What we heard: Key themes
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The Government needs to provide clear direction and stability for investors
We heard that decisions made by investors now will impact the future of the gas sector over at least the next 10 years, and potentially out to 2050.
The Government can do more to provide certainty and help guide investments in gas supply or alternative forms of energy. Submitters differed on what direction they believed was right, but there was general agreement that there needs to be a clear plan in place, particularly for the future of gas exploration and development, the gas pipeline network and gas in the electricity system.
Submitters also emphasised the need for stable regulatory settings so that investors can make long-term decisions with confidence. Some suggested that regulations should have mechanisms that provide companies with recourse if terms of licence are changed by subsequent governments.
We need to avoid an unmanaged winddown of gas pipeline networks
We heard concerns from a range of different individuals and organisations that there could be an unmanaged winddown of gas pipeline networks, where falling demand forces pipeline businesses to increase prices for remaining customers to the extent that they drive even more customers away and become financially unsustainable. This scenario would be costly for everyone, with low-income consumers most at risk.
Submitters had a variety of ideas for what the Government could do to minimise this risk. Some called for positive messaging about gas and assurance that consumers would have it as long as they want it. Some believed that renewable gas blending could help extend the economic life of pipeline assets. Some called for amendments to cost recovery regulations, particularly to Part 4 of Commerce Act. Some called for managed decommissioning of the network, and support for vulnerable consumers to switch to electrical alternatives. The common thread is that the Government needs to make a plan and manage the situation.
We need more affordable and reliable renewable electricity before we can phase out gas
Submitters generally recognised that gas plays a small but critical role maintaining electricity security of supply and affordability, and that its role may become smaller but more important as the proportion of intermittent renewable generation increases. We heard warnings that electricity reliability and affordability should not be compromised for the sake of getting the last few percent of gas-fired generation out of the system, as it could delay electrification and compromise the wider energy transition.
We heard that Government messaging which pushed 100 per cent renewable electricity prematurely discouraged investment in gas-fired generation. Some suggested the Government should intervene to actively encourage investment. Suggested interventions included requiring renewable generators to have backup available, introducing minimum notice periods for closure of thermal plants or unwriting risks for investments in gas assets.
Renewable gases and CCUS can help reduce emissions, but they are not a complete solution
Submitters had mixed views on whether biogas would play an important role in reducing emissions from natural gas. While some saw it as an opportunity which is currently technically and commercially viable and compatible with existing infrastructure, some thought it could only replace a small proportion of gas volumes due to feedstock scarcity and high prices.
Generally, submitters viewed hydrogen as less important than biogas for reducing emissions from natural gas. While some favoured it for its potential as a zero-emissions fuel, most saw it as a comparatively poor substitute for natural gas because it is relatively expensive, less compatible with existing infrastructure and inefficient.
Views on the importance of CCUS were also mixed, largely because the proposed application of CCUS in gas production has the potential to prolong gas production. While some saw it as a win-win for emissions reduction and security of supply, others were concerned it would compromise overall emissions reductions by prolonging gas consumption. Submitters saw several barriers to CCUS, including cost, regulatory settings and risks around long-term storage. Some iwi were strongly opposed to underground storage of carbon dioxide (see section on Iwi and Māori views for more detail).
The consensus was that none of these three technologies are capable of decarbonising gas on their own, and that they should be considered as complementary tools alongside renewable electricity and energy efficiency. A widespread view was that their use should be prioritised where it is needed most, particularly in hard-to-abate applications where electrification is not an option.
We need gas storage to maintain flexibility
In their responses regarding gas storage, most submitters considered gas storage to be important, particularly for maintaining electricity security of supply and in a situation where gas production is in decline. Several saw a need for increased storage capacity, except for those who expected demand for gas to decline rapidly. Submitters felt that, ideally, investments in gas storage should be left to the market, but some anticipated a need for the Government to underwrite investment risk due to the uncertainty caused by past policy decisions.
Most submitters were unsupportive of LNG importation and favoured gas storage as the better option.
There is more work to do, and it should be a collaborative effort
Submitters wanted to see more information and analysis before irreversible decisions are made. They warned against shutting down gas infrastructure before the broader implications or the opportunities for repurposing are fully understood. Some wanted to see an energy strategy in place before we begin to implement a gas transition.
We heard calls for better coordination and engagement, with both industry and with other government agencies. Submitters also emphasised the importance of achieving consent from local communities, particularly Māori.