Labour is ramping up its attack on the Government’s plans for an imported liquefied natural gas terminal, saying newly released expert modelling shows LNG is not the answer to New Zealand’s energy security problems.
The opposition says the Government should abandon what it describes as an LNG obsession and instead accelerate domestic renewable generation and other options for managing the country’s dry-year electricity risk.
The political fight has intensified after previously redacted modelling commissioned by the Ministry of Business, Innovation and Employment was released following an Ombudsman investigation.
The material concluded there was a low need for LNG and identified alternatives capable of providing similar security for the electricity system, including additional geothermal, wind and solar generation, underground gas storage and continued thermal backup at Huntly.
New Zealand’s energy system is particularly vulnerable during dry years because of its heavy reliance on hydroelectricity.
When hydro lake levels fall, the country needs sufficient backup generation to prevent electricity shortages and severe price spikes.
The Government has been pursuing an LNG import facility as insurance against that risk as domestic natural gas production declines.
But Labour says the latest information strengthens the case against spending potentially billions of dollars establishing an LNG supply chain.
The newly released modelling also warns that LNG could increase New Zealand’s exposure to international energy prices and carries a risk of pushing domestic gas prices towards more expensive imported LNG prices, potentially feeding through into electricity costs.
Those concerns have become more significant after international LNG prices experienced sharp volatility earlier this year, highlighting New Zealand’s potential exposure to global supply disruptions.
The Government has maintained that some form of dependable backup is required as domestic gas supplies decline and electricity demand increases.
Its case is that renewable generation alone cannot yet guarantee enough electricity during a prolonged dry year, particularly when hydro storage is low and wind and solar generation are also constrained.
The Government has previously argued that LNG would provide additional security and help prevent the extreme wholesale electricity prices experienced when energy supplies become tight.
But the latest modelling complicates that argument by suggesting other combinations of generation and storage could provide similar system-security benefits.
The controversy is now about more than energy policy.
The Chief Ombudsman found MBIE should not have withheld parts of the modelling and pointed to the strong public interest in transparency around significant public expenditure, particularly during an election year.
The Government’s own assessment has put the potential LNG project cost as high as $2.7 billion, while a group of climate and consumer organisations has also sought scrutiny from the Auditor-General over the procurement process and whether value for money has been demonstrated.
Energy is rapidly becoming a significant dividing line heading towards the election.
Labour is arguing New Zealand should put greater emphasis on locally generated energy rather than exposing households and businesses to volatile international LNG markets.
The Greens have gone further, proposing a publicly owned Kiwipower company alongside expanded renewable generation, household solar and batteries, community energy projects and $80 million for renewable energy initiatives supporting Māori housing.
The Government, meanwhile, faces the challenge of demonstrating that LNG provides sufficient additional energy security to justify its potentially substantial cost.
For whānau already dealing with high household expenses, the argument will ultimately come back to reliability and price.
New Zealand needs enough electricity to keep homes warm and businesses operating through the worst dry year — but the increasingly contentious question is whether that security should arrive on an LNG tanker from overseas or through greater investment in renewable energy here in Aotearoa.
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