By Guest Author 28/02/2018

Ralph Sims, Massey University

This article was originally published on The Conversation. Read the original article.

New Zealand’s new coalition government has committed to introducing zero-carbon legislation that would set the country on a course to be carbon neutral by 2050.

At the same time, it is not ruling out new permits for coal mining, offshore oil drilling and fracking during a transition away from fossil fuels.

Natural gas is often touted as a “bridging fuel” to cut the use of coal for heat and power while moving towards a low-carbon economy. Also, this week’s report by the crown research institute Scion shows that New Zealand could build a renewable low-carbon transport fuels industry by switching to biofuels instead of natural gas. Developing new gas resources in New Zealand is a shortsighted strategy that could lead to stranded assets.

Carbon budget

Carbon dioxide (CO₂) is a long-lived greenhouse gas. Each molecule released into the atmosphere from burning fossil fuels remains there for hundreds of years. Analysis by the Intergovernmental Panel on Climate Change shows that once we reach a total of 2,900 billion tonnes of carbon dioxide (Gt CO₂) in the atmosphere, the planet will likely exceed the internationally agreed target to keep warming below two degrees above pre-industrial levels.

More than 1,900 Gt CO₂ have already been emitted since the late 19th century. We are currently adding around 33 Gt CO₂ from fossil fuel combustion and 5 Gt CO₂ from deforestation every year. The atmospheric concentration of CO₂ has now surged to more than 403 parts per million, the highest in millions of years. The planet is already around one degree warmer than the average pre-industrial temperature.

This graphic shows that we have already used up around two-thirds of the total carbon budget to avoid exceeding a two-degree average temperature rise (with a 66% chance).
IPCC, Working Group 1, 2013, CC BY-ND

The remaining carbon budget, with a 66% chance of staying below the two-degree target, is now at about 800 Gt CO₂. At the current business-as-usual rate of fossil fuel combustion and deforestation, the total budget will be exceeded within 20 to 25 years.

By then, we will have used up around two-fifths of the known global reserves of coal, oil and natural gas. The remaining three-fifths will need to stay in the ground.

Gas as a transition fuel

Natural gas is described as a “transition fuel” that cuts the use of coal. This argument, and the case for providing greater energy security, is being used to justify exploration for deep sea oil and gas in New Zealand waters.

Displacing coal by burning conventional natural gas does indeed produce lower emissions, while providing the same heat or electricity services. A coal-fired power station produces around 900-1100 g CO₂/kWh generated; a gas-fired plant produces around 450-500 g CO₂/kWh. By way of comparison, a geothermal plant varies with the field but can emit up to 50 g CO₂/kWh and emissions from other renewable energy plants vary widely with the circumstances but tend to be much lower.

However, on a life-cycle basis, any carbon dioxide reduction benefits would be partially negated by leakage of methane (CH₄), the main component of natural gas. Leakage is inevitable during the extraction, distribution and use of natural gas. It is difficult to determine the level of leakage, but it is more certain that emissions from coal or gas plants are significantly higher than from a renewable energy plant of similar generation output.

Natural gas has the potential to extend the time before the carbon budget is used up, assuming it displaces coal that would then be left in the ground. But the use of gas cannot deliver the deep cuts in emissions that will be required to stay below two degrees.

Energy security and fossil fuel subsidies

Many nations, including New Zealand, aim to improve their energy security by shifting to more indigenous fossil fuel resources to reduce their dependence on imports and widely fluctuating prices. Exploring for more gas to meet local demands at contracted prices may make good political sense in the short term, but it exacerbates climate change.

Fossil fuel exploration, production and consumption is widely subsidised by many governments. The International Energy Agency estimated the value of consumer subsidies in 2016 was over US$260 billion.

Conversely, divestment away from fossil fuel companies is growing worldwide. For example, New York City is not only intending to divest US$5 billion of its holdings in fossil fuel assets, but also plans to sue the major oil companies over their contribution to climate change.

New Zealand’s economy without more gas

In New Zealand, natural gas is used to generate electricity and heat for industries, to produce methanol (mainly for export) and other petrochemical products such as urea. It also supplies around 277,000 domestic and commercial consumers in the North Island.

Currently around 1,200,000 tonnes per year (t/yr) of coal are consumed in New Zealand, mainly for heat and electricity, emitting around 2.6 Mt CO₂/yr. If all existing coal plants and heating systems were converted to gas, around 1.3 Mt CO₂/yr of emissions would be avoided. This would contribute a little towards the 20 Mt CO₂-eq/yr of emissions reductions needed to meet New Zealand’s current 2030 target under the Paris Agreement.

However, given the Government’s target to reach net-zero emissions by mid-century, gas will ultimately need to be entirely phased out together with coal and oil products. Therefore, the overall aims for New Zealand should be to:

  • use our existing reserves of natural gas wisely in order to gain maximum long-term economic benefits by maximising the return on investments already made, as well as reducing our annual CO₂ emissions by displacing coal and minimising methane leakage
  • invest significantly in research and development in sustainable energy, including low-carbon and economically viable alternatives for the current uses of existing gas supplies
  • clarify and quantify any fossil fuel producer and consumer subsidies and remove them in the near future
  • avoid the temptation to explore and develop new gas resources even if they appear to deliver short-term economic benefits; and
  • The Conversationinvest in renewable energy technologies, including biofuels, as long as they are produced from crop and forest residues and purpose-grown forests on marginal land, as identified in the Scion report.

Ralph Sims, Professor, School of Engineering and Advanced Technology, Massey University

This article was originally published on The Conversation. Read the original article.

The New Zealand government is introducing legislation to become zero-carbon by 2050, but will consider new permits for coal mining, offshore oil drilling and fracking on a case-by-case basis.
from shutter, CC BY-ND

0 Responses to “Why New Zealand should not explore for more natural gas reserves”

  • Some interesting points here but overall not a very strong or convincing argument on the key question; why not explore for more natural gas?

    As you acknowledge, replacing coal with natural gas would lower our overall emissions. Isn’t this a good outcome? A gas find off the South Island could see coal displaced for industrial uses such as milk processing plants. There is no immediate alternative; without such a discovery, the use of coal will continue. And of course, that’s without even mentioning the potential $32b economic benefit a field like the Barque prospect could deliver over its lifetime.

    Even in the North Island where natural gas is produced there is only 10 years known supply left. Again, there is no immediate realistic cleaner alternative. Without new discoveries we will have to import gas as a fuel, driving up prices for consumers and businesses and more than likely, it will be a less efficient fuel with overall higher net emissions. Again, not a good outcome.

    And again, that’s without even mentioning the economic damage this would cause to export industries like Methanex and the wider Taranaki economy.

    Oil and gas production is demand-driven, and New Zealand produces it to meet a global demand (noting at some is used domestically, but that would otherwise be imported if not produced locally). When considering emissions-intensive, trade-exposed sectors, we need to consider the concept of ‘carbon leakage’. That is where reduced production in one jurisdiction is simply offset by increased production in another jurisdiction to meet an unchanged global demand.

    Preventing production in New Zealand simply means foregoing the significant economic benefits, while not achieving any reduction in global emissions. Because climate change is a global problem, only reductions at a net-global level matter.

    You also call further production a “a shortsighted strategy that could lead to stranded assets.” We’d suggest that it is best left to private enterprise to use capital as it sees fit – unwise to second-guess that. Pricing conveys complex, disperse information to investors, and carbon pricing through the ETS conveys information about externalities on climate.

    Agree with research into alternative energy sources, as the world will need more energy from all sources in the future. But natural gas and oil provide 50% of NZ’s energy. We need to have a stronger alternative than just “we’ll figure that out later with a bit of research”

  • Phil, you are forgetting that the world’s energy use is changing very rapidly. I have just been to China, where there are no two- or three-wheeled petrol-fuelled vehicles in the country, and the decision is to ban all fossil fuelled vehicles at an as-yet unspecified date. They are the world’s largest market for electric vehicles and are actively developing autonomous vehicles.

    Solar and wind electricity generation are being added at a very dramatic rate, and coal power stations turned off. The main reason for these decisions is atmospheric pollution reduction, but also to mitigate global warming.

    The price of wind generation is the lowest, then comes solar. Both are reducing at a very fast rate, with solar expected to be equal to wind very soon, and take over as the lowest price option. Both are less expensive now than gas, or any fossil fuels.

    There is a reason that the companies are still searching for oil and gas. They do not want to spook their shareholders, who would quickly bankrupt the companies if there was a stock selling avalanche. So they carefully show that there may be a problem in the distant future, but for now it is business as usual, so do not worry. And they are sitting pretty with massive subsidies.

    The sun shines at 10 MW per hectare, and a good fraction of that can be harvested as electricity without transmission costs. The coastal winds in NZ tend to blow in the morning and evening, extending the generation time. When battery storage comes less expensive, as it is already doing, continuous supply is easy. We also have considerable geothermal assets already approved, and there is a question mark above Tiwai Point.

    So any investment in fossil fuel development will inevitably become stranded assets. There is no need for investment in a much more expensive energy source.

  • George
    Your statements about electricity production have no sense of reality. The major demand for power in NZ is about 8pm on frosty nights in July. Where is that power going to come from? We don’t have significant geothermal assets already approved – about 3000GWh pa is all that’s left and that is less than what electric cars will use.
    Wind is useless as a reliable electricity source and is not cheap. The price of turbines may have dropped but the civil and electrical works have got more expensive. Solar is “cheap” for domestic supply because the rest of the network subsidises them. Take the solar powered places off the network and see how they fare.
    With regards to your comments on China, China is the world’s leading motorcycle manufacturer, with an annual production volume of over 27 million two-and-three wheelers. Where do they go?

  • The calm frosty mid-winter nights are when the irrigation schemes can be turned off, and good control software/smart metering can control the turbine-to-toaster electron flow. We do have hydro, and we will have battery storage.

    Yes, 3 TWh is about a third of what is required to run 100 % transport entirely on electricity, by my calculation. My assumption is that Tiwai Point and its 5 TWh will eventually move to a far less expensive location, probably China.

    Off-grid solar households will do well, with initial investment in batteries or an electric car, triggered by the utilities’ greed. It will take a while, but community-based solar (1 to 20 MWp) with local microgrids will flourish.

    The economics of roof-top solar is not nearly as good as utility-sized solar farms (500 – 1000 MWp), which are now below 20 USD per MWh (late 2017). There’s plenty of golden sunshine falling on them there hills, and solar arrays can be added in a few months.

    There is plenty of reserve in the geothermal area, with 7 to 14 km bores not yet considered. So far we have picked the low-hanging fruit. But geothermal is very expensive relative to solar and wind, and takes a long time to build. Wind requires bigger turbines, socially not so acceptable. There is plenty of energy to be derived from the contra-tides through Cook Strait. Small run-of-the-river hydro can add extra. So many sources, all integrated by decent software.

    In China there is a very large number of 2 and 3 wheeled transport on the streets, all of them electric. Some years ago, motorcycles were banned on many streets in some cities. I assume that they are building petrol-driven models for export, but all local sales are definitely electric.

    Very disconcerting, as they are so quiet that I had many frights when walking on the footpaths, as a lot of especially women ride there. In below-zero January most had heavy gloves and thermal shields sewed to the handle-bars.

    Electric buses are being built as fast as they can, with over 16,000 now in one big city, Shenzhen, and they are on-target to have all 17,000 taxis there electric by 2020. No wonder the bus order from Wellington City could not be filled – they are too busy with local sales.

    There will be a favoured few manufacturers of electric vehicles, so most will stop producing soon. They are working hard to up-scale the production, intending to be the world’s supplier of electric vehicles. They realise that it will be a short-lived business, as autonomous vehicles will start making all privately owned vehicles become stranded assets within a few years.

    Wherever China goes, India follows, so expect a third of the world’s population to be running on non-fossil energy soon.

    New Zealand is not avant garde, it is very much behind the times.

  • George You need to stop reading blogs and get out in the real world. For instance you can’t get geothermal wells much beyond 3km for a whole lot of technical reasons. And irrigations schemes don’t run in middle of winter – and they don’t use hydro water. If off grid hoses in suburbia will do well, why don’t they? Could it be they don’t have power in winter when they need it? And where have they got in-situ tidal stations to work reliably? The sea is a graveyard of failures.
    What you suggest could theoretically be done but it would make electricity prohibitively expensive, like an order of magnitude higher – we are already starting to see the effects of following the Green prescription now in Europe as fuel poverty.
    How many fossil fuel cars did\China make last year? In 2016, the last year I can find data for, n 2016, approximately 24.4 million passenger cars and 3.7 million commercial vehicles had been produced in China.
    Makes your claims look pretty stupid.
    And you still haven’t answered why China is making so many fossil fuel two and three wheelers when up thread you said they didn’t

  • What I am trying to say is that there will be a mix of electricity generator and storage types in future, but clearly they will be built only if they have the required advantages not provided by other types, and not too many disadvantages. Cost is only one of many considerations. They need to be integrated by efficient software that gives the right signals, so that users can make wise decisions on how and when they use, and suppliers can optimise the system.

    Professor Sims’s thesis is that gas (and other FFs) have major disadvantages relating to our international commitment to reduce greenhouse gas emissions.

    China has three major problems to solve: financial risk, pollution and poverty. Pollution is what is driving the electricity and transport changes. If there are 49 shades of green, there must be 50 shades of grey. I saw them all over 3000 km of travel by electric train.

    It is true that electric vehicles are only at the beginning of the exponential S-curve, with China being in the top few countries. The same with solar. They only installed five times NZ’s total electricity capacity last year as new solar, so a long way to go. 53 GW in 2017, cumulative 130 GW, so 7.3 % of their electricity.

    I did not make it clear about motorbikes. There has been a downturn in local sales over some years, prompted by restrictions on where they can be ridden. Then came the decision to make it illegal to ride a petrol-fuelled 2 or 3 wheeler in China, so there are now none on the streets. Production of motorbikes, scooters etc continues, with all local sales electric, and all petrol models in the country destroyed. I assume that motorbikes made for export are a mixture of petrol-fuelled and electric.

    They will do the same with 4-wheeled vehicles at some date – illegal to drive an ICE vehicle. My best guess is that 100 % of new vehicle sales will be electric in 2023, with all ICE vehicles, including trucks and buses, illegal on the streets of China in 2028.

    Over the same period autonomous vehicles will be increasing, so not so many vehicle sales, as transport-as-a-service increases. When the last of the ICE vehicles are taken off the streets in 2028, people will not buy replacement electric vehicles – they will just hire ride-sharing autonomous vehicles.

    The same story will happen world-wide, with only scattered total banning of ICE vehicles on the streets. But the economics will have the same effect, as the cost of ownership will mean that only the dedicated and nostalgic will own ICE vehicles.

    Going back to Professor Sims’s thesis. The world wide transition of energy use away from fossil fuels will be short enough that new discoveries of coal, oil and gas will not be able to earn enough to pay for their development, let alone make a profit. They will become stranded assets.

    One final point: biofuels will be seen the same as fossil fuels from the pollution point of view, but will help mitigate global warming.

  • Experts get it wrong when it comes to disruption says Tony Seba from and he provides example after example. If one looks at the ever decreasing cost of multiple technologies for example and see that Photo-voltaic panels have decreased by 18% year on year for the past 10 years. Batteries are decreasing at 14% year on year and have been for 10 years. So in Australia, for example, current power prices at between 28c to 40 cents per kw/hr. PV on roof tops are now about 5 cents per kw/hr production, so households can have a 6kW system for about $4,000 to $5,000. Batteries are currently about $10,000 which equates to about 15 cents per kw/hr of power. Guess what? More PV was installed last year than it took in 2 decades with the Snowy Hydro scheme. The battery price in 10 years will be $2,700 . In 2017, PV is now providing a 11.4% return on capital so you see pretty much every shopping centre in Australia start to roll out those megawatts. Even the Queensland Govt is rolling out a $100m a year program each year for next 5 years to put enough solar into schools to make them entirely self sufficient. For those who say large suppliers need gas or coal should ask British billionaire Sanjeev Gupta, who recently bought the Whyalla steelworks, s planning to build the world’s biggest storage battery in South Australia and has already started renewable energy projects to get power cheaper than fossil fuels.

    So right now the capital cost for a new coal fired or gas fired plant is about $80 per MW. Solar is as low as $30 and wind about $40. George is right when he says “Going back to Professor Sims’s thesis. The world wide transition of energy use away from fossil fuels will be short enough that new discoveries of coal, oil and gas will not be able to earn enough to pay for their development, let alone make a profit. They will become stranded assets.”

    Those who claim otherwise (eg Chris or Phil above) are not seeing that an “S” curve adoption is happening right now and NZ has essentially not been in this global discussion due to existing hydro. Australia is only 14% renewables (and one of most carbon intensive globally from coal). The “minefield” is not that renewables are now cheaper, faster responding and more reliable. That argument is now past. The issue is how to manage the existing coal, oil, and gas stranded assets. That is what is spooking the energy companies, banks, insurance and superannuation funds.

  • Hugh
    It would help a lot if you actually understood how an electricity grid worked. You also need to stop reading blogs written by people who have no experience or real knowledge of electricity generation or power grids. Batteries, solar and wind cannot generate AC power. They need a stable AC signal from the grid that they then use to make synthetic AC by very fast switching of DC. In standalone mode, there is no frequency stability. As there is no rotating plant, it has no inertia. If you don’t think that is important, ask the people of South Australia. The lack of inertia there caused their grid collapse and state wide blackout.
    With regards installed plant, learn the difference between power and energy. And batteries don’t make power, they only store power previously generated, so their cost needs to be added to the generation source. Australia has a very large load from air – conditioners so there is a general match between solar and need. There have been major problems with hot evenings, which has meant regular brownouts in suburbs. NZs heavy load is in winter evenings. What good is solar then? That is why it hasn’t been adopted here – it is uneconomic. Wind isn’t being built as the subsidies for that have dried up. There have been a lot of new generation installed, often embedded. That is why new thermal plant is going in under the radar. At one stage over the winter, every thermal plant in NZ was generating and the grid had sent out a Stage 1 alert. Trouble was averted because of grid management and thermal plant is dispatchable (that means it can generate when needed), unlike the new stuff.
    Conventional power stations are built for a life of around 35 years, though most go a lot longer than that. What is the life of the new technologies? One hell of a lot shorter so they need basically total capital replacement several times. With regards batteries, that new one installed in SA can run them for 4 minutes. Whoopee, that will be really useful – not.
    All those alternative energy suppliers you quote are doing so because they are subsidy farming. That is the case in Australia. In Britain, windfarms on land get about twice the money from subsidies that they do from actual energy. For those off shore, it is even greater. It is why the heavy energy use industries, and the jobs they provide, are leaving. South Australia high unemployment rate (masked by people leaving the state) is because electricity costs are so high.

  • George
    It is amazing how many half truths and lack of understanding you can pack in just the one post.
    China shut down the old CHP plants that caused the pollution. This was because the generation shifted to new supercritical boilers that were situated away from the cities, nearer ports and coal mines. The electricity generated from coal went up, even though coal consumption went down – it is now going back up as demand increases.
    Most of China’s motorcycles are for local use.
    Sure they have electric trains -like most of Europe, best way of getting the needed energy density, but where does the electricity come from? Thermal plant. China has installed large amounts of windfarms, but many are not even generating because they haven’t grid connections. Same with solar.
    Mass produced biofuels in general terms take more energy to manufacture that they provide – the two big ones are wood pelletisation and corn ethanol. They are also subsidy farming.