Latest / Best of Business / Jonathan Young: Ara Ake Head of Industry and Government Engagement on the impact of the rapidly declining gas supply

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Jonathan Young: Ara Ake Head of Industry and Government Engagement on the impact of the rapidly declining gas supply · Best of Business

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  Speaker 1: You're listening to a podcast from NEWSTALKSTB. Follow this and
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  Speaker 2: As you have heard in the news headlines, many New
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  Speaker 2: Zealand businesses are struggling with surging gas prices and a
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  Speaker 2: shortage of gas. Energy management company Optima and Business New
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  Speaker 2: Zealand's joint survey reveal gas prices have risen by more
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  Speaker 2: than one hundred percent on average in the past five years.
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  Speaker 2: Nearly half of industrial and commercial users have had to
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  Speaker 2: make cuts as a result. So what are the alternatives?
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  Speaker 2: Aa ARK is New Zealand's National Energy Innovation Center, focused
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  Speaker 2: on accelerating the development and deployment of new energy technologies
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  Speaker 2: ada arka head of Industry and Government Engagement. Jonathan Young
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  Speaker 2: joins me now and a very good morning to you.
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  Speaker 3: Good morning, Kerry, and nice to talk to you in
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  Speaker 3: difficult times for sure.
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  Speaker 2: Well it is we were talking about this on Friday
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  Speaker 2: as well, and the ramifications of the gas shortage are huge.
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  Speaker 2: When when do you think it was first apparent that
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  Speaker 2: our reserves were just simply nowhere near sufficient to supply
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  Speaker 2: businesses until alternatives had been found a.
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  Speaker 3: Number of years ago. For sure, I'm going to read
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  Speaker 3: you a paragraph that I wrote in a report to
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  Speaker 3: Adiaki back in twenty twenty one. Business needs assurance of
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  Speaker 3: a smooth past so they don't face a lack of
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  Speaker 3: supply before a workable and affordable alternative is in place. Currently,
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  Speaker 3: that is not clear with a gas natural gas sector
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  Speaker 3: under pressure to supply industry. So that was five years ago.
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  Speaker 2: Right, What could or should businesses have done in that
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  Speaker 2: time or were they utterly dependent on alternative being found
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  Speaker 2: and broad online quickly.
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  Speaker 3: I think there was because natural gas has been a
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  Speaker 3: consistent supporter of industry over the last fifty to sixty years.
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  Speaker 3: I think there was a belief that that would continue.
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  Speaker 3: When you look at, for example, the alternatives of biogas
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  Speaker 3: and aerobic digestion. Germany has about nine thousand of these
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  Speaker 3: plants and we have a handful, only one major one
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  Speaker 3: at Reprire, run by Eco Gas. So I think there
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  Speaker 3: was a dependency that was I guess well founded and
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  Speaker 3: supported by history, but at the same time a lack
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  Speaker 3: of preparation. Knowing that, particularly in the last three years,
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  Speaker 3: the decline has been accelerated, and I think that's taken
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  Speaker 3: everybody by surprise.
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  Speaker 2: Kind of I was kind of stunned at the fact
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  Speaker 2: that when you drill you should have a rough idea
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  Speaker 2: of what's there. Otherwise, why would you put so much
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  Speaker 2: investment into a place. And all the industry experts seem
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  Speaker 2: to think that there'd be another ten years, which should
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  Speaker 2: be time for alternatives to be set up and online,
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  Speaker 2: but that was sharply accelerated. Now we're left hanging and
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  Speaker 2: in dire straits.
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  Speaker 3: Really, I think that that's also the result of economics,
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  Speaker 3: because the ten years supply in advance is the result
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  Speaker 3: of investment into exploration, and when the moratorium, the ban
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  Speaker 3: on new permits occurred, I think that investment slowed down considerably,
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  Speaker 3: and so that's what's happened. People say there's plenty of
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  Speaker 3: gas out there, I'm not sure. I think Tartanaki is
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  Speaker 3: pretty pretty much at the point of kind of final
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  Speaker 3: years of production, and there isn't any gas that's been
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  Speaker 3: discovered or is in production in other parts of the country.
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  Speaker 2: So ada k as I understand it was set up
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  Speaker 2: by the then labor government as a way of replacing
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  Speaker 2: extractive energy.
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  Speaker 3: Yes, if you go back, probably even a few years earlier,
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  Speaker 3: Stephen Joyce set up regional research institutes, and there was
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  Speaker 3: an idea that Taranaki needed an energy transition institute. So
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  Speaker 3: that goes back to twenty sixteen and when the ban
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  Speaker 3: was announced a year later, the announcement of what was
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  Speaker 3: called then the National New Energy Development seemed quite a
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  Speaker 3: mouthful was announced to help the Taranaki region in particular
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  Speaker 3: to transition. So the idea has always been there because
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  Speaker 3: there has been shortages in passing, global collapse of prices,
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  Speaker 3: et cetera, all those sorts of things that everybody was
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  Speaker 3: thinking there needed to be something put in place to
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  Speaker 3: help not just Taranaki but also I think regions and
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  Speaker 3: industries around the country that had reliance on natural gas.
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  Speaker 3: So that's how it.
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  Speaker 2: Started, right, So it started, and your role is to
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  Speaker 2: find alternatives that are viable, because we can all find alternatives,
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  Speaker 2: but somebody pedling on a bicycle is not going to
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  Speaker 2: run a manufacturing plant. They need to be viable and
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  Speaker 2: cost afford Yeah. Absolutely, And so what's happened. How far
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  Speaker 2: along are you?
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  Speaker 3: Well, we are working very hard on the alternatives in bygas.
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  Speaker 3: In particular, we work in partnership with innovators and also
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  Speaker 3: we work in partnership with Scion based in Rota, raw
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  Speaker 3: and we're working at developing a model where first and
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  Speaker 3: foremost we can recognize what the feedstock is available within
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  Speaker 3: a region produced by a gas and then there are
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  Speaker 3: industry interests and there are groups that want to collaborate
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  Speaker 3: to be able to utilize that feedstock to produce. The
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  Speaker 3: challenge will always be at this point in time when
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  Speaker 3: there isn't scale the cost factor and secondly, can buy
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  Speaker 3: a gas replace the supply of natural gas? And the
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  Speaker 3: other to that one at the moment is no, because
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  Speaker 3: just the volume is way way way short. And so
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  Speaker 3: what industry are generally doing where they can. They are
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  Speaker 3: transitioning to electricity as the energy source and the transitioning
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  Speaker 3: to biomass to wood palettes as well. So there's quite
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  Speaker 3: a move underway, but it's become more intense and more
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  Speaker 3: essential to make sure that we can do as much
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  Speaker 3: as we possibly can to enable industry to survive this transition.
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  Speaker 2: Won't well.
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  Speaker 3: We absolutely know that some some do rely on natural gas.
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  Speaker 3: We've just heard last week that balance Aggle nutrients have
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  Speaker 3: gone into a pause for four months and needing to
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  Speaker 3: negotiate another supply agreement. They will at the same time
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  Speaker 3: be thinking what can they do to transition to other
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  Speaker 3: energy sources?
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  Speaker 2: But they need as I understand that natural gas as
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  Speaker 2: an ingredient for what they make as well.
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  Speaker 3: Industries, Yeah, many industries do. New Zealand steel needs needs
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  Speaker 3: carbon as part of the steelmaking process. And really getting
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  Speaker 3: to that very high volume, high temperature heat is needed
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  Speaker 3: in a number of industries. So it's not it's not
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  Speaker 3: as easy just to say electrify. Even though New Zealand
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  Speaker 3: see will now have an electrial electroc furnace. That is
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  Speaker 3: a positive move towards the future. The transition, I think
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  Speaker 3: was always anticipated to be quite difficult, and I don't
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  Speaker 3: know whether many people are aware how difficult it is
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  Speaker 3: because the technologies take time to mature. The scale of
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  Speaker 3: which they need to arrive at to become commercial is
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  Speaker 3: quite significant as well. So Audiarchi was created to help
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  Speaker 3: innovators bridge that value of death of innovation death to
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  Speaker 3: commercialize their ideas and their processes so that industry have
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  Speaker 3: got something to work with. And so we work with
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  Speaker 3: industry quite closely. We seek to understand the challenges they
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  Speaker 3: face and we often connect them to an innovator who
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  Speaker 3: has a potential solution. But all of that's not fast.
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  Speaker 3: I wish it was, and it can also be reasonably expensive.
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  Speaker 2: Was always going to be difficult. It was always going
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  Speaker 2: to be expensive to transition from extractive fuels to renewables,
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  Speaker 2: but the dearth of gas natural gas has made it
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  Speaker 2: even more painful than it otherwise was going to be.
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  Speaker 3: Well, I think that I think that it's really really
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  Speaker 3: important to understand that there was it's never going to
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  Speaker 3: be a simple, easy transition. You know, itipified it back
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  Speaker 3: in that report. I did, you know, talking about the
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  Speaker 3: problem of a premature declining gas supply may create is
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  Speaker 3: like a relay race with a runner with a bat
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  Speaker 3: and runs out of pat fifty meters short of the
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  Speaker 3: batter and change. And this is the gap that we
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  Speaker 3: are facing at the moment, and it's creating the industrialization
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  Speaker 3: in the economy, which is not good. Not good for employment,
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  Speaker 3: not good for regional economies, not good for you know,
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  Speaker 3: the government of the day, whether that's a labor it
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  Speaker 3: or nationally government to be able to transition a country.
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  Speaker 3: And even if it's not about higher mission versus lower mission,
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  Speaker 3: lower mission versus higher mission, it's actually about a resource
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  Speaker 3: that is no longer as available it has been in
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  Speaker 3: the past. So it's actually the building blocks for many
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  Speaker 3: industrial sectors that are now missing.
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  Speaker 2: So just finally, Jonathan, if I can, I On Friday,
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  Speaker 2: I received a text from a coffee roaster who said
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  Speaker 2: to replace the machines that run on gas. The industrial
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  Speaker 2: machines is multiple hundreds of thousands of dollars from overseas.
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  Speaker 2: Even if you can get one, they're seeing the end
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  Speaker 2: of their coffee roasting business. Is this going to be
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  Speaker 2: a story replicated right around the country.
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  Speaker 3: Well, we are desperately trying to not have those stories
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  Speaker 3: come true. So this is why the biogas sector is
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  Speaker 3: so important, because it should be what's called a drop
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  Speaker 3: in pure It can just to do a simple one on
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  Speaker 3: one replacement, but to get it to that production level
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  Speaker 3: and to the volume needed for New Zealand industry and
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  Speaker 3: commerce right now is a significant challenge. There's a gap
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  Speaker 3: there and what'sccentuated it is over the last three years
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  Speaker 3: the incredible acceleration of decline that the mature gas fields
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  Speaker 3: in Taranakee region in particular have experienced. And I think
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  Speaker 3: everybody is surprised at that. All the figures that MB
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  Speaker 3: have guarded every year from the gas producers have shown
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  Speaker 3: an even steeper decline than what everybody and all the
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  Speaker 3: engineers anticipated, So you know, this is what we're facing.
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  Speaker 3: We are facing this really stressful period of time, particularly
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  Speaker 3: for companies that rely on gas.
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  Speaker 2: Thank you very much for your time, Jonathan Young, even
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  Speaker 2: though it was dismal news out of arka head of
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  Speaker 2: industry and government engagement.
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