The Prime Minister's vision of making New Zealand a carbon-neutral society set the stage for the recently released energy strategy and proposals for a carbon emissions trading scheme. Both should be the subject of intense scrutiny.

For example, Energy Minister David Parker's restriction on building new gas- and coal-fired power stations for the next 10 years is a daft decision. What was he thinking? Was he pressured by the Green Party to make this populist concession?

I cannot imagine that officials at the Ministry of Economic Development came up with the idea. Parker clearly didn't want to expose the idea to scrutiny in advance of making the decision, or we would have seen it canvassed in the draft strategy. I look forward to the minister explaining the logic for it.

If he had faith in the emissions trading scheme as a market instrument the best strategy would have allowed the market to determine the optimum mix of electricity generation (type, location) and consumption reflecting real world considerations such as supply, demand, cost-benefit and energy security.

Parker has thrown the gas industry a bone by stating that gas can be used to fire "peaking stations" for electricity generation. He appears to believe gas production can be put on hold or supplied on a drip-feed basis as and when needed for thermal generation.

This is based on a misunderstanding of the nature of the gas industry. Having made an investment, gas explorers need a return on investment, otherwise that investment will cease (in production and maintenance of infrastructure).

The idea that base load plants can be throttled back or kept on standby to act as peaking plants is simply wrong. If gas is to be stored in reserve to power thermal peaking stations this implies that someone will be paying gas producers not to sell their gas, at a significant cost to power prices.

It is apparent from ministerial statements that there are also misconceptions around the extent of gas reserves, which could be influencing Government thinking. The Minister of Energy has said he assumes there is not enough gas, and therefore in the future it will come from liquefied natural gas (LNG).

The current position is that at the very least there is 15 years of proven gas supply. Ministry of Economic Development modelling assumes 35PJ (petajoules) a year through new discoveries. There have been some encouraging discoveries of gas and a good prospect of more.

All of this adds up to a valuable indigenous energy resource which, if used judiciously and in "clean-burning" energy-efficient applications, should play a valuable role in our short- to medium-term energy mix. The gas resource has major strategic significance.