Want to fix NZ’s energy crisis? Here are four alternatives to imported LNG

2026-02-25 - 16:08

It’s a problem that the Germans have a word for: dunkelflaute, dark doldrums. These are winter days that are simultaneously dry, cloudy, and still, thus defeating all three main types of renewable-electricity generation: no rain for hydro, no wind for turbines, and no sun for solar. When New Zealand’s hydro lakes are low, generators turn to natural gas. But natural gas production has fallen off a cliff in recent years, and now, when demand is high and generation is low, electricity prices skyrocket. New Zealand needs a new backup energy source – thus the plan to stockpile LNG. Earlier this month, the Government announced plans to import liquid natural gas (LNG) as a backstop against New Zealand’s hydro generation running low. The scheme would involve the construction of a $1 billion terminal to turn the liquid back into gas when it arrived in the country, at an annual cost to households of $15 to $30 against possible savings of $50. Meanwhile, a report by New Zealand’s Green Building Council casts doubt on the Government’s $50 savings estimate, pointing out that energy prices rise when countries become dependent on global gas markets. The reality is that New Zealand has a difficult energy-security problem, and there are several alternative solutions that are cheaper, more reliable in the long term, and involve renewable fuels or existing infrastructure. When New Zealand’s hydro lakes are low, generators turn to natural gas. But natural gas production has fallen off a cliff in recent years, and now, when demand is high and generation is low, electricity prices skyrocket. New Zealand needs a new backup energy source, thus the plan to stockpile LNG. “It’s a bit of a wicked problem,” says Brent Young, a professor at the University of Auckland who specialises in process systems engineering. “And I don’t think the one silver bullet is LNG. I think there’s actually multiple solutions that we should be looking at.” Young points out that LNG itself is vulnerable to price shocks or supply chain disruptions; for instance, the global LNG market spiked after the Russian invasion of Ukraine. Imported LNG simply displaces New Zealand’s energy-system vulnerability to a different point, says Young, as failure of any part of the scheme puts the country back to square one. Instead, New Zealand needs a whole package of solutions: “I think it’s actually going to be a portfolio approach.” Four ways to fix New Zealand’s energy-security issue 1. Burn fuels we already have using infrastructure we already have LNG is a fossil fuel, like coal. Paradoxically, coal may be the lower-emissions choice out of the two, once the entire lifecycle cost of production, transportation, and delivery is taken into account. “On the surface, you would think gas is better than coal,” says Young. “But one of the issues with LNG is that it takes a lot of energy to turn gas into liquid. You lose a lot of it when you transport it, because you’ve actually got to bleed off some of the liquid to produce gas to keep it refrigerated and cold while you transport it. And then you lose energy when you get it to the destination.” The result? “When you take all that into account, it’s likely that the emissions are actually worse than coal.” While coal is an immediately available option, precluding the need to urgently construct an LNG terminal, it’s not a solution to the country’s emissions profile. Instead, other sources of energy could be developed. New Zealand’s largest power station, Huntly, currently burns coal but could generate energy using a renewable source of fuel in the form of wood pellets, otherwise known as biomass. New Zealand doesn’t currently produce biomass for electricity generation but it could: Scion research found the country produces enough “woody waste” to power all its dairy factories six times over. “We might be better off replacing or upgrading an in-country solution,” says Young, “rather than going for an external solution where there are other issues”. 2. Reduce demand on hydro lakes using solar generation and efficiency upgrades If electricity-supply issues arise when hydro lakes are low, then what about interventions that would keep more water in reserve for dry spells – such as generating electricity elsewhere, or reducing overall demand? A report by the Green Building Council found that the LNG scheme was three to four times more costly than building out New Zealand’s solar-generation ability and upgrading homes to less energy-intensive hot-water systems. These technologies in parallel could generate or save enough electricity to make a meaningful difference in dry years, says the council. Young cautions that this wouldn’t solve the dry-year problem single-handedly, but it has other advantages. “It should be part of the solution, but it won’t be the entire solution,” he says. “Rooftop solar with some battery storage may help, and certainly we should be doing it anyway, for the non-dry year problem – getting to net zero.” 3. Build a spare lake to act as a giant rechargeable battery It’s called ‘pumped hydro’, and it takes advantage of electricity oversupply – on windy days, sunny days, or in rainy seasons, when generation is plentiful. At these times, generators could pump water uphill into a storage dam, essentially stockpiling it. Then, when more electricity is needed, they could release that water into a hydro generation system. Building pumped hydro is also expensive. In 2023, the Government cancelled a pumped hydro scheme being constructed at Lake Onslow, citing cost. Still, says Young, pumped hydro does ensure New Zealand’s energy self-sufficiency, involves lower emissions than other alternatives, and unlike the LNG terminal, would not involve importing fossil fuels from overseas. The Government “pretty arbitrarily” discarded pumped-hydro options proposed alongside the LNG scheme, says Young, which, he argues, are worth reconsidering. “Maybe not the scale of Lake Onslow, but [we could] look at smaller-scale pumped hydro.” New Zealand’s hydro lakes, when full, can currently store around 4500 Gigawatt-hours (GWh), or enough to power the country for six weeks using only hydro.It’s a comparatively low level of storage compared to other countries’ hydro schemes, meaning it’s reliant on regular rainfall. 4. Make agreements with industry to reduce demand On June 22, 2024, New Zealand was running low on the two main resources it uses to generate electricity: water and natural gas. The previous month, two of the country’s power companies had signed a new agreement with their largest consumer, the aluminium smelter at Tiwai Point. This meant the power companies could ask the smelter to use less electricity until demand dropped. Which they did: in the end, the smelter operated at reduced capacity until September 30 that year – and was compensated accordingly. This system is called ‘demand response’. Young says it needs to become more clever and perhaps allow manufacturers to draw more from the grid when demand is low. “If you had the ability to then ramp up production at other times and had contracts and technology, then that could help,” says Young. “We’ve got to provide a solution that can keep the lights on for everyone, but also we want to produce as well.” Overall, Young emphasises the need for a strategic approach that looks across our whole energy system – and one with broad consensus behind it. “I think we should try and find a way to make a considered decision in a bipartisan way, and we should be looking at multiple options,” he says. “This sort of thing is a generational decision for New Zealand, and we shouldn’t rush into it.”