In particular, the strategy needs to be more than a sum of the ad hoc, tentative, underwhelming, under-resourced and largely reactive measures your Government has implemented or is studying. It needs to be ambitious. It needs to aggressively and urgently foster development of existing, new and a more diverse range of energy resources. It needs to do much more than stick a few fingers in crumbling dykes. Inaction is a greater risk than too much action. After all, more than enough energy means cheaper energy.<\/p>\n
Declining natural gas availability is at the centre of New Zealand\u2019s emerging energy and productivity challenge. Photo \/ NZME<\/p>\n
You know more than most of us that, in business, to achieve strategic outcomes you need strategies \u2013 not individual policies or projects. You need the right strategies, strategies with vision, and you need to resource them properly. Better to over-resource than under-resource them because with energy most of the risks are on the downside. They have been for a while.<\/p>\n
But over time the machinery of government has been slow to recognise this, and too slow to react. It has made some bad choices and allowed things to drift. Hence the current crises. For all the progress your Government is making on other fronts \u2013 improving trade access, simplifying planning laws, building infrastructure \u2013 energy uncertainty, insecurity and cost is a drag anchor pulling against that. Despite this obvious truth, it is mind-numbing that few people seem to understand this \u2013 let alone articulate it or act on it.<\/p>\n
At the core of many problems is the declining availability and increasing cost of natural gas. The effects include but also extend beyond impacts on industrial gas users to electricity generators and, therefore, to industrial, commercial and household electricity prices.<\/p>\n
Here is the first sentence of an article in the December 18 issue of Energy News: \u201cNew Zealand urgently needs more gas and a plan to reduce industrial demand as it faces an \u2018increasingly unavoidable\u2019 energy shortage, according to the Gas Working Group.\u201d A recent Boston Consulting Group report contains similar sentiments.<\/p>\n
As someone who has been ringing alarm bells and providing information on this subject since the start of the year, I\u2019m beyond mortified at how little has been done, and how slow progress has been. The net result for industry? Lower growth. A few high-profile manufacturing business closures are merely the tip of the iceberg. The real damage is less visible and more insidious.<\/p>\n
This was highlighted by a survey my company undertook with the BusinessNZ Energy Council this year. The damage takes the form of lower production, business retrenchment, staff layoffs, lower confidence, deferred investment, less supplier activity, higher energy costs passed on in prices, more expensive and carbon-intensive import substitutes<\/a>, capital spent on energy security without extra output, lower profitability, lower company tax revenue, less GST and less PAYE. Not to mention the reverse scenario of greater business growth and new investment we might be experiencing if we still had secure, affordable energy.<\/p>\n An energy strategy for these times needs to urgently support transition by industry away from natural gas, as well as provide new gas supply to avoid running out completely. It needs to have the vision to embrace new technologies such as biomass, biogas and carbon capture. It also needs to factor in resilience in the face of known risks \u2013 such as declining gas reserves, the looming cost impacts on exports and imports of environmental requirements for greener sea and air freight fuels, and the potential impact of major earthquakes on our hydro and geothermal power generation.<\/p>\n A large proportion of New Zealand\u2019s GDP is based on what used to be abundant, low-cost energy. It was a source of competitive advantage for the main primary processing industries; it underpins some large businesses directly and sustains a wide range of other manufacturing, which in turn generates major multiplier economic and employment benefits. Our industrial asset base has developed accordingly. That is where we are now. Shouldn\u2019t we be trying to build on this instead of letting it all decay to the point where it will be hard to reverse the decline?<\/p>\nThe call for decisive leadership places an energy strategy firmly on the Government\u2019s agenda. Photo \/ Mark Mitchell<\/p>\n