Soaring energy bills are a problem for firms, households, and the government. This was a headline in The Economist last week – but it can’t happen here, can it?
After all, NZ has plenty of energy. Unlike Europe, 80% of its electricity is from renewable sources. And according to oil industry authorities, NZ is surrounded by a massive continental shelf — the fifth largest in the world, beneath which lie vast quantities of undiscovered natural gas and, probably, some light oil.
So surely NZ can face the future with confidence?
Well, no: let’s not forget Prime Minister Jacinda Ardern had her “non-nuclear” moment and placed a ban on new offshore exploration permits for oil and gas. Since then, as international oil explorers gave up their offshore exploration licences, supplies from existing producing wells have begun to diminish for several reasons.
Higher costs are starting to flow into household and business gas bills. Vector is increasing Ongas LPG cylinders from $115.026 to $125.82.
Meanwhile wholesale electricity prices which bounced up earlier this year are predicted to stay relatively high for some time yet. That is having an impact on industries which are big electricity consumers — though not to the extent that Britain is experiencing.
Nevertheless it wouldn’t be stretching the long bow to suggest NZ may be hit with more of the blackouts of the kind experienced in August.
Across the rest of the world, the natural gas shortage is hitting economies hard. Prices have surged, pushing up the price of power virtually everywhere. As The Economist put it, the first energy squeeze of the green era has important lessons for governments.
It argues governments have not made enough allowance for the intermittency of renewable energy.
And The Economist concludes that if governments do not manage the energy transition more carefully, then today’s crisis will be the first of many that threaten the vital move to a stable climate.
In many countries, including Britain and Spain, governments are rushing through emergency measures to protect consumers. Factories are closing temporarily.
The fast-rising energy price rises are particularly painful in Britain: since oil and gas was discovered off its north-east coast half a century ago, gas has generated much of its electricity and heated almost half of its homes. But North Sea gas is running out and as Britain has replaced coal-fired plants with wind power to reduce emissions, it has become painfully dependent on natural-gas imports, especially in calm weather.
Here there are warning signals for NZ, as the government urges power companies to generate more power from wind farms to get to its 100% renewable target. (What happens when the wind doesn’t blow and the dams have emptied?)
Meanwhile, back on the farm, NZ’s primary producers are being told prices for beef and lamb could reach new records this season, while over in the dairylands, the payout from the giant co-op Fonterra could surpass last season’s strong result. But costs, particularly for energy and shipping, are rising even faster.
Fuel has never been so expensive in NZ. Petrol price data shows prices at the pump are even higher than the peak in 2018. Octane 91 has cracked $2.50 and the 91 national average is $2.39.
Big energy users in NZ will be ruing that cheap gas is but a memory.