One of New Zealand’s largest electricity generators has told a parliamentary committee that the country does not need a multi-billion-dollar liquefied natural gas import terminal to keep the power flowing through dry years, opening a fresh split between the energy sector and the Government over how to manage the risk of low hydro lakes.
Meridian Energy chief executive Mike Roan appeared before Parliament’s Transport and Infrastructure Committee, where he said the modelling his company relies on shows the dry-year problem is already under control. “From everything we can see, the analysis shows dry-year risk is being managed through the next 10 years,” Roan told MPs, according to RNZ. He added that importing gas “is not necessary from an electricity perspective”.
The comments matter because Meridian is the country’s biggest renewable generator and runs the hydro stations whose lake levels sit at the centre of the dry-year debate. When rain is scarce and the southern lakes run low, New Zealand has historically leaned on gas and coal to fill the gap. The question the Government and the industry are now arguing over is whether that backstop needs to be rebuilt around imported gas, or whether the existing tools are already enough.
Roan pointed to several arrangements that he said already cover the risk. They include the strategic coal reserve held at the Huntly power station, demand response deals with the Tiwai Point aluminium smelter that allow the smelter to cut its enormous electricity draw when supply is tight, and the remaining mix of generation across the grid. His view was echoed earlier by Contact Energy chief executive Mike Fuge, who has said dry-year risk for New Zealand is reducing rather than growing.
Roan did not dismiss imported gas entirely. He accepted that the Government may still have good reason to look at LNG because New Zealand’s own gas fields are running down faster than expected, but he framed that as a separate energy supply question rather than an electricity reliability one.
The pushback lands in the middle of a procurement the Government has already set in motion. Energy Minister Simon Watts has confirmed the Crown will contract a provider to build, own and operate an LNG import facility, most likely in Taranaki, with the aim of signing a contract by the middle of this year and the terminal potentially running by 2027 or early 2028. In announcing the plan, Watts argued that simply having a reliable backup in place would save households and businesses money. “Just having a reliable back up is expected to save Kiwis around $265 million per annum by reducing price spikes and lowering the risk premium built into power bills that exist because of supply challenges, equivalent to around $50 per annum per household,” he said.
The Government’s case rests on modelling that suggests an LNG terminal would lower future wholesale electricity prices by at least $10 per megawatt hour, worth around $50 a year off the average household bill, and would protect roughly 2000 jobs that it says are exposed to high energy costs. Officials have estimated that higher energy prices cost the economy about $5.2 billion in lost output in 2025. The Government has also said the value of having gas on hand could rise to around $1.2 billion a year by 2035 if local gas supply keeps falling.
What has made the plan contentious is how it would be paid for. The cost of the terminal is set to be recovered through a levy on the electricity sector of roughly $2 to $4 per megawatt hour. In his own Cabinet paper, Watts acknowledged that if that charge is passed straight through to consumers it would add around $15 to $30 to the average annual household power bill, a point seized on by the Labour opposition, which has branded the levy a “gas tax”. Officials have separately warned that the charge “will likely be passed on” to consumers, and that whether the promised savings actually show up on bills will depend on how the market behaves, according to the New Zealand Herald.
Critics outside Parliament have made a similar argument. The New Zealand Green Building Council and others have pushed the case that distributed energy, demand flexibility and pumped hydro could deliver the same dry-year insurance at lower cost and without locking the country into a new fossil fuel import chain. The previous government’s NZ Battery project at Lake Onslow, a pumped hydro scheme designed to solve exactly this dry-year problem, was scrapped in 2023, and the debate over what should replace it has never really gone away.
For Meridian, the timing is pointed. The company is a gentailer, meaning it both generates electricity and sells it to households and businesses, so it would help collect any levy from its own customers while arguing the terminal those customers are funding may not be needed for the grid. With the Government aiming to sign on the dotted line within weeks, the select committee evidence from one of the sector’s biggest players is a reminder that the people who actually run the power system are not convinced the country needs to import its way out of the dry-year problem.
Do you think the Government should press ahead with an LNG import terminal, or are the existing backstops enough to keep the lights on? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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