Infrastructure Commission warned govt to slow down on LNG plans

The Infrastructure Commission warned the government to slow down over its LNG plans, saying it should develop the "right solution, not the most expedient one".

In a December 2025 memo released under the Official Information Act, the commission said there were viable, less expensive alternatives that should be explored more thoroughly.

It was also not convinced the project would lower electricity prices, warning of cost blow-outs and the "inherent volatility" of LNG prices.

In a Cabinet briefing, MBIE rejected most of the advice, while saying more detailed analysis of non-LNG options had "not been possible in the time available".

Energy Minister Simeon Brown has backed up his officials, saying they looked "closely" at nearly a dozen alternatives.

The Infrastructure Commission's feedback is the latest in a tranche of documents raising concerns over whether a liquefied natural gas (LNG) import facility is necessary to solve the country's 'dry-year' risk.

The government has said importing LNG is the best way to see off that risk within the short-term, while more renewable energy is developed.

It confirmed earlier this month it was proceeding with the facility, but had scrapped its initial plan to fund the billion-dollar plus cost through a levy charged to all electricity users.

RNZ revealed last week that modelling commissioned by the Ministry for Business, Innovation and Employment (MBIE) found there was "low need" for the facility, and no need at all in some scenarios.

The Infrastructure Commission feedback, provided to MBIE late last year, shows the commission, too, was unconvinced of the need for the facility or even the problem it aimed to solve.

The commission said it acknowledged "the pace of the process" and the urgency that government ministers had demanded from MBIE officials.

However, it implored the ministry and government to slow down.

"Our core feedback is to take the time needed to identify the right solution, not the most expedient one," the commission's senior advisors wrote.

They suggested that, "given it equates to a potential $2.4b investment over 15 years impacting all electricity users", the project could be submitted to the commission's Infrastructure Priorities Programme for independent assessment.

It was not clear how officials had assessed a long-list of 11 options, and the analysis it did do was "in a basic form".

The analysis of the five short-listed options, which included using new and converted diesel peakers and biomass turbines, was also lacking, it said.

"The LNG option has been developed in far more detail than the other options - making it hard to do a balanced comparison between them."

The shortlist should also have included the "base case" so that the other options could be compared against the status quo.

It was "unclear" whether the lower wholesale electricity prices that MBIE had forecast would eventuate, the advisors wrote, "given the inherent volatility of LNG prices and cost escalation often associated with large projects".

The options that MBIE assessed aim to fill a 1.5 terawatt-hour generation gap that officials have calculated will be needed in a dry year.

The commission said there was "inherent uncertainty" in that figure and suggested the gap did not need to be addressed all at once.

"Options could be set out that address the 1.5TWh in more bite-size chunks."

Disagreement from MBIE officials and minister

In a Cabinet briefing that included a summary of the commission feedback, MBIE officials agreed that there could be a trade-off between the speed of a proposal and its effectiveness.

"However, the Government will be better placed to judge this [in 2026] following further analysis of accelerated proposals."

It rejected the suggestion to look at smaller-scale options alongside supply and demand interventions. "[That option] was considered less flexible as it involves investment in new generation assets that may not be needed in the long term."

MBIE officials also disagreed with the commission's assessment on how LNG could affect electricity prices.

"A secure fuel source (LNG) for firm generation will give the market confidence that cover will be available in a dry year and reduce that risk premium."

Long-term wholesale electricity prices have fallen this year, which MBIE and the government have attributed to the government's LNG decision.

In a written statement, Energy Minister Simeon Brown said he was confident in MBIE officials' assessment of LNG and the alternative options.

"MBIE looked closely at 11 technical options for managing dry year risk. LNG remains the lead option considering the urgency of providing cover, time to deliver, cost, flexibility and spillover benefits to other parts of the economy."

Officials' advice was that the dry-year energy generation gap was a total of 3TWh, with half of that already covered by a coal stockpile at Huntly and the ability to require Tiwai aluminium smelter to power down in times of extreme demand , he said.

The remaining 1.5TWh gap was "substantial and it can last weeks or even months".

With Maui gas field anticipated to close at the end of the year, which would trigger the withdrawal of major gas user Methanex, New Zealand's electricity system would be left without the demand-response that Methanex has also provided in previous dry years.

"The economic consequences of a dry year occurring without back-up electricity cover are potentially catastrophic," Brown said.

The government anticipated a dry year approximately once every four years.

"New Zealand does not have the luxury of waiting for an alternative solution to emerge," he said.

"While others have their views, ultimately the government needs to act."

Government has 'blinkers on'

Lawyers for Climate Action spokesperson Laura MacKay, whose organisation requested the commission documents, said the feedback "clarifies and solidifies a lot of the existing concerns" that had been raised about the project.

"One of the key things it raises, is why has there been such limited exploration of alternatives?"

For such a major investment, it would make sense to compare the costs and benefits of other options, MacKay said.

"That just hasn't been done - the LNG proposal has just been proceeded with, with the blinkers on."

There was still time for the government to take a pause.

"[The Commission] is saying this is not necessarily wrong, but you're rushing through the decision without proper consideration of the actual problem, of the costs, the benefits."

Labour Party energy spokesperson Megan Woods said the commission's feedback "adds to the stack".

"It's not being compared to what other options are out there and the government is refusing to do that work, and Simeon Brown needs to come clean with New Zealanders about why that is the case."

She agreed that dry-year risk was an issue that needed to be addressed, but there was time to assess the alternatives.

"This winter isn't looking like a risk - the lakes are full, everyone knows what gas is doing."

In the meantime, there were options available to start easing pressure on electricity demand immediately, she said.

In a written statement, Infrastructure Commission chief executive Geoff Cooper said the December advice was consistent with the commission's broader advice on best practice for infrastructure project planning, and focused on "the need for sound business case analysis of the cost of alternative options, whether a combination of options can achieve similar outcomes, and considering who benefits and who pays for any investment".

"We understand the proposals have since progressed and as we have not been provided with further detailed proposals since this initial advice was provided, we are not in a position to make any further assessments."