To address the gas shortfall, the Government is seeking expressions of interest to develop an LNG import facility, with a decision expected in December. Even with a quick decision, building the infrastructure will take time.
It’s important businesses also think about the costs that will likely be involved, and the impact on the prices paid by end users.
Businesses are therefore feeling the pressure. At EECA, we work with most of the country’s biggest energy users and see it up close. Much of the discussion so far has focused on the big end of town, but small and medium enterprises are also being affected.
Many businesses of this size don’t have energy managers or the kinds of support bigger organisations rely on, which means they’re more exposed when costs rise or things get complicated.
To dig into this more and support with our direct work in New Zealand’s regions, we commissioned a deep dive by research company Verian focused on small to medium enterprises.
The first-of-its-kind research evidenced what we have been hearing anecdotally from the market. Our business leaders are feeling stuck.
Respondents reported facing doubling gas costs as contracts come up for renewal, and uncertainty about absorbing the extra cost or committing to expensive new energy systems – even though alternatives are becoming increasingly proven and available.
One called any guess about future supply and pricing “a stab in the dark”. High costs, uncertain payback and substantial existing debt were other reasons cited as holding businesses back.
With the future unclear, businesses are wary of making the wrong move, being the first to commit to new technology, or are holding out in hope new gas supplies will somehow come to market in the next five years.
My message is to not wait it out – instead, grab the opportunity to get ahead. In the long term, unless we hit another Maui, which is unlikely and would take decades to bring online, the era of cheap, abundant gas is over. Business leaders need to start planning now.
We should start with efficiency. We know through years of work that businesses can save between 10-30% off their energy bills right now. Things like tuning a boiler and fixing leaky valves are not headline-grabbing stuff, but are critical for saving money.
Why, then, do businesses not embrace efficiency if the benefits are so self-evident? It’s for the same reason that so many of our businesses do not take up best practices around asset management or workforce planning. Because many small to medium-sized enterprises can’t see the money being left on the table, and even if they see the value, they don’t have a spare hand to grab it.
That’s exactly where the Government can come in through EECA: helping businesses identify energy savings and supporting them to make the best choices for themselves.
Being more efficient is the lowest-risk, highest-return action businesses can take – and it will go a long way to help productivity for NZ Inc.
In recent months, the team has focused on developing a suite of options especially to help those struggling with energy prices. This includes walk-through energy assessments – practical, on-site advice to save energy now, energy audits and feasibility studies. These are pathways that can crack the business case open and help companies plan or invest.
There are bigger steps, too, when a business is ready, and the investment case is there. New Zealand has an advantage many countries envy – we already generate around 85% of our electricity renewably.
Affordable and abundant renewable energy will be increasingly important for keeping our industries and economy humming. Heat pumps for hot water, and in a few years, steam production, are a key pathway for industry towards a secure long-term energy supply.
We are also innovating and finding increasingly smart ways to use energy efficiently and flexibly. An example of how this looks is our Solar on Farms demonstration programme, which will support around 40 farmers to install solar arrays, smart inverters and batteries to demonstrate viability and share lessons with other farmers.
Incorporating battery storage helps manage network impacts, avoid unnecessary network costs, and create a long-term pathway for scalable uptake of renewable generation.
Similarly, wood fuel made from previously unused residues on forest floors is is being produced from the harvesting sites and presents a huge opportunity for the country, especially for those reliant on coal or gas boilers, as they’re easier to swap out.
EECA regional analysis showed around eight million green tonnes of wood biomass is available each year from forestry harvest residues, offcuts and low-grade logs – material that could be sustainably used for energy.
Gas users can’t control the global energy market, but they can control how prepared they are. The sooner businesses start exploring their options, the more choices they will have.
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