Energy crisis: What’s happening with power prices, what’s to blame, and can it be fixed? - The Front Page
Prime Minister Christopher Luxon, Energy Minister Simeon Brown and RMA Reform Minister Chris Bishop at a post-Cabinet press conference in Wellington at Parliament to announce a new LNG-related energy policy amid an ongoing energy crisis. Photo / Mark Mitchell
Multiple issues across the years have contributed to the country’s current energy crisis, according to the chairman of the Major Electricity Users’ Group (MEUG).
Record-low hydro-lake levels and diminishing gas supplies during the cold winter months have seen the country run low on electricity supply, and have
The Government announced a suite of measures to alleviate these issues in the future, including plans to fast-track a new liquefied natural gas terminal to import gas, on top of investing in more renewable energy sources.
MEUG chairman John Harbord told The Front Page two big concerns have contributed to this, with the scarcity of energy at the moment the immediate concern.
“The longer-term issue is we had an outage at the Pohokura gas field back in 2018. When the gas field went down, the wholesale electricity price jumped from around $75-80 per megawatt hour [MW/h] to almost twice that, but when the gas field came back online, the price stayed up, and it stayed up for the last six years.
“So the price has been averaging around $150-160MW/h for the last six years. The Electricity Authority had a look at it, probably three years ago now, and they couldn’t explain why the price had stayed up as high as it was.”
Harbord said there are a lot of theories as to why the price has stayed high over six years, but there has not been a rigorous examination of why.
The current National-led Government has pointed the finger at Labour for banning oil and gas exploration while in office as one cause, while Labour has said the part-privatisation of the generation retailers that make and sell electricity under Sir John Key had contributed to soaring profits.
Harbord said the end of the oil-gas exploration did have impacts by scaring off investment and maintenance in existing fields.
“Because we haven’t had that maintenance and we haven’t had sort of the fresh exploration of existing fields – so not even talking about finding new ones, but just ongoing exploration of our existing fields – because we scared a lot of that investment away, it just hasn’t been happening at the levels that we needed it to, and that I think has undoubtedly contributed to the fact that we have less gas available in our existing fields right now.”
On the part-privatisation argument, Harbord said that is more open to debate. He said the MEUG commissioned independent work on one of the gentailers after partial privatisation and found the level of economic profit “quite dramatically” rose, but a look at the wider network hasn’t been done.
As the Government eyes longer-term solutions to avoid this crisis repeating, Harbord said the move towards more renewable energy sources, such as wind and solar, needs to come with an acceptance of the fact they are “highly intermittent”.
“Even our hydro lakes are not reliable, and so you don’t have a lot of options to fall back on, which is why we’re going to continue to need gas and coal for the foreseeable future. I think we all hope that we use less and less of it, but we’re still going to need it.”
Listen to the full episode on what the energy crisis means for you, what the new LNG terminal could do to alleviate energy concerns in the future, and the cost of going renewable.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
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