The strategy that was promised and never delivered
Somewhere inside MBIE, a webpage still commits the government to publishing a national energy strategy by the end of 2024. That deadline came and went without explanation. In its place, Energy Minister Simon Watts commissioned a Frontier Economics review of the electricity market, talked up “fundamental” reform, then in October 2025 accepted just two of the review’s ten recommendations and rejected all five of its main proposals.
The centrepiece of what survived was a procurement process for an LNG import terminal targeting winter 2027 delivery, plus a vague commitment to Crown participation in capital raising for new generation, with no detail on amounts, timing, or qualifying projects.
For a business community that had been asking for strategic direction, the package landed like a pamphlet at a house fire.
Gas is collapsing and industry is already shrinking
The urgency is not theoretical. Natural gas production fell 20.8% to 118 PJ in 2024, its lowest level since 2011. In the December 2024 quarter, net gas production dropped 23% to 26.16 PJ, the weakest quarter since December 1983.
The consequences are already showing up on factory floors. Industrial energy demand fell 7.5% in 2024. Methanex temporarily idled manufacturing operations from mid-August to end-October 2024 due to gas supply disruptions. Cabinet papers estimated that energy problems had cut GDP by $5.2 billion and lowered real wages by 1.4%.
In August 2025, the BusinessNZ Energy Council surveyed gas-using businesses and found prices had on average more than doubled over five years, with some paying above $25/GJ. Of those surveyed, 31 businesses reported they had raised prices, reduced operations, or cut staff.
Tina Schirr, the BEC’s executive director, warned in August 2025: “If we do nothing, a major de-industrialisation crisis could escalate in the next two years.”
The LNG terminal arithmetic doesn’t add up
The government’s headline commitment, an LNG import terminal by winter 2027, has a basic maths problem. An industry report found that even with full government support, it would take at least three years for gas to reach market. The procurement process was announced in October 2025. That points to late 2028 at the earliest.
Meanwhile, wind and solar are faster to build and cheaper than fossil generation. Renewables already hit a record 45.5% of primary energy supply in 2024, and renewable generation capacity grew 17% between 2020 and 2024. But renewables alone cannot solve the firming problem. When the hydro lakes run low, something needs to fill the gap. That something used to be gas. Without a credible replacement or a strategy for managing the transition, the gap just widens.
A coalition that couldn’t agree on the hard bits
The political dynamics explain the weakness. NZ First’s Shane Jones had been the loudest ministerial voice demanding an energy shake-up. Yet when the reform announcement landed, his name was conspicuously absent from the media release. That absence told its own story: the final package did not reflect what Jones had pushed for, and coalition compromise produced a lowest-common-denominator result.
The structural solutions that might have mattered, separating the gentailers’ generation and retail functions, removing electricity from the ETS, amalgamating regulators, all carried political costs the coalition was unwilling to absorb. So it announced a process and called it reform.
Policy ambiguity is now a line item
In February 2026, the BEC’s Catherine Beard was still calling for what should have been delivered more than a year earlier. “A comprehensive energy strategy is essential to give the sector clarity and ensure long-term affordability and reliability,” she said. “The risk of de-industrialisation in New Zealand is real without policy certainty and strategic direction required to unlock investment in new supply.”
In 2025, Schirr framed the problem as a competitive one: “Sustained regulatory uncertainty and sovereign risk have muted investment in new flexible electricity generation, storage, and gas.”
For businesses making capital allocation decisions over five-to-ten year horizons, process announcements are not policy. Gas prices have doubled, industrial demand is falling, a major methanol plant has already been forced to idle, and the strategy MBIE promised eighteen months ago still does not exist. The government didn’t fail because the problem was too hard. It failed because every real solution had a political cost, and it chose to pay none of them. That bill is now being picked up by every manufacturer, processor, and employer whose energy costs are climbing while the plan to fix them remains a webpage with an expired deadline.
Sources
- Newsroom: Damp squib energy reforms reject 8 of 10 recommendations (2025-10-01)
- NZ Herald: Energy warning – An open letter to PM Christopher Luxon
- BusinessNZ Energy Council: Government to put foot down on gas (2025-08-12)
- Scoop: Amid tough energy decisions, LNG plan has potential (2026-02)
- BEC: Energy sector releases blueprint for NZ’s energy strategy (2025)
- RNZ: Flickering fortunes – National’s energy plan unlikely to light up polls