August - September 2021
Was banning oil and gas exploration a mistake? ENERGY
As New Zealand tries to move closer towards decarbonisation, last year saw the highest level of coal-based electricty generation in a decade, says Total Utilities Managing Director Richard Gardiner
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ew Zealand’s electricity and natural gas markets are inextricably inter-linked. Electricity and gas compete as alternative energy sources, but rely on each other for production. Electricity generation is the second biggest user of natural gas after methanol production by Methanex.
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Gas is the second biggest source of electricity generation after hydroelectricity. With this intricate dependence on one another, the effective management of our national energy strategy (including electricity and gas etc) is critically important. The outright prohibition three years ago of all new
offshore oil and gas exploration, is having a profoundly negative impact on the natural gas sector and hence on the health of the electricity sector. No matter how well intentioned this original decision was, it was not thought through properly at the time. It’s unfortunate that, as
a result of these policies, coal-based electricity generation in 2020 was the highest for a decade. This coincided with the lowest gas-based electricity generation for nine years. Given that coal emits 1.9 times more CO2, on a gigajoule-for-gigajoule basis than natural gas, this is an environmental step backwards. We understand coal imports of 1 million tonnes from Indonesia in 2020 are currently on course to triple in 2021. Recently the Government has seemed more accepting of natural gas as a transition energy source on the road to 100% renewability. The negative impacts of the prohibition have been compounded by various other negative electricity supply and demand factors since then: • Rebounding electricity demand following the Global Financial Crisis in 2008. • Back-to-back very dry