Source: Radio New Zealand
The rate of gas installations has slowed, as the supply shrinks. 123RF.com
Renewables advocates claim it’s “madness” that thousands of new piped gas connections are being installed into houses every year, despite dwindling supply.
Organisations pushing for the country to electrify say households will face steeply rising bills in the short term and huge costs when they eventually need to switch.
They say the country’s declining natural gas supply should be saved as much as possible for manufacturers and other businesses, who are facing a costly and disorderly transition away from fossil fuels.
One advocate says, instead of banning new connections, an education campaign combined with a proposed financing scheme to help households switch to electric would be a better choice.
Data from the gas registry shows the overall number of ‘active’ gas connections has dropped and the rate of new connections has slowed.
However, new connections are still proceeding – more than 2000 were added in the last year, at a rate of nearly 200 a month.
Electrification non-profit Rewiring Aotearoa estimated another 300,000 households may use liquid petroleum gas (LPG) bottles for some form of cooking or heating.
No public data existed on the number of households using LPG, but the overall volume of LPG powering household cooking appliances, gas water heaters and heating went up nine percent between 2017-23, the most recent year of data.
The largest gas retailer in the country, Genesis, stopped accepting new piped connections last year.
But some retailers still offered gas-only connections, and Auckland network owner and distributor Vector said it would still allow new connections, if customers paid the full commissioning cost – usually about $2000.
The company, which had 120,000 residential connections on its gas network, forecasted earlier this month that it would have no new customers from 2029.
However, chief public policy and regulatory officer Mark Toner said it was “important to maintain that customer choice”.
“Some of the research shows that people really love infinity hot water, never-ending hot water,” he said. “They love cooking with gas hobs.”
Toner said he used gas at home himself and had recently replaced a gas hotwater heater with another one.
He acknowledged the long-term future of gas in New Zealand was “highly uncertain”, but customers could continue to have confidence in supply for now.
“There has been a lot of commentary about the state of natural gas in New Zealand,” he said. “There is no prospect of residential customers running out of gas any time soon.”
Green Building Council chief executive Andrew Eagles said the fact that new connections were still going in – even if that number was declining – was “absolute madness”.
The council published a report earlier this year looking at how much natural gas and LPG could be saved for industrial processes, if gas heating in homes and buildings were replaced with electric heat pumps.
“The amount that we need for manufacturing and industry is exactly the amount that homes and buildings will be using in 2035,” Eagles said.
“You’ve got firms that are closing or firing people, and down the road, you’ve got people connecting new gas, when it’s going to be significantly cheaper for that household to electrify their home.”
Retail gas prices had increased markedly and there was no indication that would change, he said.
Green Building Council chief executive Andrew Eagles says it’s “madness” that new gas connections are still being put into houses. Supplied / NZGBC
Rewiring Aotearoa chief executive Mike Casey said that message was not filtering through to many homeowners.
“It’s preference, plus a very serious lack of knowledge around the energy future for this country.”
Similarly, developers were encouraged to build and sell houses as cheaply as possible at the moment, he said.
“Avoiding any form of capex cost is a way to do that, so installing a $2000 gas califont, instead of an $8000 hot water heat pump matches what they’re incentivised to do, which is to sell turn-key solution houses at the cheapest price possible.”
All that did, he said, was “shift the economic burden onto the person who will live in that household”.
The upfront cost of installing gas systems can be much cheaper for developers than electric alternatives. RNZ / Rebekah Parsons-King
People love gas, but it was unhealthy, increasingly expensive and the arguments for it no longer held up, Casey said.
“They talk about instant and infinite hot water, but hotwater heat pumps can provide that same outcome now electrically.
“People say they love cooking with gas, but I think anyone who moves to induction likes induction more.”
Homeowner who wants out
When Pip Gay, 71, and her husband moved into their house in Auckland 26 years ago, the water heating, heaters, oven and stove were all gas.
Over time, as appliances have reached the end of their lives, they’ve switched almost everything to electric – except the gas hobs on a large kitchen range.
“That is wildly inefficient and uneconomic, because of the monthly line charge and the tiny amount of gas we use.”
Just having the connection now costs more than $70 a month, while the gas itself is only about $3.
Gay said she’d be very happy to eliminate gas altogether.
“It’s terrible pumping that gas out from where it’s quite happy under the sea and piping it all the way up the country, and forcing it into our houses and then burning it – it’s a bit bizarre, really.”
The upfront cost of replacing the range – which she loved – was prohibitive.
“If a young family bought this house, it’s probably the first thing they’d do, because they’d hopefully be looking at staying here for a good long spell, just like we have – but I don’t feel like doing it at the end of our run.”
The same reasoning had also put them off installing solar panels – another thing they would have liked to do.
“I wish we’d done it five years ago.”
Pip Gay says she would have loved to install solar panels and eliminate gas – but the upfront cost is too high Supplied/SolarZero
Her example illustrated the plight of many households who could see the benefit of switching to electric or installing solar, but either could not afford the upfront cost or were running out of runway to make it worth it, Casey said.
The cost of decommissioning gas, once it was connected, could become a further disincentive.
“You often hear stories of people being charged $2000 for a disconnection, but that involves digging up all the pipes,” he said. “It should be no more than the labour cost of getting the guy around to cap the pipe.”
Toner confirmed a current charge of $2500 for full decommissioning, but said capping the pipe was also an option, at a cost of a few hundred dollars.
“If you’re doing works on property and earthworks in particular, you would want a full disconnection at the street to make the site safe,” he said. “If you’ve simply replaced an appliance in your house, it would be a very sensible option just to cap and remove the meter.”
‘Running out of gas’
Earlier this year, the government rolled back the previous ban on new oil and gas exploration, and set aside $200 million as a ‘co-investment’ to encourage development of new fields, recently extending that to include new drilling in existing fields.
It was also exploring options to import liquified natural gas (LNG) as a back-up option in the meantime – a move that has been widely criticised as expensive and inefficient.
Gentailer Genesis, which has a 46 percent share in the Kupe field, stopped accepting new household gas connections last year.
Chief revenue officer Stephen England-Hall said the decision was made “once the national gas supply began to decline faster than was expected”.
“The thought then was, how do we prioritise existing customers on the gas network and also electricity generation, and not necessarily prioritise new connections to an infrastructure that is clearly going to come under stress?”
While the decision was partly driven by economics, it was also “better for the environment and everybody”, England-Hall said.
“One of the things we’re very focused on is how do we help customers electrify as much of their lifestyle as they can? Fundamentally, electricity is a very, very efficient and very cost-effective type of energy.”
Genesis chief revenue officer Stephen England-Hall says the energy crisis prompted the company to stop accepting new gas customers. RNZ / Rebekah Parsons-King
Even so, Genesis had not ruled out accepting new customers again, if future supply became more certain – but the data “continues to show signs of decline”, he said.
“We’re not seeing any major new finds occurring and we’re not seeing major new drilling investment occurring that would give us confidence that there’s going to suddenly be a big supply of new gas in the New Zealand market.”
Importing LNG was “technically viable”, he said. “What we are very interested in around that discussion is at what cost?”
Eagles described the search for new gas as “a strategy of hope”.
“[Companies] have spent billions of dollars searching and the massive amount of territory they’ve still been able to search over the last 20 years has not found anything,” he said. “We are running out of gas.”
Alternatives like biogas offered false hope, because it was still mostly fossil gas, he said.
Financing transition
Even if new natural gas was found, it would take 12-14 years to bring online – time and money that Eagles said would be better spent electrifying the country.
“If you look at the state of Victoria in Australia, they’ve said all new builds will be all-electric… and at end-of-life for existing homes, you need to move to electric systems.”
More than 60,000 households had taken up hotwater heat pump support packages in Victoria, since the policy was introduced in 2024.
Similar policies were needed here, he said.
“The poor and people who can’t move are going to be stuck with unhealthy, massively rising costs on a network that has less and less people.”
Energy Minister Simon Watts said there was “not a clear case for further subsidies at this time in the residential gas market”.
Energy Minister Simon Watts RNZ / Samuel Rillstone
The Warmer Kiwi Homes programme had provided subsidies for heat pumps for many years, he said.
“In addition, most major banks in New Zealand provide low-rate loans for households who are installing renewable energy or switching their appliances to more energy-efficient options.”
There was no need to intervene in the residential gas market to “limit consumer choice”, Watts said.
“With new builds, data shows the rate of new connections has been declining and I understand that only one gas retailer is offering new connections where existing infrastructure is not in place.”
Ending gas connections for existing homes would impose extra costs for households, and the government had “a clear plan” to improve gas supply through encouraging exploration and procuring an LNG import facility.
Casey said simply banning new gas connections was likely to create “an allergic reaction”.
“We saw it happen in America, when the Biden administration… tried to ban gas cooktops and you literally had celebrity chefs handcuffing themselves to their stovetops, saying ‘Over my dead body’.
Rewiring Aotearoa chief executive Mike Casey says habit and a lack of knowledge is fuelling new household gas connections Supplied / Rewiring Aotearoa
Finance was the solution, but the switch could happen without subsidies, Casey said.
His organisation supported a Local Government New Zealand business case to develop a ratepayers’ assistance scheme, funded by capital raised by councils.
The scheme would offer long-term, flexible loans to anyone who wanted to make renewable upgrades to their property.
“Most New Zealanders can’t access [bank] loans – pensioners, renters, and also those who are struggling to make ends meet and struggling to pay off the mortgage.”
The scheme would fund electric appliances like heat pumps and hot water heat pumps, switchboard upgrades where needed, solar panels and batteries, Casey said.
Crucially, it would allow homeowners to transfer the remaining portion of the loan when they sold their house – making it a viable option for anyone who might not plan to stay in a property long term.
Watts gave tentative support to the idea earlier this year, and said Local Government New Zealand and the Local Government Funding Agency were currently revising the business case.
“I understand they have taken a few additional months to get it right and are ready to present it to me shortly.”
Once he received it, he would consider it alongside official advice and expected to make decisions in the new year.
“I endorse the efforts made to bring relief to ratepayers, but I will be looking at the proposal closely to understand the mechanics and viability, before sharing any further views.”
Casey said it was positive that the numbers showed people starting to leave the gas network of their own accord, but not all households were in a position to make that choice.
“If we don’t plan for a decommissioning of the gas network, then it’s going to be a chaotic transition, where vulnerable New Zealanders really suffer.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand