Rainbow Park was one of the last companies to receive a major grant from the Government Investment in Decarbonising Industry (Gidi) fund before new rounds were frozen and the scheme was branded \u201ccorporate welfare\u201d by the coalition. The Energy Efficiency and Conservation Authority (EECA) covered roughly a third of the cost \u2013 about $880,000 \u2013 with the nursery borrowing and doing much of the installation work itself.<\/p>\n
With no local examples to learn from, the company relied heavily on the advice of suppliers and consultants \u2013 and a lot of hope.<\/p>\n
\u201cBolting 32 heat pumps together and putting them into two enormous hot-water tanks … it was a leap of faith,\u201d Tayler says. \u201cBut if we hadn\u2019t, we\u2019d still be in the cycle of sweating every year about the gas \u2013 are they going to supply us, what is the price going to be, how is that going to affect our business?\u201d<\/p>\n
Rainbow employs more than 90 people. Doubling gas prices, Tayler says, would have \u201chamstrung\u201d the business. Instead, the nursery now buys certified zero-carbon electricity and uses the savings on its gas bill to pay down the new system.<\/p>\n
A swathe of heat-pumps warm the water in the huge hot water tank at Rainbow Nurseries. The hot water is then pumped through pipes to warm the glasshouses. Photo \/ RNZ, Cole Eastham-Farrelly<\/p>\n
\u201cWe\u2019d have to do what some other businesses are doing \u2013 curtailing production, turning the heat off in some compartments, maybe laying off staff, changing what we grow,\u201d Tayler says.<\/p>\n
\u201cI do feel like some of the guys that didn\u2019t have the opportunities we have will be finding it very tough.\u201d<\/p>\n
Since Rainbow Park switched, the bottom has truly fallen out of New Zealand\u2019s gas market. Supplies are collapsing faster than expected. Long-term contracts have become scarce and expensive.<\/p>\n
Factories that rely on gas now find themselves in a strange limbo \u2013 unable to secure long-term supply and facing steep price rises, but with little guidance or public funding to help them make massive, costly decisions about their energy future.<\/p>\n
The result, energy experts and businesses warn, is a \u201cforced transition\u201d: a messy, unmanaged exit from fossil fuels that risks shuttering plants, hollowing out regional economies and pushing up prices for everyone else.<\/p>\n
\u201cEnergy transitions work better when people have time to see the signals and make informed decisions,\u201d energy analyst Richard Hobbs, a partner at Boston Consulting group, says. \u201cWhen shocks arrive unexpectedly and timeframes are short \u2013 that\u2019s when you get the really bumpy situations.\u201d<\/p>\n
Businesses backed into a corner<\/p>\n
In Bay of Plenty, Whakat\u0101ne Growers heats four hectares of capsicum and chilli glasshouses with a mix of coal and gas. The plan had been to get off coal and move fully on to gas, which is cleaner and easier to run, with captured CO2 helping lift yields by up to 20%.<\/p>\n
Instead, site manager and co-owner Michael Simpson is stuck.<\/p>\n
A year and a half ago, the company went to renew its gas contract. Their existing supplier could not even offer one. Two other offers came back \u2013 at 40-50% higher prices.<\/p>\n
\u201cThere\u2019s two main issues,\u201d Simpson says. \u201cSupply \u2013 it\u2019s never a good thing to not know how the future is going to look \u2013 and cost. Gas prices have just exploded and no one\u2019s had the opportunity to make the best decisions for their business. You\u2019ve got to rush now.\u201d<\/p>\n
Whakat\u0101ne Growers still runs its gas boiler, but has had to dial back temperatures, focus on efficiency and lean harder on coal.<\/p>\n
\u201cWe never really stopped using coal, but we didn\u2019t go any further with transitioning away from it \u2013 more or less because we didn\u2019t have any option,\u201d Simpson says.<\/p>\n
The business has looked seriously at geothermal energy paired with heat pumps. The numbers were \u201cinsane\u201d.<\/p>\n
\u201cThe capital required was absolutely mind-blowing,\u201d Simpson says. \u201cAnd with electricity prices going up as well, the running costs were going to be the same, or more. You\u2019re kind of between a rock and a hard place.\u201d<\/p>\n
With clear signals and a runway, he says, the business could have plotted a path.<\/p>\n
\u201cTen years would have been a lot. If there\u2019d been a clear signal: \u2018By this date, you won\u2019t be able to run on gas\u2019, we could have planned. Instead it feels like gas prices have just exploded with little to no warning.\u201d<\/p>\n
Without support, many growers and manufacturers, Simpson says, are simply absorbing the costs, passing some on to consumers and hoping something changes.<\/p>\n
\u201cUltimately, if New Zealand businesses have been backed into this corner, to stay productive and operating, we\u2019re going to need some help to transition,\u201d he says. \u201cIt\u2019s all good and well to say you\u2019ve got to transition. But if the capital outlay is going to kill half the businesses in the country \u2013 and the gas prices kill the other half \u2013 what are we going to be left with?\u201d<\/p>\n
No silver bullets here<\/p>\n
New Zealand\u2019s exit from gas was meant to be more orderly than this.<\/p>\n
Under the previous Government, officials had started work on a Gas Transition Plan, consulting on how to phase down gas while keeping the lights on. The idea was to map out which uses should be prioritised, when new supply would taper off, and how to avoid simply swapping gas for coal when shortages hit.<\/p>\n
Alongside it, the Gidi fund helped pay for the hardware needed to switch: electric boilers, high-temperature heat pumps, biomass boilers and efficiency upgrades in factories, schools and hospitals.<\/p>\n
The Gidi fund helped pay for Rainbow Park Nurseries to switch from old coal and gas boilers to electric. Photo \/ RNZ, Cole Eastham-Farrelly<\/p>\n
The goal was not only to reduce dependence on a fuel in decline \u2013 it was to cut emissions. Gas is one of the biggest sources of industrial climate pollution, and the Gidi fund was designed to help firms shift in order to help meet the country\u2019s climate goals.<\/p>\n
That has now flipped: decarbonisation has become the bonus, with the driver keeping businesses running as supply worsens.<\/p>\n
That dual purpose \u2013 climate and energy security \u2013 is what a \u201cmanaged transition\u201d was meant to balance.<\/p>\n
The current Government parked that process. It had its own plan: the idea of \u201cmarket-led\u201d transition: where the Emissions Trading Scheme (ETS) and price signals will, over time, make fossil fuels too expensive and clean alternatives more attractive. Ministers have argued that public subsidies distort markets and say a market-led transition will deliver lower costs over time.<\/p>\n
The problem is, since the Government made that decision, none of the markets involved have been behaving the way textbooks say they should.<\/p>\n
Gas prices for industry have already doubled on average over five years, but new supply is still shrinking and exploration is yet to restart. At the same time, electricity prices are historically high and security margins are tightening as gas-fired stations age and new renewables lag demand.<\/p>\n
Further, the ETS carbon price has slumped<\/a>, with multiple auctions failing to clear, weakening the incentive to invest in lower-emissions technology.<\/p>\n \u201cThere\u2019s enough evidence already to show that the market is demonstrably not working,\u201d Optima energy consultant Martin Gummer says. \u201cIf the market was right, then as prices have gone up, there\u2019d be more gas coming on stream. The opposite is happening.\u201d<\/p>\n In that context, a \u201cmarket-led\u201d transition risks becoming no transition at all \u2013 and as a result, the country faces the worst of both worlds: emissions stay high while businesses face shortages and huge energy bills.<\/p>\n \u2018The bottom has fallen out of the gas market\u2019<\/p>\n The scale of what might yet happen if New Zealand cannot get its energy crisis under control was laid out last month in Energy to Grow, a report by Boston Consulting Group (BCG) for the four main gentailers.<\/p>\n