Gas supply shrinkage sparks fears of suburban shortages

Auckland electricity and gas network company Vector is warning that in a worst case scenario it might have to stop supplying gas to some suburbs.

Its chief executive is calling on the government to make a plan so that households can stay connected if gas use dwindles and it is no longer economic to repair and maintain old pipelines.

Labour was working on a plan to manage a gradual exit from fossil gas by 2050, prompting Vector to make a plea for a smooth and managed transition off gas.

Even though the current coalition government has no goal to exit gas, and is re-opening for oil and gas exploration, gas supplies are still shrinking fast.

Vector chief executive Simon Mackenzie said there was no replacement source of gas coming soon enough to rely on, including LNG imports, which he said would have "volatile prices" if they arrived.

He said that after last winter's revelations about dwindling offshore gas fields, the issue probably had "more urgency" now than it did under Labour.

"From our perspective the focus is the gas transiiton and the risk on customers," he said.

'Exponential' price rises

Vector told the previous government that if it did nothing to manage the process of gradually shifting away from gas, gas customers might plunge in a switch to electric appliances - and gas pipeline companies wouldn't be able to recover the the cost of their investments.

It said there was a risk that remaining gas users could face "exponential" price hikes - or be forced to switch off gas faster than they expected, incurring costs of $7,000 -20,000 a house for new appliances and fittings.

It warned there could be costs totalling $7.9 billion for appliance switch-out costs in the event of a "forced gas switch off".

Mackenzie said the overall position had not changed.

"Let's just say hypothetically in an area of Auckland the network was old and we say, we cannot rehabilitate it or we cannot reinvest in this area, so you've got six months ...and you have to move over to electricity," he said.

"If you can have a transition over a longer period of time, that at least allows people to plan for it, rather than having it sprung on them unaware," said Mackenzie.

Vector wants the government to use regulatory tools or some other method to help it recoup its pipeline investments and afford to maintain gas services, even if there's an exodus of users.

It follows similar discussions in Australia, where some gas pipe owners in Victoria and West Australia have lobbied regulators to let them charge higher network tariffs to customers now, to recover on their gas pipes investments faster.

Faster cost recovery is seen as an insurance policy by recovering money while the customer base is strong, in case there is a smaller group left to pay for pipeline maintenance later.

Green gas and green hydrogen are being pursued as cleaner solutions to replace some of today's fossil gas.

Gas produced from Auckland's compost collection is being produced in Reporoa and blended with fossil gas to serve customers of Firstgas's North Island pipeline network.

Firstgas said the Reporoa facility could produce enough renewable gas for 7200 homes.

But Vector said hoping for enough green or renewable gas to materialise to protect all residential gas users amounted to "running a lottery".

Mackenzie said there was not enough on the way to serve Auckland's gas pipe users.

Energy consultant Jeff Smit said research suggested green alternatives can replace only about 10 per cent of fossil gas demand.

"It's something that will be I think necessary for particular industries, but there's not very many of them," he said.

"And if we're talking about collecting every little piece of poo from every cow in the country and if we're talking about every organic waste stream coming together and collecting that, that's a huge amount of infrastructure for a relatively small amount of gas."

Smit said some industrial customers can not get gas now, and it was forcing them to switch to electric processes faster than they budgeted for.

He called the transition "ad hoc" and "unfair".

"Industrial customers who are rolling off contract are seeing enormous price increases, and that drives a need economically to electrify. There are business out there who have been unable to procure gas at all."

Smit said going electric will be cheaper for the companies in the long-term, and deliver more stable prices.

But for now it was an unplanned cost in difficult economic times, he said.

Andrew Eagles of the Green Building Council said it was a shame households were not being helped to switch off gas, when

some companies were having to lay off staff because there was not enough.

He said households did not need gas - especially when burning gas indoors had been linked with serious health impacts.

Eagles said the latest greenhouse gas statistics showed that carbon emissions from household heating were rising, from burning fossil fuels, mainly gas.

And although residential households were small gas users in the scheme of things, Eagles said new homes were connecting to gas all the time.

"We could be electrifying our new build homes or existing homes instead, which means less cost and less volatility for those homeowners, but it also means we'll have more gas for...mills or heating processes."

Energy Minister Simeon Brown said he was seeking officials' advice on an energy strategy.

He said the previous government had lowered confidence in gas and this government had reversed the exploration ban. "We are also working to enable the importation of liquefied natural gas (LNG) to bolster our energy security in the interim," said a statement from the Minister's office.

Brown said the government's top energy priority was fostering better electricity prices, by improving electricity market competition and liberalising the electricity consenting regime.

He said the list of the government's fast-track projects included 22 renewable electricity projects.

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