Keeping Gas Is Far Cheaper For Consumers

Switching customers off gas and on to electricity would be more expensive for consumers in the medium to long-term unless the price of electricity drops significantly, a new study shows.

The study by global energy consultancy Castalia, commissioned by the gas industry co-regulator the Gas Industry Company, calculated the full cost and emissions impacts of ending natural gas supply to consumers through gas distribution networks.

It took into account the cost of replacing appliances and having them installed, the ongoing electricity costs, and the increase in electricity lines charges needed to expand local electricity networks.

The study also took account of customers who may choose to switch to LPG.

GasNZ chief executive Jeffrey Clarke says the results show that even if electricity prices did not increase at all over the next 25 years, gas prices would need to rise by around 70 percent before switching off gas was cheaper for Kiwi consumers.

“This is a robust study, and that’s a very important finding,” he says.

“And honestly, unless you think electricity prices won’t increase over the next 25 years – the real gap would be even bigger.

“New Zealand needs to figure out the cheapest, fastest way to become a low emissions economy,” Clarke says.

“The regulator was right to ask for a solid study about who would end up paying if we disconnect customers off gas suddenly, instead of planning a sensible energy transition.

“The answer is: Kiwi consumers will pay.”

Castalia also found that while turning off gas would reduce New Zealand’s greenhouse gas emissions, Kiwi consumers would end up paying much more for that reduction than other emissions-reduction options.

Shutting off gas would cost about 15 times more per tonne of emissions saved ($821-$911) than the current ETS carbon price of around $57 per tonne.

“Importantly, by keeping the gas network we get the chance to scale up renewable gas production, so businesses that need the immediate high heat of gas, like steel production, have a viable, low carbon gas option,” Clarke says.

Clarke urges all political parties to review this study, and to incorporate its finding into a shared energy strategy – planning a least-cost transition for New Zealand that meets its climate change goals, and protects both Kiwi consumers and businesses from unnecessary cost.

The study – titled “Switching off the gas distribution network: Consumer, network and emissions impacts” was commissioned by New Zealand’s gas co-regulator, Gas Industry Company, in consultation with EECA, the Energy Efficiency & Conservation Authority.

The study can be downloaded from www.gasindustry.co.nz .

Notes:

• The Gas Industry Company (GIC), which commissioned the Castalia study, is the official co-regulator for the gas sector.
• GasNZ is the voluntary membership body for around 75 companies in the gas sector.

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