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Wholesale electricity prices spiked in winter 2024. (Source: Electricity Authority)<\/p>\n
Most consumers were shielded from the spike due to fixed-price contracts, but Transpower had to issue emergency notices urging people to conserve power to prevent rolling blackouts. Many large industrial users, like mills and factories, had to pause or reduce operations.\u00a0<\/p>\n
The problem wasn\u2019t the cold. It was actually the third-warmest winter on record. The problem was that the weather was too mild. There wasn\u2019t much rain, so the hydro dams were low, and there weren\u2019t big storms to charge up the wind power.\u00a0<\/p>\n
When the hydro dams are low, power companies typically ramp up the production of coal and gas generators in order to meet demand. In the winter of 2024, they relied on this so much that New Zealand\u2019s coal stockpiles got worryingly low. Gas was already in short supply, because New Zealand\u2019s oil fields are dwindling and we haven\u2019t found any new ones since 2012. (NZ\u2019s locally-produced gas is almost entirely used for electricity and fertiliser production because it isn\u2019t the right kind of oil to turn into petrol or diesel).\u00a0<\/p>\n
New Zealand ended up importing extra coal from Indonesia to help firm up the supply, but couldn\u2019t import extra liquified natural gas (LNG) because none of the existing ports are equipped to handle it.\u00a0<\/p>\n
The review<\/p>\n
The crisis prompted the government and industry leaders to dust off an old plan from 2006<\/a> to build an LNG terminal in Port Taranaki. Back then, it was proposed as a joint venture between Contact Energy and Genesis Energy but was scrapped over concerns about safety and impacts on the local coastal environment.\u00a0<\/p>\n Energy minister Simeon Brown thought the terminal would be a good \u201cstop-gap<\/a>\u201d measure to prevent future energy crises. In August 2024, he announced that the government would greenlight the necessary permits if the industry still wanted to build it.\u00a0<\/p>\n The four big energy gentailers got together with pipeline operator Firstgas and did a market study<\/a> looking into the idea. The study found that building a terminal was theoretically possible, but it would require a huge amount of new port infrastructure, with construction possibly costing upwards of $1 billion and up to $210 million per year in ongoing running costs.\u00a0<\/p>\n None of the gentailers were particularly interested in paying for that. A few weeks later they struck an alternative deal between themselves<\/a> to set up a larger coal stockpile at the Huntly Power Station.\u00a0<\/p>\n The government commissioned its own report looking at the whole electricity sector<\/a>, including the LNG Terminal. The report\u2019s authors, Frontier Economics, were also not huge fans of the idea. They thought there were cheaper ways to manage the risk of another winter energy shortage, saying it made \u201cno economic sense to develop an LNG import terminal to meet just dry year risk\u201d.\u00a0<\/p>\n However, the Frontier report also didn\u2019t love the gentailers\u2019 agreement in Huntly. It suggested starting a new, government-owned company (creatively titled \u201cNew Co\u201d) to run the coal and gas plants, be in charge of stockpiling fuel, and help to underwrite new coal and gas exploration. The report was critical of the Labour government for cancelling new oil and gas exploration permits and of the National government for cancelling the Lake Onslow Hydro scheme, both of which could have helped prevent future dry year problems.\u00a0<\/p>\n The plan<\/p>\n The government carefully considered the Frontier report\u2019s recommendations and chose to mostly ignore them. Simon Watts, who had by then replaced Simeon Brown as energy minister, announced in February that the government would go ahead and build the LNG terminal itself<\/a>, which would be paid for by an electricity levy of $2-4\/MWh.<\/p>\n Consumer NZ estimated it would add $15-$30 per year<\/a> to most people\u2019s power bills. Labour and the Taxpayers\u2019 Union became unlikely allies<\/a>, calling it a \u201cgas tax\u201d and \u201cpower tax\u201d, respectively. In June, energy minister Simeon Brown (who had re-replaced Watts) dropped plans for the levy but still insisted the terminal would be paid for by the electricity sector).\u00a0<\/p>\n The reactions<\/p>\n Aside from the controversy over who would pay for it and how, the proposed LNG terminal has been criticised by several government officials, industry groups, and activist organisations.\u00a0<\/p>\n Parliamentary commissioner for the environment Simon Upton said the plan \u201craises the possibility that not only will we lock ourselves into a higher emissions pathway but will do so in a way that exposes us to higher energy costs \u2013 the worst of both worlds<\/a>.\u201d He said the plan \u201cmost likely won\u2019t reduce electricity prices overall.\u201d\u00a0<\/p>\n Rewiring Aotearoa commissioned its own report<\/a> from Sapere which suggested that New Zealand could address the dry year risk by instead focusing on diesel backup generators, building more renewable energy plans, and encouraging more industrial electrification.\u00a0<\/p>\n Meridian chief executive Mike Roan told a parliamentary select committee in May that the terminal was \u201cnot necessary from an electricity perspective<\/a>\u201d because the sector has already taken steps to manage the dry year risk in the near term.\u00a0<\/p>\n And several climate groups oppose the plan<\/a> for encouraging the use of fossil fuels and the potential harm to the local environment and nearby residents.\u00a0<\/p>\n However, some industry bodies have been supportive of the idea. Gas Industry Co<\/a> chief executive David Prentice called the terminal \u201cmission-critical for energy security\u201d and Pan Pac Forest Products<\/a> pulp general manager Roger Jones said it would help to keep the company in New Zealand.\u00a0<\/p>\n The future<\/p>\n Back in September, Brown said he was keen to get a contract signed before the election<\/a>, potentially binding a future government. Act and NZ First put the kibosh on that plan. David Seymour said it would be \u201cirresponsible<\/a>\u201d to rush the decision. However, RNZ confirmed last week that the government had continued pushing forward with its plans and had quietly selected a preferred provider<\/a> to build the terminal.\u00a0<\/p>\n Labour, the Greens and Opportunity all oppose the LNG terminal plan. Labour leader Chris Hipkins said his party would \u201cnot proceed with an LNG import facility if there is any way to stop it\u201d. It seems the fate of the LNG terminal will be decided by the election on November 7.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"National says it’s the gas facility critical for our energy security. Labour says it’s too expensive, unnecessary, and…\n","protected":false},"author":2,"featured_media":637248,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[138,111,139,69,16715],"class_list":["post-637247","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-new-zealand","tag-newzealand","tag-nz","tag-taranaki"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/637247","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=637247"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/637247\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/637248"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=637247"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=637247"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=637247"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"First](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/10\/01a15756-e334-7289-927a-06bc6f06c30e.webp\")
Energy minister Simeon Brown has been the main driver behind the LNG plan. <\/p>\n