Open letter warns LNG import terminal would lock in higher power prices

LNG has been put forward as a possible solution to New Zealand's energy needs.

An open letter from environmental and energy groups has urged the Government to not spend taxpayers’ money on a liquefied natural gas import terminal.

The letter from a broad range of signatories said investment in liquefied natural gas (LNG) would waste hundreds of millions of dollars, lock customers into a more expensive energy future, increase exposure to international price shocks and make it increasingly challenging to meet carbon targets.

“We believe there are more cost-effective, homegrown solutions than LNG to meet our dry-year energy needs, provide reliable, affordable energy for industry needs, lower energy bills for all customers and improve national productivity while advancing our transition to decarbonisation,” the letter said.

In October, after releasing a review of the electricity market, the Government said it would run a competitive procurement process for an LNG import facility to support New Zealand’s hydro-dominated power electricity system through the dry years.

The Government said it would engage with the sector to test market interest, including the possibility of delivering LNG quickly.

The process has already opened and the next set of decisions is expected to be taken by the Government this month.

The 2024 winter price spike – driven by dwindling local gas supplies and drier and calmer weather – has put possible LNG imports into the equation as gas plays a back-up role for the national grid.

“An LNG terminal could produce power at around $300 per MW hour – double the cost of new hedged renewables already on our grid,“ environmental group 350 Aotearoa said.

“Energy companies have already reviewed the numbers and walked away from the terminal as [it’s] too risky and too expensive to build themselves,“ group co-director Alva Feldmeier said.

“Now the fossil industry has pressured the cabinet into bankrolling it with public money.”

LNG typically comes with “take-or-pay” contracts tied to global fossil fuel markets, leaving New Zealand exposed to international price shocks.

Mike Casey, CEO of Rewiring Aotearoa – a charity aimed at decarbonising power generation – said an LNG terminal would lock New Zealand into a solution that would increase energy costs, reduce fuel security and create unnecessary emissions.

Luke Blincoe, CEO of renewable energy firm Supa Energy, said the country did not need an LNG terminal.

“This locks in more dirty imported energy when we have the people and resources to instead make clean energy at home,” Blincoe said.

The letter said there were other solutions to the energy shortage.

These included:

• A mass heat pump and hot water heat pump rollout.
• Ongoing flexible demand response agreements from Tiwai Point smelter and Methanex.
• Accelerate renewable generation and provide low-cost renewable electricity for industrials through Government-backed power purchase agreements.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.

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