more water through the dams.
Even the wind is not helping.
During July, average daily wind generation was only 77.6% of that seen in July last year.
This was despite a 16% increase in installed wind generation.
Weekly wind generation was the second lowest it has been within the past year. Average daily wind generation during July 2024 has been the second lowest of the year.
At the same time, average daily demand in July was the highest it has been during July over the past 10 years.
Niwa is forecasting normal spring rainfall in the South Island, and that should help alleviate the situation.
“Typically, hydro storage levels increase in spring as rain falls, which should help mitigate the situation,” Transpower says. “But even in a worst-case scenario of hydro inflows due to insufficient rain, we are not forecast to reach the point of launching an Official Conservation Campaign (OCC) until early January.”
Meanwhile, the industry regulator, the Electricity Authority, is planning for the worst. As part of its preparation for what it calls “eventualities”, the authority has approved changes to an existing plan that manages the worst-case scenario — where an electricity supply shortage would be declared and how this would be managed.
The authority says it sets out how the system operator (Transpower), alongside distributors and large industrial consumers, would conduct rolling outages (ie, temporary planned outages of a consumer’s supply) if such a shock were to occur.
“Rolling outages are conducted as an emergency response to conserve fuel and avoid further unplanned outages,” the authority says. “Rolling outages have not been needed since the electricity market was established.”
Rolling outages have not been instituted since the 1980s when water heating cuts of up to 12 hours a day were imposed because of dry years.
In the meantime, all the Government can do is pray for rain.

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