June 2022
Industry update: what we're seeing
Cost of living remains the top issue on voters' minds, according to a poll conducted in May. It maintains a strong lead over other pressing concerns such as the economy and COVID-19. We expect this to continue and have implications for the energy sector.
Geopolitical uncertainty from the Russian invasion of Ukraine has seen oil and other commodities rapidly increase in price.
Prices show no signs of decreasing anytime soon as Russia continues to push back the Ukrainian military from the industrial heartland of Donbas in the east, and the EU passes sanctions to limit member countries' importation of Russian oil.
Globally we are seeing increasing emphasis on energy security, on the basis that all economic activity is ultimately energy conversion. New Zealand is no exception.
The price of imported petrol entering New Zealand is now up 90c/L on this time last year. That has led to motorists paying more than $3/L for 91 octane, despite the Government's reduction in fuel tax. The AA warn that motorists could face prices of up to $4/L by the end of the year.
Cost of living pressures are set to endure. Many of these are independent of our domestic settings, but policymakers would be well-advised to carefully consider the role of energy sector policies and investment uncertainty.
The Government's Emissions Reduction Plan proposes a myriad of policies, subsidies, and phase-outs. Unpacking the Government's commitments, making sense of how they interact with one another, and their effect on the energy industry will be an ongoing task.
Now the hard work truly begins.
Emissions Reduction Plan
Last month was a big one for the Government and the energy sector with the release of the first three emissions budgets, Emissions Reductions Plan (ERP), and Budget 2022.
The ERP was the most significant of these releases, with the Government committing $2.9 billion to various strategies, programmes, and subsidies.
The ERP is a complex document that will continue to create a lot of uncertainty for businesses and consumers. One journalist noted that of the 284 actions outlined in the Plan itself, more than half (158) are commitments to produce further plans.
It is clear that the ERP, and its planned plans, will require ongoing analysis to understand the implications for New Zealand's energy sector.
GIDI Fund expands
The cornerstone of the Government’s Emissions Reduction Plan was a massive expansion to the Government Investing in Decarbonising Industry (GIDI) Fund. The GIDI Fund is growing from $69m (already allocated) to an additional $650m over the next four years and widening the eligibility for the types of projects it will support.
The GIDI Fund provides public co-investment (subsidies) to businesses to increase their uptake of low-emission energy sources.
Shortly after the announced expansion of the fund,
Stuff’s Tom Pullar-Strecker raised concerns about whether the funded projects will be able to reduce overall emissions owing to our capped Emissions Trading Scheme.
Commerce Commission decision on gas pipeline assets
The Commerce Commission’s decision on accelerated depreciation of gas pipeline infrastructure generated a lot of media attention.
The decision will see depreciation of the assets brought forward and result in households paying about $48 extra per year for the next four years.
John spoke to Newstalk ZB about the issue and noted that the Commerce Commission had a tough call to make due to uncertainty created by the Government's approach to the energy sector.
New Zealand Infrastructure Strategy
The Infrastructure Commission recently published their New Zealand Infrastructure Strategy. The report highlights the glaring infrastructure shortfall New Zealand faces and will continue to face in the coming years.
The Strategy highlighted the abundant potential sources of renewable energy at New Zealand’s disposal. However it remained largely silent about who
would pay to develop these - or even if they were commercially viable.
Our press release noted that the Strategy overlooked the important role our world-leading Emissions Trading Scheme played in weeding out uneconomic forms of energy. If fuel sources are uneconomic after paying for their emissions, they simply will not be used.
Report shows big opportunity for CCUS in New Zealand
Ara Ake's latest report Carbon Dioxide Removal and Usage in Aotearoa New Zealand promotes discussion about the role of carbon capture, utilisation and storage (CCUS) as a tool for New Zealand to reach net zero carbon emissions.
The report profiles how CCUS are being used in several countries such as Norway, the US and UK. Unlike New Zealand, each of those countries have regulatory frameworks that enable their use of CCUS.
The report also echoes a point previously made by the Intergovernmental Panel on Climate Change: "the deployment of carbon dioxide removal to counterbalance hard-to-abate residual emissions is 'unavoidable' if net-zero CO2 or GHG emissions are to be achieved."
We are encouraged by Ara Ake's report and are glad to count them as another organisation alongside us, the Aotearoa Circle, the New Zealand Initiative, and the New Zealand Geothermal Association in pushing for a regulatory framework for CCUS.
Energy Skills Industry Talent corner
This year Energy Skills is showcasing talented energy professionals and their pathway into our sector
Process Operator, Francis Tippins talks about her journey into the energy industry.
“Taranaki has many hidden wonders, but what I didn't realise growing up was that we had an abundance of oil and gas in our region and that it played such a huge role in Aotearoa New Zealand.
I studied at WITT in 2014 completing a Certificate in Process Operations, which is a programme established by energy skills and various companies within the energy industry. This was an excellent introduction to the industry and my time spent on placement at Ballance Agri Nutrients and Māui Production Station solidified the fact that this was a great job for not only work/life balance but a real career path which I hadn't had so far.
At the end of the course I took a role at the Kapuni Production Station for Shell Todd Oil Services (now Todd Energy Ltd) as a Trainee Operator Technician.
It will be 8 years since I started at KPS this October.
I enjoy the diversity of the job, and the opportunities to upskill. I love being outside and using my hands, so fixing pumps and swinging on valves in the elements was a great fit for me. Becoming a Control Room Operator was the ultimate goal, and I achieved that at the beginning of 2021. It is an intense job at times and you need to be able to think on your feet but most days are smooth sailing in safely delivering the country the energy it needs.
I am now at home on maternity leave with my 3 month old son. I'm looking forward to going back to work next year, which will look a little different than before, but the opportunities are endless in the energy sector and I have no doubt there will be more training and upskilling for me.”
New staff appointments
In the past month we have welcomed two new staff members to bolster our team and reflect our new strategic approach.
Jesse Corlett
Policy Director - Energy Use and Fuels
Jesse joins us from EECA where he was Manager of their Policy and Engagement team for the past three years. Prior to this, he worked for the Department of Prime Minister and Cabinet, and was Private Secretary to the Minister of Energy and Resources in the previous government.
Jesse will bring his experience to this new role in which he will focus on downstream policy issues such as energy use, transport, petrol markets and new technologies and fuels.
Ben Craven
Communications Manager
Ben joins us from The New Zealand Initiative, where he was the think tank’s External Relations Manager. He has an extensive background in communications and public relations. Ben has worked in Parliament, the public sector and as a public relations consultant for well-known national and international companies, including large energy distributors and users.
Member profile: Morrison Mallett
Morrison Mallett is a law firm specialising in corporate advisory, mergers & acquisitions, commercial property and securities.
Founded in 2011, the firm has high performing legal staff across their Auckland and Wellington offices.
Morrison Mallett has been actively involved in the New Zealand energy sector for many years. Projects they have worked on have spanned solar projects, assisting companies with their ETS strategies, advising on gas supply arrangements and downstream contractual matters.
Most recently, Morrison Mallett's work has focused on commercial transactions, assisting with the implementation of an ETS strategy and general advisory work for an upstream oil and gas company.
If you have a corporate or commercial issue that requires a law firm with a strong understanding of the energy sector, get in touch with the team at Morrison Mallett.
Contact Daniel Croft, Partner, on daniel.croft@morrisonmallet.co.nz or
+64 4 498 3641
