National power grid operator Transpower says the decline in New Zealand’s gas availability means the country needs to deliver more electricity generation to reliably meet growing demand.
Transpower said generation investment is accelerating but until new plant is delivered, the sector must work harder to make the most of existing generation assets through careful maintenance and by ensuring sufficient hydro storage and thermal fuel is available to run them over winter.
The country’s supply risks were highlighted in Transpower’s annual Security of Supply Assessment (SOSA) report, covering the decade through to 2034.
Transpower executive general manager operations, Chantelle Bramley, said New Zealand needed to speed up development.
“Any delay in new resources entering the market will put more strain on existing resources, impacting the ability to manage energy and capacity challenges, which will impact the sector’s ability to meet growth in demand for electricity across New Zealand,” Bramley said.
The report shows that the sector is already responding to the challenge with a 350-megawatt (MW) increase in newly commissioned generation since the last assessment in 2024.
This is around 3.5% of existing installed generation capacity, which is enough to power Wellington, the Hutt Valley and Kāpiti on the average weekday.
The quantity of committed projects has also increased by about 1500MW since the last assessment, or 15% of current installed capacity.
“However, with so much of the supply pipeline unconsented, there is risk that these projects could be delayed, deferred or dropped,” Bramley said.
“So it’s essential for New Zealand that we pick up the pace and move planned projects quickly through the financing, consenting, design, build and commissioning phases so that they can start contributing much-needed megawatts.”
New Zealand currently faced two main risks to electricity supply.
“The first is making sure we have enough energy across the winter if it doesn’t rain for an extended period, as happened last year and early in 2025, or if there are faults to key equipment, further declines in gas availability or interruptions to coal supplies,” Bramley said.
“The other is ensuring we can meet demand on the coldest mornings and evenings if the wind isn’t blowing, the sun isn’t shining and not all other generation is available, either due to maintenance needs, fuel shortages or faults.“
The market was well aware of the immediate challenges posed by the sudden decline in gas supply and was already acting to manage them.
This included working together to make the most of existing electricity generation assets and ensuring there is enough fuel to run them across winter.
Early this month, the big four power generators looked to be getting closer to doing a deal to support Genesis Energy’s thermal generation at Huntly in order to offset dry-year risk for the hydro-dominated national electricity system.
Bramley said it was good to see the industry advancing arrangements to extend the life of Genesis Energy’s third Rankine unit at Huntly and securing coal reserves at that site to reduce the impact on electricity generation from falling gas availability.
“The assessment assumes all three Rankine units at Huntly are fuelled and operational but factors in the planned retirement of Contact Energy’s TCC gas plant in Taranaki,” she said.
“If there were a plant failure or retirement of a thermal generator like the third Rankine unit, risk would increase and new generation would need to be built even faster.”
The electricity sector is still smarting from last year’s spike, which saw wholesale prices hit $820 per megawatt hour (MWh) due to low hydro levels, calm wind conditions and constrained gas supply.
Prices remained elevated early this year, but heavy rain in recent weeks has filled the hydro lakes, driving prices down to around $60MWh last week.
In early June, official data showed New Zealand’s gas supply was reducing faster and sooner than previously forecast.
The Ministry of Business, Innovation and Employment said that, as of January 1, 2025, natural gas reserves had reduced 27% compared to last year.
Revised forecasts have annual gas production falling below 100 petajoules (PJ) by 2026 instead of 2029.
The Government is in the process of removing the ban on offshore oil exploration, put in place by the previous Labour-led Government in 2018.
There has not been a significant offshore gas find since Pohokura, 4.5km off the Taranaki coast.
Pohokura was drilled in early 2000 and went into production in August, 2006.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.