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11:11 am, February 16th, 2026 - 14 comments
Categories: Christopher Luxon, climate change, Environment, ETS, national, national/act government, same old national, science -
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A comparison of the LNG Terminal deal and the previous Government’s deal with NZ Steel to replace its coal fired furnace with a renewable energy supplied electric arc furnace clearly shows what this Government’s priorities are.
Cost
The cost is $2.7 billion for the LNG Terminal and it was $140 million for the NZ Steel coal fired furnace. In both cases private entities benefit.
The LNG Terminal will be paid for by ordinary households. The Government’s modelling clearly anticipates this will happen.
Greenhouse Gas benefits
The Cabinet Paper suggests that there could be 0.284 Mt CO₂-e emissions benefits from the gas terminal but this will depend on there being dry years and there being no other responses.
The NZ Steel project predicted GHG emission savings of 0.8 Mt CO₂-e emissions benefits PER YEAR or approximately three times the benefits the total benefits of the gas terminal, EACH AND EVERY YEAR THE FURNACE OPERATES.
The NZ Steel projet came from EECA’s contestible decarbonising industry fund. This Government shut the fund down and spent the $646.7 million on other matters even though it was anticipated that the funding would deliver 26 per cent of the emissions reductions required for Emissions Budget period for 2025 to 2030. The Government was advised that allocating no new GIDI funding aside from processing applications that have already been submitted would result in approximately 3.2 million tonnes (Mt) additional emissions by 2030 and 10Mt additional emissions by 2050 but did it anyway. The phrase “environmental hooligans” springs to mind.
Coal consumption
The gas terminal project may, depending on the weather, prevent the burning of coal, although given that burning LNG may be worse for the climate than burning coal, this is not necessarily a benefit.
The NZ Steel’s arc furnace would halve the amount of coal that it consumes.
ETS implications
The NZ Steel would save the Government approximately $30 million per year by reducing its obligation to purchase ETS credits. The gas terminal may save the Government a small amount by allowing hydro power to be used more but this requires considerable crystal ball gazing.
Financial implications
The gas terminal will, because the current electricity market allows gentailers to charge all power at the cost of the most expensive power, allow spikes in wholesale power prices to continue to happen. This will keep profits up and the Government as majority shareholder will continue to benefit.
The NZ Steel deal will increase power consumption but the savings could be applied to creating further renewable generation and this would allow further ETS savings. And as pointed out by Bernard Hickey if the $2.7 billion was used to buy solar power systems this would allow our lakes to remain full during dry years.
Luxon’s response to both deals
About the NZ Steel deal he said:
I thought that announcement was outrageous, actually, because it just says to me that this is a Government that’s got its priorities all wrong. Just this week, this Budget couldn’t find money to actually help support Kiwis going through a tough cost of living crisis. But all of a sudden they can find $140 million as a subsidy paid for by Kiwi taxpayers and give it to a large foreign, multinational, profitable company.”
About the LNG terminal announcement he said:
It’s all designed to lower power bills for New Zealanders. That’s why we’re doing it, and that’s what it’s all about. It’s about increasing supply, so we lower the dry risk year, and therefore lower electricity prices.”
Luxon is happy to subsidise big business but not apparently if the investment will result in significant greenhouse gas emission reductions.
This comparison shows clearly, in my humble opinion, that this Government’s decision making is at best completely indifferent to the urgent need for us to make sure we have a climate that we can live with.
This is all very relevant and telling. Our present government pretends to be dealing with climate change then proposes the increased consumption of fossil gas. It will also make us more dependent on overseas supply instead of local production. Renewable energy is the only responsible way forward.
Here is a tangible example of the above, how the COC's thinking is 20th century rather than 21st. Out of gas and out of ideas. Glucina Alloys New Zealand’s only aluminium recycler may go out of business if it can’t find an energy source to replace its expiring natural gas supply. Switching to electricity isn’t an option for Glucina Alloys in Auckland’s Avondale because it is too expensive. Local lines company Vector will charge the small firm $500,000 just to provide the capacity. It would then need to spend an additional $300,000 on equipment and installation work.
$800,000 from some GIDI type fund and the smelter converts to electricity, reduces pressure on our gas supplies, keeps a recycling outfit local and keeps kiwi jobs. But it would rather blow GIDI on tax cuts and build a $1-$2 billion dollar facility which will lock NZ in a carbon future for 20 or more years
Re the LNG proposal, I say again look across the Tasman. Australia has done a wonderful job on renewables….I read another report today saying power prices are falling and more predictable over there because of renewables and significant battery storage.
The UK is moving quickly in the same direction. Two Labour governments realising solar is the answer….let's make it three.
(I'll link the report when I get back to NZ in 3 weeks)
I thought the savings at NZ Steel come from shutting down 2 of the 4 rotary kilns, where coal is heated with ironsand to yield iron, CO2 and slag. This reduction in feedstock to the arc furnace is then to be made up by recycling scrap steel. This gives about 40% reduction in the CO2 emissions of the plant but shifts the carbon use to the electricity suppliers.
Although solar and wind don't produce CO2 in operation, there are still significant emissions in their manufacture coupled with the disposal problems at the end of their short life. There's no such thing as a free lunch.
Nobody claims that they’re a free lunch, so that’s a red herring.
https://cleangridalliance.org/faqs/ [What happens at the end of a wind turbine's life cycle?]
You may wish to elaborate on what you consider a ‘short life’ and provide some actual facts, then we can debate things properly.
The same FAQ also answers this: What happens to solar systems at the end of their life?
Hydro stations last a long long time – 50 to 100 years at minimum. We still have small stations here in NZ that have had their centenary.
Thermal (rankine) stations – 30 to 50 years. Examples Huntly (still running), Meremere and New Plymouth both gone but lasted 30 to 40 years. Marsden A – very expensive but did it's job. Marsden B – white elephant that never ran in production.
Gas Turbine: Think aircraft engine. Inexpensive (relatively) but require lots of spare parts. There have been 2 GT stations at Otahuhu since the early 1960's – both gone.
Geothermal – depends on the bore field and how quickly it is depleted. Wairakei was commissioned in 1958 but due to be decommissioned next year. Replacements are planned.
Solar – 30 years if you're lucky.
Wind – 30 years but blades deteriorate. Burying in landfill seems to be the preferred disposal option.
Personally, I hate to see good land covered in arrays of solar panels and all the hills covered in windmills.
I think many people do consider wind and solar to be a free lunch, forgetting the fact that in the most part the pollution is outsourced to their country of manufacture. In the case of NZ Steel, we'll be burning coal/gas in power stations instead of at Glenbrook. It's not clear that wind/solar will expand to meet forecast demand.
More geothermal and hydro would be good, although these too have significant impact on the environment. These are however longer term solutions than meeting the immediate needs that the LPG option is supposed to help with.
Thank you.
So, it depends on whether those ‘people’ include all environmental costs, incl. manufacturing, or only look at the country’s emissions balance.
In any case, wind and solar power are considerably better than LNG or coal, even when taking into account all environmental costs (but not the costs to your view/enjoyment of the environment, which is subjective, of course).
I don’t understand your point of bringing the ‘free lunch’ into this debate, i.e., where does it lead?
Ummmm – it's a metaphor. I'm sorry you can't understand it.
So, it was rather pointless, I understand that much.
Good to have those generator lifespans approximated.
I worked on Turitea Windfarm for Mercury for two years, and was surprised at the tonnes and tonnes of steel and concrete needed for each turbine, let alone the massive earthworks to form the connecting roads and massive connecting utilities, as well as the pylons and substations.
It all looks so "green" from afar, and then you get close and have to actually construct it.
It has been both dreadful and fortunate that New Zealand's collapse of heavy manufacturing over the last four years has essentially flatlined our heavy user electricity demand.
What is really missing is an actual explanation to the public who are going to have to pay for this LNG terminal. Very little from the EA, or the Commerce Commission. Or who will even own it.
At the moment the Government is just a set of ideas, not a plan. They owe that to use all.
And when you take all those visible & hidden costs into account, it’s still heaps greener than power generation by gas turbines, for example.
https://rsnz.onlinelibrary.wiley.com/doi/10.1080/03036758.2024.2344785 [analysis of onshore Harapaki Wind Farm, developed by Meridian Energy Ltd.]
Similar analyses have been done for offshore wind farms and solar farms. While the numbers do vary a lot, also because each (local) situation is unique, the conclusion remains the same: it’s much greener than fossil fuel-based power generation.
You were fine until your last sentence.
No doubt wind farms in New Zealand are highly efficient and their payback rate is really fast. But $$ investment payback in a dry or low-wind year for the LNG plant is also very, very fast. And as systems they are doing different jobs.
Annex 1 in the MBIE paper only compares to kinds of generation that could support a dry year, not anything else.
I don't know how long this proposed LNG plant is supposed to last. There's no detail of it in the MBIE paper. The short lifespan of wind farms is a real risk – there are several now above Palmerston North that have had blades fall off and their grid partially disabled.
https://www.mbie.govt.nz/dmsdocument/31754-government-investment-in-dry-year-risk-cover-consideration-of-an-lng-import-facility
If "green" means produces less carbon during operation, well sure you're right. But if it means anything else well that's just untested.
I often stumble at the last hurdle.
Granted. But we have a pre-approved coal pile that’s going nowhere, so why the need for another dirty source of electricity that requires large up-front investment in infrastructure (and why the rush?)?
It’s relative but 30 years is or should be included in planning and Life Cycle Assessment (LCA). Prudent operation includes (preventative) maintenance & repair, also included in planning and LCA. AFAIK, catastrophic events are part of planning and included in strategic procurement too. If they skimped on purchase, installation, PM, and/or other important factors then this will affect risk profile, obviously.
You brought the term into this thread @ 4.1.1.2 and used scare quotes. In this context, I use one of the LCA parameters, which is the total carbon footprint in gCO2eq/kWh. I don’t know what you mean by untested.
We are told it's a backup supply for use to bring down the power spikes.
But these things have periods when they can't be left off or the machinery gets damaged.
It's an important question to ask: how long can it be switched off for before damage occurs or, perhaps as likely, does it have to be operating all the time at a certain capacity and if so what is that capacity?
Doesn't take much imagination before this becomes an integral part of the normalized power grid.