Report argues diesel wins out over LNG for power fix if neither is needed after 2039

Thursday, 4 June 2026

Burning diesel to generate the electricity to see the country through a winter energy crunch would be a faster and cheaper short-term alternative to importing and burning LNG, a study funded by lobby group Rewiring Aotearoa argues.

That calculation is based on an assumption that neither fossil fuel would be required for electricity generation beyond 2039.

The Government is tipped to confirm early next week that it has decided to underwrite the procurement of an LNG terminal at the Port of Taranaki.

But a report commissioned for Rewiring Aotearoa and produced by consultant Sapere instead advises relying on diesel as “dry-year” back-up for the electricity system until extra renewable energy generation can bridge the gap.

Read more:

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Rewiring Aotearoa’s patrons include Sir Stephen Tindall and Google vice president Urs Hölzle, both of whom have been prominent investors in solar power in New Zealand.

Rewiring Aotearoa chief executive Mike Casey said Sapere’s report showed officials from the Ministry of Business, Innovation and Employment didn’t adequately compare LNG to diesel when considering ways to prevent power shortages in the short term.

“We think the procurement process should be stopped because LNG is not in the best short or long-term interests of New Zealanders,” he said.

Sapere said its analysis showed importing and storing more diesel would be a better way to bridge an energy gap if either fuel only had to be relied on up until 2033 or 2035.

A reliance on LNG until 2035 could cost $3.5 billion and a reliance on diesel until then $3b, it estimated.

That was because although diesel is a more expensive fuel for the electricity it generates, Sapere estimated that the upfront costs would be lower.

Diesel’s overall price advantage over LNG would fade out if the country still needed either fuel in 2039, it estimated.

“If a renewable dry-year solution took until 2039, there’s not much in it,” it said.

The backers of the proposed Lake Onslow pumped hydro scheme have estimated that could provide a long-term renewable solution to the country’s dry-year generation problem from as early as 2034.

About 400 megawatts of gas-turbine capacity in Taranaki that is currently used to help meet peak electricity demand could be converted to be capable of burning diesel within about 12 months at a cost of between $100 million and $170m, Sapere said.

It estimated that existing domestic diesel storage facilities could be expanded to allow for storage of 28 days of diesel generation at a cost of between $270m and $580m.

Outside of dry years, that capacity would be useful for the trucking industry, it said.

Optima Energy Management Solutions consultant Martin Gummer, who has advocated in support of an LNG import facility, said he did not want to comment until he had reviewed the report more thoroughly.

But he said the comparison would be difficult to do before it was known what the bill for an LNG import terminal would be.

Sapere’s report estimated the capital cost at between $1b and $1.5b, based on early indicative comments from former energy minister Simon Watts.

Gummer also noted that imported LNG could be used by industrial businesses that still relied on natural gas for process heat, for example to power factory boilers.

Energy Resources Aotearoa chief executive John Carnegie said it was a “massive about face” for Rewiring Aotearoa to be acknowledging a case for fossil fuels to bridge a gap in the energy market.

But he forecast an LNG import terminal would cost less than $1b. “You have to squint pretty hard to make the case for diesel,” he said.