The speed of decline of our gas supply could be hampering the transition to alternative energy.
A Business NZ survey of commercial and industrial users shows average price rises have topped 100% in the past five years.
Nearly half made various cuts to their business.
Energy innovation centre Ara Ake's Jonathan Young told Kerre Woodham supply's fallen a lot quicker than anyone expected.
He says it's hurting as companies try to transition.
Young says it's like a relay runner falling short ahead of the baton exchange, and it's leading to de-industrialisation.
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Speaker 1 (00:06):
You're listening to the Kerrywood and Morning's podcast from News
Talks headb.
Speaker 2 (00:11):
As you have heard in the news headlines, many New
Zealand businesses are struggling with surging gas prices and a
shortage of gas. Energy management company Optima and Business New
Zealand's joint survey reveal gas prices have risen by more
than one hundred percent on average in the past five years.
Nearly half of industrial and commercial users have had to
(00:33):
make cuts as a result. So what are the alternatives?
Aa ARK is New Zealand's National Energy Innovation Center, focused
on accelerating the development and deployment of new energy technologies
ada arka head of Industry and Government Engagement. Jonathan Young
joins me now and a very good morning to you.
Speaker 3 (00:55):
Good morning, carry and nice to talk to you in
difficult times.
Speaker 2 (00:59):
For sure, Well it is we were talking about this
on Friday as well, and the ramifications of the gas
shortage are huge. When when do you think it was
first apparent that our reserves were just simply nowhere near
(01:19):
sufficient to supply businesses until alternatives had been found a.
Speaker 3 (01:28):
Number of years ago. For sure, I'm going to read
you a paragraph that I wrote in a report to
Adiaki back in twenty twenty one. Business needs assurance of
a smooth pass so they don't face a lack of
supply before a workable and affordable alternative is in place.
Currently that is not clear with a gas natural gas
(01:49):
sector under pressure to supply industry. So that was five
years ago.
Speaker 2 (01:54):
Right, What could or should businesses have done in that
time or were they utterly dependent on alternatives being found
and broad online quickly.
Speaker 3 (02:08):
I think there was because natural gas has been a
consistent supporter of industry over the last fifty to sixty years.
I think there was a belief that that would continue.
When you look at, for example, the alternatives of biogas
and aerobic digestion. Germany has about nine thousand of these
(02:31):
plants and we have a handful, only one major one
at Reprile, run by Eco Gas. So I think there
was a dependency that was I guess well founded and
supported by history, but at the same time a lack
of preparation. Knowing that, particularly in the last three years,
the decline has been accelerated, and I think that's taken
(02:54):
everybody by surprise kind of.
Speaker 2 (02:57):
I was kind of stunned at the fact that when
you drill, you should have a rough idea of what's there. Otherwise,
why would you so much investment into a place. And
all the industry experts seem to think that there'd be
another ten years, which should be time for alternatives to
be set up and online. But that was sharply accelerated.
(03:20):
Now we're left hanging and in dire straits.
Speaker 3 (03:23):
Really, I think that that's also the result of economics,
because the ten years supply in advance is the result
of investment into exploration, and when the moratorium, the ban
on new permits occurred, I think that investment slowed down considerably,
(03:47):
and so that's what's happened. People say there's plenty of
gas out there, I'm not sure. I think Tartanaki is
pretty pretty much at the point of kind of final
years of production and there isn't any other gas that's
been discovered or is production in other parts of the country.
Speaker 2 (04:08):
So arda k as I understand it was set up
by the then Labor government as a way of replacing
extractive energy.
Speaker 3 (04:22):
Yes, if you go back, probably even a few years earlier,
Stephen Joyce set up regional research institutes and there was
an idea that Taranaki needed an energy transition institute. So
that goes back to twenty sixteen and when the ban
was announced a year later, the announcement of what was
(04:48):
called then the National New Energy Development secened quite a
mouthful was announced to help the Taranaki region in particular
to transition. So the idea has always been there because
there has been shortages in the past and global collapse
of prices, et cetera. All those sorts of things that
everybody was thinking there needed to be something put in
(05:11):
place to help not just Taranaki, but also I think
regions and industries around the country that had reliance on
natural gas. So that's how it started.
Speaker 2 (05:21):
Right, So it started, and your role is to find
alternatives that are viable because we can all find alternatives,
but somebody peddling on a bicycle is not going to
run a manufacturing plant. They need to be viable and.
Speaker 3 (05:33):
Cost afford yea, absolutely, And.
Speaker 2 (05:36):
So what's happened. How far along are you?
Speaker 3 (05:40):
Well, we are working very hard on the alternatives in bygas.
In particular we work in partnership with innovators and also
we work in partnership with Scion based in rotaor and
we're working at developing a model where first and foremost
we can recognize what the feedstock is available within a
(06:02):
region to produce by a gas and then there are
industry interests and there are groups that want to collaborate
to be able to utilize that feedstock to produce. The
challenge will always be at this point in time when
there isn't scale, it's the cost factor. And secondly, can
(06:25):
biogas replace the supply of natural gas and the other
to that one at the moment is no, because just
the volume is way way way short. And so what
industry are generally doing where they can. They are transitioning
to electricity as the energy source and the transition to
biomass to wood palettes as well. So there's quite a
(06:50):
move underway, but it's become more intense and more essential
to make sure that we can do as much as
we possibly can to enable industry to survive this transition.
Speaker 2 (07:03):
Some won't, well, we absolutely know.
Speaker 3 (07:06):
That some do rely on natural gas. We've just heard
last week that balanced egle nutrients have gone into a
pause for four months and needing to negotiate another supply agreement.
They will at the same time be thinking what can
they do to transition to other energy sources.
Speaker 2 (07:27):
But they need as I understand that natural gas is
an ingredient for what they make as well.
Speaker 3 (07:35):
Yeah, many industries do. New Zealand steel needs needs carbon
as part of the steelmaking process and really getting to that,
very high volume, high temperature heat is needed in a
number of industries. So it's not it's not as easy
just to say electrify. Even though New Zealand Stelill now
(07:58):
have an electric electroc furnace that is a positive move
towards the future. The transition, I think was always anticipated
to be quite difficult, and I don't know whether many
people are aware how difficult it is because the technologies
take time to mature. The scale of which they need
(08:22):
to arrive at to become commercial is quite significant as well.
So Audiarchi was created to help innovators bridge that value
of death of innovation death, to commercialize their ideas and
their processes so that industry have got something to work with.
(08:42):
And so we work with industry quite closely. We seek
to understand the challenges they face and we often connect
them to an innovator who has a potential solution. But
all of that's not fast. I wish it was, and
it can also be reasonably expensive.
Speaker 2 (09:03):
So it was always going to be difficult. It was
always going to be expensive to transition from extractive fuels
to renewables, but the dearth of gas natural gas has
made it even more painful than it otherwise was going
to be.
Speaker 3 (09:22):
Well, I think that I think that it's really really
important to understand that there was it's never going to
be a simple, easy transition. You know, itipified it back
in that report. I did, you know, talking about the
problem of a premature declining gas supply may create is
(09:43):
like a relay race with a runner with a batter
and runs out of PAP fifty meters short of the
batter change. And this is the gap that we are
facing at the moment, and it's creating the industrialization in
the economy, which is not good. Not good for employment,
not good for regional economies, not good for you know,
the government of the day, whether that's a labored or
nationally government to be able to transition a country. And
(10:07):
even if it's not about higher mission versus lower mission,
lower mission versus higher mission, it's actually about a resource
that is no longer as available it has been in
the past, So it's actually the building blocks for many
industrial sectors that are now missing.
Speaker 2 (10:26):
So just finally, Jonathan, if I can I On Friday,
I received a text from a coffee roaster who said
to replace the machines that run on gas. The industrial
machines is multiple hundreds of thousands of dollars from overseas.
Even if you can get one, they're seeing the end
of their coffee roasting business. Is this going to be
(10:48):
a story replicated right around the country.
Speaker 3 (10:52):
Well, we are desperately trying to not have those stories
come true. So this is why the biogas sector is
so important, because it should be what's called a drop
and pure can to a simple one on one replacement,
but to get it to that production level and to
the volume needed for New Zealand industry and commerce right
(11:15):
now is a significant challenge. There's a gap there and
what'sccentuated it is over the last three years the incredible
acceleration of decline that the mature gas fields in Taranakee
region in particular have experienced. And I think everybody is
(11:37):
surprised at that. All the figures that MB have guarded
every year from the gas producers have shown an even
steeper decline than what everybody and all the engineers anticipated,
So you know, this is what we're facing. We are
facing this really stressful period of time, particularly for companies
(11:59):
that rely on gas.
Speaker 2 (12:01):
Thank you very much for your time, Jonathan Young, even
though it does more News Okey, head of Industry and
Government Engagement.
Speaker 1 (12:09):
For more from Carrywood and Mornings, listen live to News
Talks at b from nine am weekdays, or follow the
podcast on iHeartRadio
You're listening to the Kerrywood and Morning's podcast from News
Talks headb.
Speaker 2 (00:11):
As you have heard in the news headlines, many New
Zealand businesses are struggling with surging gas prices and a
shortage of gas. Energy management company Optima and Business New
Zealand's joint survey reveal gas prices have risen by more
than one hundred percent on average in the past five years.
Nearly half of industrial and commercial users have had to
(00:33):
make cuts as a result. So what are the alternatives?
Aa ARK is New Zealand's National Energy Innovation Center, focused
on accelerating the development and deployment of new energy technologies
ada arka head of Industry and Government Engagement. Jonathan Young
joins me now and a very good morning to you.
Speaker 3 (00:55):
Good morning, carry and nice to talk to you in
difficult times.
Speaker 2 (00:59):
For sure, Well it is we were talking about this
on Friday as well, and the ramifications of the gas
shortage are huge. When when do you think it was
first apparent that our reserves were just simply nowhere near
(01:19):
sufficient to supply businesses until alternatives had been found a.
Speaker 3 (01:28):
Number of years ago. For sure, I'm going to read
you a paragraph that I wrote in a report to
Adiaki back in twenty twenty one. Business needs assurance of
a smooth pass so they don't face a lack of
supply before a workable and affordable alternative is in place.
Currently that is not clear with a gas natural gas
(01:49):
sector under pressure to supply industry. So that was five
years ago.
Speaker 2 (01:54):
Right, What could or should businesses have done in that
time or were they utterly dependent on alternatives being found
and broad online quickly.
Speaker 3 (02:08):
I think there was because natural gas has been a
consistent supporter of industry over the last fifty to sixty years.
I think there was a belief that that would continue.
When you look at, for example, the alternatives of biogas
and aerobic digestion. Germany has about nine thousand of these
(02:31):
plants and we have a handful, only one major one
at Reprile, run by Eco Gas. So I think there
was a dependency that was I guess well founded and
supported by history, but at the same time a lack
of preparation. Knowing that, particularly in the last three years,
the decline has been accelerated, and I think that's taken
(02:54):
everybody by surprise kind of.
Speaker 2 (02:57):
I was kind of stunned at the fact that when
you drill, you should have a rough idea of what's there. Otherwise,
why would you so much investment into a place. And
all the industry experts seem to think that there'd be
another ten years, which should be time for alternatives to
be set up and online. But that was sharply accelerated.
(03:20):
Now we're left hanging and in dire straits.
Speaker 3 (03:23):
Really, I think that that's also the result of economics,
because the ten years supply in advance is the result
of investment into exploration, and when the moratorium, the ban
on new permits occurred, I think that investment slowed down considerably,
(03:47):
and so that's what's happened. People say there's plenty of
gas out there, I'm not sure. I think Tartanaki is
pretty pretty much at the point of kind of final
years of production and there isn't any other gas that's
been discovered or is production in other parts of the country.
Speaker 2 (04:08):
So arda k as I understand it was set up
by the then Labor government as a way of replacing
extractive energy.
Speaker 3 (04:22):
Yes, if you go back, probably even a few years earlier,
Stephen Joyce set up regional research institutes and there was
an idea that Taranaki needed an energy transition institute. So
that goes back to twenty sixteen and when the ban
was announced a year later, the announcement of what was
(04:48):
called then the National New Energy Development secened quite a
mouthful was announced to help the Taranaki region in particular
to transition. So the idea has always been there because
there has been shortages in the past and global collapse
of prices, et cetera. All those sorts of things that
everybody was thinking there needed to be something put in
(05:11):
place to help not just Taranaki, but also I think
regions and industries around the country that had reliance on
natural gas. So that's how it started.
Speaker 2 (05:21):
Right, So it started, and your role is to find
alternatives that are viable because we can all find alternatives,
but somebody peddling on a bicycle is not going to
run a manufacturing plant. They need to be viable and.
Speaker 3 (05:33):
Cost afford yea, absolutely, And.
Speaker 2 (05:36):
So what's happened. How far along are you?
Speaker 3 (05:40):
Well, we are working very hard on the alternatives in bygas.
In particular we work in partnership with innovators and also
we work in partnership with Scion based in rotaor and
we're working at developing a model where first and foremost
we can recognize what the feedstock is available within a
(06:02):
region to produce by a gas and then there are
industry interests and there are groups that want to collaborate
to be able to utilize that feedstock to produce. The
challenge will always be at this point in time when
there isn't scale, it's the cost factor. And secondly, can
(06:25):
biogas replace the supply of natural gas and the other
to that one at the moment is no, because just
the volume is way way way short. And so what
industry are generally doing where they can. They are transitioning
to electricity as the energy source and the transition to
biomass to wood palettes as well. So there's quite a
(06:50):
move underway, but it's become more intense and more essential
to make sure that we can do as much as
we possibly can to enable industry to survive this transition.
Speaker 2 (07:03):
Some won't, well, we absolutely know.
Speaker 3 (07:06):
That some do rely on natural gas. We've just heard
last week that balanced egle nutrients have gone into a
pause for four months and needing to negotiate another supply agreement.
They will at the same time be thinking what can
they do to transition to other energy sources.
Speaker 2 (07:27):
But they need as I understand that natural gas is
an ingredient for what they make as well.
Speaker 3 (07:35):
Yeah, many industries do. New Zealand steel needs needs carbon
as part of the steelmaking process and really getting to that,
very high volume, high temperature heat is needed in a
number of industries. So it's not it's not as easy
just to say electrify. Even though New Zealand Stelill now
(07:58):
have an electric electroc furnace that is a positive move
towards the future. The transition, I think was always anticipated
to be quite difficult, and I don't know whether many
people are aware how difficult it is because the technologies
take time to mature. The scale of which they need
(08:22):
to arrive at to become commercial is quite significant as well.
So Audiarchi was created to help innovators bridge that value
of death of innovation death, to commercialize their ideas and
their processes so that industry have got something to work with.
(08:42):
And so we work with industry quite closely. We seek
to understand the challenges they face and we often connect
them to an innovator who has a potential solution. But
all of that's not fast. I wish it was, and
it can also be reasonably expensive.
Speaker 2 (09:03):
So it was always going to be difficult. It was
always going to be expensive to transition from extractive fuels
to renewables, but the dearth of gas natural gas has
made it even more painful than it otherwise was going
to be.
Speaker 3 (09:22):
Well, I think that I think that it's really really
important to understand that there was it's never going to
be a simple, easy transition. You know, itipified it back
in that report. I did, you know, talking about the
problem of a premature declining gas supply may create is
(09:43):
like a relay race with a runner with a batter
and runs out of PAP fifty meters short of the
batter change. And this is the gap that we are
facing at the moment, and it's creating the industrialization in
the economy, which is not good. Not good for employment,
not good for regional economies, not good for you know,
the government of the day, whether that's a labored or
nationally government to be able to transition a country. And
(10:07):
even if it's not about higher mission versus lower mission,
lower mission versus higher mission, it's actually about a resource
that is no longer as available it has been in
the past, So it's actually the building blocks for many
industrial sectors that are now missing.
Speaker 2 (10:26):
So just finally, Jonathan, if I can I On Friday,
I received a text from a coffee roaster who said
to replace the machines that run on gas. The industrial
machines is multiple hundreds of thousands of dollars from overseas.
Even if you can get one, they're seeing the end
of their coffee roasting business. Is this going to be
(10:48):
a story replicated right around the country.
Speaker 3 (10:52):
Well, we are desperately trying to not have those stories
come true. So this is why the biogas sector is
so important, because it should be what's called a drop
and pure can to a simple one on one replacement,
but to get it to that production level and to
the volume needed for New Zealand industry and commerce right
(11:15):
now is a significant challenge. There's a gap there and
what'sccentuated it is over the last three years the incredible
acceleration of decline that the mature gas fields in Taranakee
region in particular have experienced. And I think everybody is
(11:37):
surprised at that. All the figures that MB have guarded
every year from the gas producers have shown an even
steeper decline than what everybody and all the engineers anticipated,
So you know, this is what we're facing. We are
facing this really stressful period of time, particularly for companies
(11:59):
that rely on gas.
Speaker 2 (12:01):
Thank you very much for your time, Jonathan Young, even
though it does more News Okey, head of Industry and
Government Engagement.
Speaker 1 (12:09):
For more from Carrywood and Mornings, listen live to News
Talks at b from nine am weekdays, or follow the
podcast on iHeartRadio
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