The proposed Liquified Natural Gas (LNG) import terminal is a short-term reaction that will have negative long-term consequences — and there are better options available. That's the main thrust of a new report produced by independent energy experts Sapere for Rewiring Aotearoa.
The analysis clearly shows we should not be rushing into this LNG decision and signing something in the next few months. It appears premature and costly relative to lower-cost bridging and long-term renewable options.
The report shows the Government has not fully considered whether a new dedicated dry-year fuel is even necessary, and did not do a robust comparison with the other options. The procurement process should be stopped, because LNG is not in the best short- or long-term interests of New Zealanders.
Three faultlines
The report says the 2024 energy crisis exposed three "faultlines" in our system:
- Declining gas reserves and production capacity means that in the near future, existing domestic gas will not be able to reliably flex to cater for all the needs of a dry year.
- New domestic gas is unlikely, and LNG cannot be a sustainable long-term fuel for process-heat users because it is volatile and expensive. There is still no meaningful strategic policy response for industries facing an inevitable gas shortfall.
- A deficient electricity contract market that will continue to leave businesses exposed to wholesale prices and delay investments in a dry-year solution.
What the report recommends instead
Rather than invest in an LNG terminal, the report recommends:
- Enabling investment in renewables for dry-year firming, with diesel as a short-term bridge.
- Accelerating industrial businesses transitioning from gas to electricity for process heat.
- Creating firm-energy contracts that unlock dry-year investment.
