NZ Takes Urgent Action as Energy Price Rises Hurt Businesses

(Bloomberg) -- New Zealand’s government unveiled a raft of reforms in the energy and electricity sector as it responds to a surge in wholesale power costs that has seen some large manufacturers review the future of their businesses.

The reforms are targeted at bolstering energy security and affordability, Energy Minister Simeon Brown said Monday in Wellington. They will sit alongside changes already under way to make it easier to get approval to build more renewable generation.  

“New Zealand needs abundant, affordable energy,” Brown said. “That’s why the coalition government is taking a series of immediate actions to restore confidence to our energy sector and remove regulatory barriers that have stopped firms generating electricity or bringing in the fuel that Kiwis need.”

Low lake levels have curbed hydro generation at the same time as there has been a shortage of gas due to outages, leading to soaring power prices. Winstone Pulp International is considering a proposal to cease its pulp and timber manufacturing operations indefinitely as costs become prohibitive.

Prime Minister Christopher Luxon said New Zealand power prices are currently among the highest in the western world and the country is facing an energy security crisis, “no doubt about it.”

Methanex Corp. has temporarily closed its New Zealand methanol plant and agreed to sell its gas entitlements to Contact Energy and Genesis Energy. The two power companies said that will allow them to generate more power from their gas-fired plants.

Rio Tinto has curbed electricity use at its Tiwai Point aluminum smelter under a demand response agreement with Meridian Energy, freeing up more power for the national grid.

The government will pass legislation by the end of 2024 to reverse a ban on offshore oil and gas exploration, it said today.

It will also remove regulatory barriers to the construction of facilities to import liquefied natural gas, including legislating consents for an LNG terminal. It said imported LNG will support flexible generation of electricity, and the current price is cheaper than New Zealand spot prices for natural gas. 

The latest time for LNG imports to commence would be winter 2026, Brown said.

Climate Denial?

The decisions to explore for gas and import LNG were slammed by Greenpeace as “climate denial” and a slap in the face for Pacific Island nations facing rising sea levels from climate change.

“Luxon is trying to drag New Zealanders back into fossil fuel slavery, into the forsaken land of climate apocalypse,” Executive Director Russel Norman said in a statement. “The science is very clear now that all use of fossil fuels has to be rapidly phased out if we have any hope of surviving the climate crisis.”

In other changes announced today, the government will allow electricity lines companies to own and operate generation assets larger than 50 megawatts, and will undertake a review of the performance of the electricity market.

It will review whether settings that allow hydro lakes to be drawn down below consented levels are fit for purpose. It also wants to legislate to create a regime for offshore wind farm developments which will provide more certainty for potential investors.

(Updates with Greenpeace reaction in 11th paragraph)

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