The following opinion piece by ALENZ Chief Executive Nick Collins, in his role as spokesperson for the New Zealand Manufacturing Alliance appeared, in BusinessDesk on 23 August 2024.

ALENZ is a member of the Alliance, an incorporated group of business leaders representing a range of industries within New Zealand’s manufacturing sector. WE come together to provide advocacy on the overarching matters of interest to all manufacturers in New Zealand.

The coalition Government wants to grow our economy and double exports. That is not going to happen when, through its lack of action, it is effectively contributing to de-industrialising New Zealand.

With exorbitant electricity costs, the NZ economy is becoming highly unattractive as an investment target for foreign manufacturers. At the same time, the Government reaps the dominant share of profits from our electricity generators.

Karioi pulp mill is being blamed on soaring energy prices

Energy crisis

We need immediate Government intervention to address wholesale electricity prices; the current market model has failed. To ensure NZ manufacturing remains internationally competitive, the Government needs to:

  • Immediately intervene and set the maximum wholesale electricity price (no higher than that enjoyed by Australian manufacturers).
  • Mandate that generators disclose the wholesale price at which they supply electricity to their retail operation.
  • Introduce initiatives to drop baseload off the grid through the EECA (Energy Efficiency and Conservation Authority), either through energy-efficiency initiatives or alternative energy sources, such as manufacturers’ dual-fuel boilers, which can use diesel fuel instead of gas.
  • Act quickly to commission LPG (liquefied petroleum gas) import infrastructure.
  • In the medium term, threaten generators holding consents for new generation to begin construction or face financial sanctions.
  • In the long term, an energy strategy should be implemented to maximise NZ’s natural resources – sun, wind, and water – with the intention of delivering abundant renewable energy and ensuring NZ manufacturing has a global competitive advantage. This strategy needs to incentivise renewable generation and reform the electricity market, separating generation from retail, thus providing transparency over wholesale pricing while reforming the electricity network and ensuring new connections are delivered quickly and at a competitive price.

NZ is experiencing an energy crisis, but the government profits from its shareholdings in electricity generators. Failure to act will result in a significant loss of export earnings and jobs in our regions. For the pulp mills, if shut-downs persist for any length of time beyond what has been announced, the impact will radiate well beyond those employed in these factories, as serious as that will be in regions where there is no easily available alternative employment. With log prices rock-bottom already, this will drive others in the forestry supply chain out of business, often permanently removing resources from the industry (like logging crews and their equipment). The current cost-of-living crisis is child’s play compared with the damage being wrought by exorbitant electricity costs.