Gas Infrastructure Working Group sets out reasons for managed gas transition

Monday, October 11, 2021

Gas infrastructure companies and government agencies have been collaborating closely on a crucial report that identifies the impacts of the move away from natural gas.

Click here to view the report.

A key finding is the need for a managed transition that protects consumers from a potential $5.3 billion bill, while balancing the needs of the government and network investors.

The Gas Infrastructure Future Working Group was set up to enable a collaborative approach to the challenges and has produced an in depth analysis, which will help inform the government’s response to the Climate Change Commission’s advice in relation to the future of gas in New Zealand.

The group’s report shows a managed transition is critical to help navigate issues such as the high cost to consumers of changing away from gas appliances, as calculated under the Climate Change Commission’s demonstration transition pathway. It also addresses the need to retain the option for existing gas pipelines to be repurposed for low- or zero-emissions ‘green gasses’ to help in other ‘hard to abate’ energy uses, such as high heat processes and heavy road transport.

The group is co-chaired by Geoff Swier and Eli Grace-Webb from Farrier Swier, and is made up of the country’s largest gas infrastructure companies Vector, Firstgas Group and Powerco, with observers from the Gas Industry Company, Ministry of Business, Innovation and Employment, the Commerce Commission, the Electricity Authority, and the Major Gas Users Group.

They are urging a managed transition to ensure continuity of a safe, reliable, and affordable energy supply as gas and LPG consumers move to zero carbon gas or alternative renewable energy sources.

Vector Chief Executive Simon Mackenzie says: “The working group is keen to continue working collaboratively with the government to solve this puzzle and develop a new compact between government and the gas industry that supports the government’s zero carbon target, promotes the long-term interests of energy consumers, and creates economic development and job opportunities.

“Vector’s view is there needs to be a new transitional agreement because the current regulatory settings were designed for a different operating environment than we are now facing. This is not uncommon, as we saw with a similar transitional arrangement put in place for the rollout of Ultra Fast Broadband.”

Firstgas Group Chief Executive, Paul Goodeve says, “We support the report’s recommendation that further engagement is needed to determine the right regulatory settings for gas infrastructure given the environment we are operating in.

“The release of our hydrogen trial study earlier this year has also highlighted to us, the importance of having the government’s support to preserve gas pipelines and infrastructure if we are going to reach zero carbon by 2050,” adds Goodeve.

Powerco Acting Chief Executive Chris Taylor says that changing the way New Zealand’s energy needs are served requires careful planning.

“We support New Zealand's move towards a zero-carbon future and are confident that the development of renewable options mean that gas will continue to play an important role in the country’s energy mix.

“It’s crucial that this transition to renewable energy sources is carefully and thoughtfully managed. Being a dual electricity and gas distributor, we understand the challenges the country faces to maintain secure and affordable energy as decarbonisation drives greater demand for electricity," he says.

While the working group’s focus has been on gas infrastructure, it has needed to look broadly across the energy sector. The working group process so far has been valuable as it has enabled the members and observers to exchange information and perspectives and gain a common view of the future challenges across the wider sector as we look for solutions to decarbonise our energy systems.

The group’s next step is to continue working together to develop recommendations for a new framework, with the aim of a draft solution being ready early next year.

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