Report pulls Government up on Gas

Embargoed until Wednesday 26 March 2008, 4pm.

New Zealanders’ energy bills could jump by over 50%, and they could face power shortages, as a result of the Government’s current energy policy.

That’s according to a new report released today on behalf on the Petroleum Exploration and Production Association (PEPANZ) by the Centre for Advanced Engineering (CAE). The report analyses the effects of the Government’s renewable energy targets in the electricity sector on New Zealand’s gas industry.

PEPANZ executive officer, John Pfahlert, says the Government’s aim of achieving 90% renewable energy by 2025 will have a huge impact on the electricity and gas systems.

“These policies risk exposing the New Zealand public to rising energy costs, increased uncertainty and an inconsistent electricity supply to homes and businesses around the country,” Mr Pfahlert says.

The report indicates electricity costs will rise by at least 15%. However, Mr Pfahlert believes the real costs could be much higher.

“Possible increases could be 40 to 50% within 15 to 20 years.”

The CAE report predicts current Government policy will have massive impacts on the gas industry - including a decrease in gas availability and potential price increases.  The report argues existing policy will discourage exploration for gas, leading to significant gas shortages.

Under current energy policy, New Zealanders will rely on renewable energy as their main source for generating electricity. However, due to the intermittent nature of renewable energy, a supply of thermal fuels will be essential as a generation back-up.

When gas prices rise as a consequence of reduced exploration and production, a potentially cheaper substitute would be a coal-fired generation, which has far higher carbon emissions.

“Using coal instead of gas would defeat the Government’s environmental objectives altogether,” Mr Pfahlert says.

“The likely result of the current policy will be the closure of one of New Zealand’s three existing combined cycle gas turbine power plants – not only a loss of jobs, but the loss of a much needed back-up supply.

“The gas sector is a significant and proven contributor to New Zealand’s economic base and is often overlooked. Current Government energy policy seems likely to reduce the size of the New Zealand gas market, increase energy prices and ultimately reduce energy security,” Mr Pfahlert says.

“This could mean bad news for the energy markets and, more importantly, bad news for consumers.”

ENDS

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