What can the Government do for the energy sector?

Electricity prices in New Zealand are about six times higher than Australia, this week sitting at around $700 per megawatt; while in late 2021 they were $100 per megawatt.

Multiple large scale businesses are proposing the idea of shutting down as a result of the high prices, and the Government is now looking at possible intervention.

Energy Resources Aotearoa Chief Executive John Carnegie joins Ryan Bridge on Early Edition to discuss what that may look like. 

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Episode Transcript

Speaker 1 (00:00):
The Finance Minister along with the Energy Minister are looking
at urgent advice what can we do about this wholesale
electricity price spike which has just gone through the roof.
I mean it's nuts, really when you talk about the
numbers sitting at around seven hundred dollars per megawatt. In
late twenty twenty one it was at around one hundred
dollars per megawatt. As a result of these prices, multiple

(00:22):
large scale businesses are halting their operations. Actually the latest
is pan Pack in Hawke's Bay forest products they do.
They export pulp product to India and China. They've halted
their operations. Cost of electricity outweighs profit. Joining me is
Energy Resources alted O Chief executive John Carnegie, John, good morning,
Good morning. First of all, why is it that the

(00:46):
spike is happening and not happening in other places like
in Canada for example. I mean it's interesting looking at
pan Pack, they point to Canada their biggest competitor in
terms of the products they're making. Their electricity index, when
up twenty percent since twenty eighteen hours is up two
hundred percent.

Speaker 2 (01:06):
Well, look, I guess what we're seeing in actually the
most painful way is how reliant our economy is on
natural gas and how important you know, you're probably wonder
why I'm talking about natural gas for electricity, but how
important it is to our electricity system. About twenty percent
of our produced gas is used in the electricity market,
and about ten percent of all electricity generator using the

(01:30):
users gas. And of course that might be used to
your listeners, but it's a real problem if gas production reduces,
which it has been quite dramatically, and when you combine
that with extremely low lake levels, you know, we've got
some of the driest conditions we've ever ever seen, combined
with insufficient gas five power stations which are used to

(01:54):
hold the system together when the lakes are low. Well,
then I guess you'd call that the perfect.

Speaker 1 (02:01):
What do you you know? The government's looking at things
like importing lng G. What do you make of that?

Speaker 2 (02:11):
I think al G is probably a very useful backup option,
but there are a range of other solutions that I
think that they should also be working on as well.

Speaker 1 (02:21):
How long just on aler G, how long before we
would actually see that if we started importing it making
a difference here to that market?

Speaker 2 (02:31):
I mean, that's quite quite difficult to answer, but I
think you're talking you're talking around about twelve months, twelve
after eighteen months possibly, and it's not an insignificant piece
of investment. You know, we're talking hundreds of millions of dollars.
But you know, one of the solutions I think, if

(02:52):
you're wanting to help bring down prices back to long
run averages, is actually just getting more gas into our system,
natural gas, and that's actually most likely probably going to
come through our existing gas producers who have the infrastructure,
the workforce, and the knowledge, but actually just need assurances
from the government that their investments aren't going to be

(03:14):
undercut by future government policy changes like they were in
twenty eighteen.

Speaker 1 (03:18):
But that's the hard thing, right, I Mean, it's a democracy.
We vote people and we vote them out, and when
the next labor lot come in, I mean, you saw
what they did last time. So how can businesses have
confidence to invest?

Speaker 2 (03:31):
Well, I guess that cuts to one of the solutions
that I'm going to propose and have been proposed, and
that's us working our way back to political bipartisanship to
ensure in New Zealand's energy security Frankly, we should never
be putting our country in this situation where we can't
take care of our people. Industries closing and communities being

(03:54):
devastated by job losses is not a part of an
energy future. Thanky that I thought I would ever see,
and I hope never to see again. This. Actually, this
isn't a political game. Actually, this is about livelihoods and jobs.

Speaker 1 (04:07):
John, thanks for your time. John Carnegie, the Energy Resources
to archieve executive saying we need bipartisanship when it comes
to our electricity sector. He's got a point, doesn't he need?
But you need confidence. Businesses need confidence to invest in
order to make sure that the demand is met so
that we're not in this mess every time the hydro

(04:28):
late levels are down.

Speaker 2 (04:30):
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Speaker 1 (04:34):
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