Decades of underinvestment by the power companies have landed us in this mess, argues Lisa McLaren – and gas is not the ‘transition fuel’ that will get us out of it.
On the back of yet another big energy announcement from the government, it feels like every person and their dog has had an opinion on the energy debate over the last month. When reading the articles about our electricity crisis on your lunch break, it’s hard to wade through the sea of hot takes and opinions to separate fact from fiction.
One reason for all the muddiness around energy is the lack of transparency in terms of the motives and bias of the people talking about it. Why are people supporting particular ideas? Who do they work for? Who has their ear while hanging out in the Koru Lounge? And why are they trying to convince you that they are presenting the only viable solution? In the age of massive online overwhelm, it can be hard to sort through the political and industry rhetoric to form your own opinion.
I’ll be upfront from the start – my main motive in writing this piece on the energy crisis is to outline why our energy system doesn’t need gas as a transition fuel, and how decades of underinvestment by the power companies have landed us in this mess. My background is in climate policy and academia, and my bias is that I believe scientists when they tell us that the climate crisis is here and that the whole-of-life emissions from gas are as bad for the climate as coal. We only have a few years to decarbonise – and democratise – our energy system.
Everybody should have the right to clean, affordable electricity. For many in Aotearoa today, we know that’s not the case. Around 300,000 New Zealanders are living in energy hardship – struggling to heat their homes and keep the lights on. Household power bills have increased by 42% over the last 14 years, while renewable electricity generation has stayed around 85% for half a century now. We have so much untapped potential for increasing our renewable energy generation, but the current barriers are corporate greed and a lack of political will.
The industry giants have starved our energy system of renewables investment, and instead filled the pockets of their shareholders by the eye-watering amount of more than $10 billion this last decade. By paying out excess dividends to shareholders, the four big “gentailers” – Genesis, Mercury, Meridian, and Contact Energy – ensure that there is never sufficient investment capital to expand new renewable generation. Those companies have a perverse incentive to keep fossil fuels (coal, oil, gas) in the grid as it hikes power prices, enabling them to make record profits and distribute excess dividends, all of which slows the development of new renewable energy generation.
Whatever the source of the generation (such as hydro, geothermal, solar or gas), the gentailers are paid for the cost of the most expensive source of generation in any 30-minute period. Gas and coal are the most expensive to produce, which incentivises electricity companies to keep supply tight so gas and coal are needed, rather than cheap renewables. Expensive fossil-fuel inputs thus set the price for cheap renewable electricity, keeping profits high and shareholders – including the government – happy. But this kills the climate, and keeps our power bills sky high.
As a country, we are still stumbling into this climate crisis world like it’s business as usual. If we know that gas is not our future, then why are we still creating new subdivisions and houses which have gas installed? Why aren’t we prioritising getting our gas out of the homes, schools and hospitals that cater to some of those most vulnerable in our community? If gas prices are to continue going through the roof in the coming years, why are we locking ourselves, our communities, and our local industries into paying those exorbitant costs? We’ve seen just this week how vulnerable our workers are to changing energy prices with the closure of two timber mills in the central North Island.
Yesterday, the government announced it was pushing ahead with fast-tracking consent for a new facility to import LNG (gas). It also committed to reverse the ban on offshore oil and gas exploration by the end of the year. Those with vested interests in the longevity of the fossil fuel industry are naturally coming out in support of gas as a “transition fuel”. But there are a few problems here. First up – it would take well over a decade between overturning the ban and new gas actually coming online for use. Secondly – overseas studies have shown that gas is at least as bad for the climate as coal, when you consider the whole-of-life emissions, and there is a lack of credible data showing this isn’t the case in Aotearoa. So we don’t just have to worry about the gas we are burning – we also have to worry about the gas that is leaked in the process of getting it from the ground to where it is used. Because of how much is leaked during drilling, transportation and so on, we know that gas is at least as bad for the climate as burning coal, and is definitely not a transition fuel.
Finally, and most excitingly, increasing our gas supply is simply not needed. The price of solar panels, batteries, wind power, and other associated technologies is plunging. With the right tools and incentives, electricity demand and supply can be managed without the need for new gas exploration. Community energy projects can provide resilience to the grid – and large energy users can be incentivised to dial down their power use when needed. More household solar could mean using less hydro during the day when the sun is shining, freeing up hydro capacity at peak times and reducing need for gas.
The government could buy out Methanex and replace gas-fired “peaker” plants as soon as possible, to meet peak electricity demand with renewable energy, energy storage and active demand management. Better still, through establishing a Ministry of Green Works, the government could take an active role in building and operating renewable power storage, complementing the role of Transpower as the publicly owned operator of the electricity grid.
The government, as a majority shareholder of Genesis, Mercury and Meridian, remains the largest player in the electricity sector. This coalition government could rewrite the rules that govern our energy system – as well as use its power as a majority shareholder to force gentailers to invest in building renewable infrastructure. The review of the performance of the electricity market announced on Monday is a perfect time to consider all options, especially the changes that will make the biggest difference.
If the government continues to pursue expensive, climate-killing gas, rather than develop a forward-thinking, renewables-based energy transition plan, then every New Zealander will know that they don’t have their best interests at heart.
