NZ$1.2 bn loan scheme opens biomass pathway

May 26, 2026

New Zealand’s wood processing sector has welcomed a Crown-backed loan guarantee scheme as a practical mechanism for shifting away from natural gas, while calling on the government to extend support to biomass supply infrastructure as well as demand.

The Gas Transition Loan Guarantee Scheme, announced as part of Budget 2026, will see the Crown guarantee 80% of each supported loan, with banks required to pass lower interest rates on to borrowers. Individual loans are capped at NZ$50 million, the scheme runs for three years, and NZ$48 million has been set aside to cover potential losses. Businesses must consume at least 1,000 gigajoules of gas annually and demonstrate energy savings of at least 15% while maintaining or increasing production to qualify. The scheme is expected to open for applications from July or August.

Mark Ross, chief executive of the Wood Processors and Manufacturers Association of New Zealand (WPMA), said energy insecurity had become a genuine threat to manufacturing growth and that the scheme offered a timely financing route to alternatives including biomass produced from wood residues and forestry by-products.

However, Ross said access to finance for fuel switching was only part of the picture. Investment in biomass processing, logistics and infrastructure remained essential to building a reliable and cost-effective supply. Many regions already had the raw biomass resource, he noted, but the capacity to convert it into delivered fuel was the determining factor in whether manufacturers could realistically make the switch.

WPMA also welcomed a separate Budget allocation of NZ$5.9 million for the Energy Efficiency and Conservation Authority to investigate pathways away from gas — an area where the association has worked alongside the agency to help members reduce energy costs.

The scheme comes against a backdrop of a tightening domestic gas outlook. Twelve of New Zealand’s 17 operational gas fields are expected to cease production within a decade, and officials estimate that full deployment of the NZ$1.2 billion facility could reduce gas consumption by up to 10 petajoules annually.

Ross said WPMA would continue to support cross-party consensus on a long-term energy strategy. “The opportunities to solve our energy challenges are already within reach,” he said, describing the loan guarantee as one important component of a broader effort to build a more secure and affordable energy future for the sector.

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