Three things the Government says will help make power cheaper

Monday, 26 August 2024

The Government will urgently reverse a ban on oil and gas exploration, a move it says will help control soaring electricity prices.

As well as loosening regulations, which ministers say should make it easier to start new electricity generating projects, the Government confirmed it would conduct a review into the competitiveness of the electricity market.

New Zealand has been struggling with high power prices, which have come home to roost this month. Multiple businesses made decisions to close or reduce production earlier this month.

“There is no reason New Zealand can’t have affordable abundance energy,” Prime Minister Christopher Luxon said on Monday, as he outlined a range of policies aimed at driving down the price of power.

These are three key changes which the Government argues will fix the electricity market:

1. PM backs down on 2030 renewable target

Luxon said the Labour Government’s goal of having a fully renewable energy sector in place within six years was impossible and risky policy. He said it put New Zealand’s “energy security at risk”.

“It’s a bumper sticker, Post-it note, idea,” he said.

“It was reckless and counterproductive. For the second quarter this year, Genesis reports a 264% increase in coal-fired electricity generation.”

He said New Zealand’s increased reliance on coal was driving up carbon emissions, given it was more environmentally friendly to burn gas - which is in short supply.

Energy Minister Simeon Brown said the Government would, by the end of this year, have repealed law prohibiting oil and gas exploration.

Luxon said the Government remained committed to a long-term goal of a sustainable energy sector, but he said the 2030 deadline had sent the wrong message.

“If you were an investor in gas exploration in New Zealand, and in 2018 you got told it's going to come to an end, you’ve got 195 other countries around the world where you could potentially invest,” he said.

2. Support, but not fund, gas imports

As a “medium-term” solution, Brown said the Government wanted to look at how to enable the importation of Liquefied natural gas (LNG).

LNG could be shipped to New Zealand and used as fuel for electricity generation.

But there was no port capable of handling LNG imports.

Brown and Resources Minister Shane Jones said they would report back in October about what options the Government had to assist with LNG importation.

But on Monday, Brown ruled out any Government funding.

He said they would be looking into regulatory changes or non-cash incentives.

3. Investigate market competition

After Jones accused the electricity generators of price gouging, and Deputy Prime Minister Winston Peters said he knew they were “profiteering”, the Government confirmed it would investigate competitiveness in the market.

National Party ministers had taken a less aggressive stance towards the power “gentailers” - companies that own the power generation facilities, and also sell that electricity to customers. On Monday, Luxon said Brown had done well to work with those companies, and other key gas and electricity users, to find “short term” solutions to ease pressure.

But Brown said he was not convinced the market was competitive.

He said the government would “undertake a review of the performance of the electricity market”.

That review would focus on what regulatory changes the Government could make.

Jones and others said the gentailers were effectively incentivised to limit the supply of electricity, as it drove up the cost of power.

Separately, Brown said he expected the Electricity Authority and the Commerce Commission would undertake their own work to ensure the market was operating as it should.