Energy Pricing is changing fast. How Total Utilities helps you adjust.

Posted 24 May 2021 by Chris Hargreaves

By 2050, the government has pledged to eliminate emissions of long-lived greenhouse gases, and to reduce biogenic methane emissions by between 24-47%. This means energy pricing is changing fast! While this is good news for the environment, it requires business to make some major adjustments. 

Let’s look at the impact of these changes and then the solutions that are available to you.

Decline in gas production drives an increase in price

New Zealand’s main gas field has been experiencing production issues since 2018. This year, their production is already down by 42%.

This significant shortfall is having a heavy toll on electricity generation. By 2030, gas production is expected to be half of what it is now.

energy pricing - gas consumption by sector in new zealand 2020
Gas consumption by sector in New Zealand, 2020

Natural Gas Production Down and Energy Pricing Up

Natural Gas or LPG fired boilers have lower emissions than their coal-fired counterparts. But we have seen oil and gas exploration companies already hand in their exploration permits because of New Zealand’s policy changes.

Because of this, access to gas is becoming far more restricted. When production declines but the demand is still high, prices inevitably rise.

energy pricing - forecast gas production in new zealand - mbie 2020
Forecast Gas Production as Reported to MBIE 2020

This has led to an increase in using coal as a substitute. In the South Island, for example, where there is no natural gas, many boilers remain coal fired. Having said that, some are attached to reticulated LPG networks in Christchurch, Queenstown and Dunedin.

But by 2022, a ban on new low and medium temperature coal-fired boilers will also be enforced, with a proposal to phase out any remaining coal boilers by 2037.

This will severely undercut the feasibility of these coal-fired burners in the near future.

How can industries respond to changing energy pricing?

52% of sustainable businesses have an energy strategy

You need two action plans:

  1. Short-term plan: optimise what you have to get the best bang for your buck now.
  2. Long-term plan: understand your options, decide which route you’ll take, and plan how to get there.

The good news is Total Utilities can help you now and well into the future. Plus, we’ll regularly review and track your progress.

Short term energy pricing plan: optimise what you have

For our large commercial and industrial gas customers, we are now seeing an increase of around 180% in cost as they come off contracts signed three years ago. Despite the increase, gas is still a cheaper source of fuel than electricity. But it is fast catching up. As gas supplies further decline, gas prices will only continue to increase.

What’s more, the Emissions Trading Scheme (ETS) continues to pose further costs.

The chart below shows the upward trend in total costs from raw gas pricing and the ETS scheme over the last three years:

energy pricing - total utilities retail price index of gas plus ETS costs
Total Utilities Retail Price Index of gas plus ETS costs – 2018-2021

We are helping clients by tracking the trends of retail gas prices and negotiating cost-effective gas contracts. We also help you save money by optimising what you have for the remaining lifespan of your current heating systems.

Long term energy pricing plan: switch to sustainability

Working closely with the specialists at New Zealand Energy Systems, we help you decarbonise and eventually replace your boiler. We do this by understanding the energy source, the technical options for replacement, and what triggers price changes.

Moving from fossil fuels to electricity, or to another renewable energy source will reduce emissions and help New Zealand achieve its goal of being Net Zero by 2050. In some cases, existing coal-fired boilers with decades of life remaining can be converted to burning biomass instead of coal.

However, in some regions, such as Canterbury, the supply of woody biomass residues falls short of the energy demand for process heat. Total Utilities considers these variables and complexities in your long-term plan.

With increased energy pricing on the cards, now’s the time that you get significantly more bang for your buck when you invest in energy and carbon reduction projects.

Here for you now and into the future

The team at Total Utilities can help you achieve energy efficiencies for the remaining lifespan of your current systems. We do this by conducting a low-cost study into your energy consumption and identify ways you can save money.

Over the long-term, a switch to carbon reduction energy sources makes sense for the environment and your bottom line. That’s why, when you’re ready, the team at Total Utilities can guide you through the switch to solar and other renewable energy sources.

Contact us today to turn cost-effective, environmentally friendly strategies into action.

 

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