LNG imports: Is coal 'twice as bad' as liquefied natural gas for emissions?

Spending hundreds of millions on building an liquefied natural gas import terminal will not reduce New Zealand's emissions compared with burning coal, says an energy expert.

Falling production from offshore gas fields, along with low hydro lake levels, have been blamed for burning more coal at the Huntly power station and increasing New Zealand's emissions.

But Sustainable Energy Professor Ralph Sims of Massey University says by the time gas is extracted, cooled, stored and shipped in the form of liquefied natural gas (LNG), any climate benefits over burning coal will disappear.

The government on Monday announced steps to address an energy crisis which has seen gas and electricity prices spike for many large commercial users and some companies pause production.

One announcement was a plan to pass a law allowing the building of an LNG import terminal, rather than going through the usual consenting - or even fast-track consenting - process.

The government also announced a date for its previously-signalled repeal of Labour's ban on offshore oil and gas exploration, and said it would allow electricity lines companies to own their own electricity generation facilities. Sims said that was the most promising move on the list, because lines companies could build generation near where people use electricity, saving transmission costs.

Prime Minister Christopher Luxon told Morning Report that, along with a dry year, the oil and gas ban had resulted in the current situation.

"It's not good when you're importing coal because it's twice as bad as gas," Luxon told the programme.

Sims said the "twice as bad" statistic was an exaggeration, and finding more gas offshore would worsen emissions despite being cleaner than coal.

"Emissions will go up if we find more gas and burn it, it will take another few years but it will result in emissions continuing to rise for a decade or more after a gas find," he said.

"But more interestingly, if we import LNG....including the whole process of extracting the gas, cleaning it, chilling it, transporting it, storing it, and utilizing it, it exceeds coal emissions per kilowatt hour."

International studies have compared the two fossil fuels over the years with varying results, with some US studies finding LNG is substantially cleaner than coal and some finding it slightly worse, depending on various factors.

Much of the difference between coal and gas (whether LNG or otherwise) depends on how much methane leaks during drilling and transport, and recent findings suggest previous studies might have underestimated methane emissions from gas production.

Aerial readings from the US-based MethaneAir project last year found methane coming from gas fields was four times higher than was being officially reported.

Earlier in the year, US President Joe Biden temporarily paused approvals of LNG terminals in the United States to reexamine their climate impact, after 170 climate scientists signed a letter saying liquefied natural gas was worse for the climate than coal.

Offshore gas exploration

David Dempsey, an Associate Professor of Civil and Natural Resources Engineering at University of Canterbury, said it seemed likely there was more undiscovered gas off the coast of New Zealand. The question was how much demand would be left by the time it was discovered, developed and available.

"If you allow people to come in and develop it that's one thing, but are they going to be motivated to do it... and even if they are confident are we going to have the gas purchasers sticking around for 10-20 years to keep buying that gas?" said Dempsey.

"If you enabled offshore exploration starting next year and there was an immediate find of a significant nature you would need those overseas companies to come in and invest and bring those supplies online, and previous experience tells us the timeline for that is five to ten years," he said.

"In the meantime you have existing fields.... and the LNG option, but that is still quite expensive.....still a lot lower than the peak prices we've been having...[but] for all the historic long term users out there who have built their businesses on prices of $6-8 a gigajoule, those LNG prices that are 3-4 times higher, and it's very hard to see how they would sustain their businesses."

Dempsey said solar might be a cost effective option that was more in line with New Zealand's climate goals, but that would also take time.

"It has that intermittence which means it would need to be carefully managed, either by the way we manage our hydro lakes or grid scale batteries."

A report out Tuesday from Rewiring Aotearoa, co-written by Reserve Bank chief economist Paul Conway, found that when transport fuel was included New Zealand homes and businesses were spending around $55 million a day on fossil fuels, mostly imported.

It said $9 million of that could be saved by households going fully electric, because solar was now the cheapest form of energy in New Zealand.

The report said the price of grid electricity and fossil fuels had increased at above the rate of inflation, but prices of rooftop solar and batteries had gone in the opposite direction, which could take pressure off the electricity grid.

Renewable projects consented but not built

Ministers have also promised to smooth the way for renewable electricity projects.

But Environmental law Professor Barry Barton of University of Waikato said lowering legal hurdles to renewable energy would not solve most of the problem, because operators were choosing not to build renewable plants they already had consent for.

"There's always room for improvement in environmental regulation, but we have a track record now of 20 years of wind projects getting consented, and a shorter time of solar projects getting consented.

"Some get turned down, but the vast majority get consented. And at any one time we see a number of projects fully consented but not actually initiated. Companies are making commercial decision about when to take projects into action."

He said the high-profile decline of consent for one wind farm recently didn't necessarily point to a problem.

"Not all projects make good sense."

Barton said being more flexible with demand for both gas and electricity could help.

"One question is, how we can better use the gas we've got. We currently have about 40 per cent of it being used to produce chemicals, methanol and urea."

"If other users value that gas more, the market is going to prevail."

Tiwai Point smelter has just signed a deal with Meridian Energy to stop producing aluminum at times of power supply strain.

"It might be something other companies can do - on the other hand there are limits to how far we can go shutting down commercial operations to solve our energy problem," said Barton.

Smart chargers for EVs and other demand-side measures, like remotely switching on and off hot water cylinders for short periods, are also being promoted by lines companies and others to time-shift demand, and allow more electricity use with less expansion of lines and generation.

Professor Sims, of Massey, said the government hadn't mentioned anything on the demand side in its list of actions despite the huge potential.

"Most people like to talk about supply - solar panels or gas or whatever - and energy efficiency isn't very sexy."