(Abridged from Newsroom)
Analysts from the world’s foremost economic forum have rebuked the government’s plans to import liquefied gas (LNG) and spark a renaissance in domestic fossil fuel production. In its annual economic survey of New Zealand, the Organisation for Economic Co-operation and Development (OECD) warns many of the government’s energy policies are unlikely to achieve their desired effect.
The analysts urged a far greater rethink of the electricity system, saying any reliance on long-term fossil fuel use was “imprudent.”
“ … a prudent strategy under high uncertainty is to reduce electricity’s structural dependence on gas by progressively replacing gas peaking with batteries and expanding non‐gas seasonal firming (back-up) generation (e.g. pumped hydro), supported by greater demand‐side flexibility,” the analysts wrote.
Where the OECD has diverged from the government’s view, is in identifying that new fossil fuels are not the answer. LNG, it found, should be used, if used at all, as a short-term transition tool to meet dry-year seasonal firming (back-up) needs only.
“Public sponsorship of LNG risks locking‐in fossil dependence and weakening incentives for alternatives such as biomass, pumped hydro and demand response. The conflict in the Middle East underlines that introducing reliance on LNG would exacerbate New Zealand’s already high vulnerability to imported liquid fuels shortages.
In theory, the government wants to use LNG only as an interim measure, although this has been contested by the Parliamentary Commissioner for the Environment. Even that strategy is flawed. It was made clear in its analysis that no great new domestic gas find is waiting around the corner.
“Given limited opportunities in Taranaki and high-risk prospects elsewhere, the likelihood of major new discoveries is low. Experience in New Zealand and OECD countries shows that large developments rely on foreign joint ventures, which are unlikely to return without compelling prospects,” the OECD reported.
Instead, OECD’s analysts pointed to biomass (used in Nordic countries to underpin hydro generation), demand response, more geothermal and retrofitting existing hydro schemes to allow for more storage as firming tools..
In the medium term new pumped hydro and wind and solar overbuild would be on the table. In the long term, supercritical geothermal could unleash significant amounts of clean, domestic energy. It also advised regulating for greater competition in the wholesale electricity market – including, as a backstop, breaking up the gentailers.
