In a significant shift in energy policy, New Zealand’s parliament has voted to lift the ban on offshore oil and gas exploration, effectively ending a key environmental measure introduced under former Prime Minister Jacinda Ardern in 2018. The legislation, passed on July 31, 2025, with 68 votes in favor and 54 against, allows companies to apply for new petroleum exploration permits as early as September, extending beyond the onshore Taranaki region. This move by Prime Minister Christopher Luxon’s conservative coalition government aims to address energy shortages and boost investment in the sector, marking a reversal of the previous centre-left Labour government’s efforts to combat climate change by reducing fossil fuel dependency.
Resources Minister Shane Jones described the decision as a “pragmatic” step, emphasizing the continued role of natural gas in the nation’s energy mix and the need to enhance energy security through indigenous reserves. Critics, including the Green Party’s Chloe Swarbrick, argue that it undermines New Zealand’s transition to renewable energy sources. This development comes amid broader policy rollbacks, such as repealing green car rebates and fast-tracking mining projects, reflecting the current administration’s focus on economic growth and energy reliability.
Background on the Ardern-Era Ban
The ban on new offshore oil and gas exploration was enacted in 2018 by Ardern’s Labour-led government as part of a broader strategy to transition New Zealand toward a low-carbon economy. It prohibited the issuance of new permits for offshore exploration, limiting activities to existing onshore operations in Taranaki. The policy was hailed by environmentalists as a bold step against climate change but criticized by industry stakeholders for deterring investment and contributing to declining domestic gas production. According to government officials, the ban led to reduced sector investment and exacerbated energy shortages, prompting the current reversal.
Overview of New Zealand’s Energy Policies
New Zealand’s energy policies have long emphasized sustainability and renewable sources, with a national target of achieving 90% renewable electricity generation by 2025 and an aspirational goal of 100% by 2030. The New Zealand Energy Strategy, last updated in 2011-2021, focused on efficient energy use and renewable development, but as of February 2025, a comprehensive new strategy has yet to be implemented. Recent policies under the Luxon government include enabling offshore renewable energy development, such as wind farms, to support the transition to net-zero emissions by 2050.
The government is also pursuing regulatory reforms to attract foreign investment in renewables and infrastructure, including grid modernization and market reforms to handle rising demand, projected to increase by at least 35% by 2050 due to electrification. The Carbon Neutral Government Programme aims for government operations to be carbon neutral by 2025, providing guidance on emissions measurement and reduction. However, the lifting of the oil and gas ban signals a balanced approach, prioritizing energy security alongside renewables, amid challenges like regulatory uncertainty and the need for a just transition away from hydrocarbons.
Key legislation includes the Resource Management Act (RMA), which governs renewable project consents, and the National Policy Statement for Renewable Electricity Generation, which supports the 90% target by streamlining approvals for hydro, geothermal, wind, and solar projects. Budget 2025 allocated limited funding for the sector, despite commitments to net-zero, highlighting a focus on private investment.
New Zealand’s Energy Mix
New Zealand boasts one of the world’s most renewable-heavy electricity systems. As of 2025, approximately 80-85% of electricity generation comes from renewable sources, with hydropower dominating at around 53%, followed by geothermal at 20%, and wind/solar/other renewables contributing significantly. Natural gas accounts for about 12-17% of the electricity mix, with coal and oil playing minimal roles in power generation but larger in overall energy consumption (oil at 34.1% and gas at 16.8% of total primary energy supply).
Live data from Transpower on July 31, 2025, shows hydropower generating 4,463 MW, geothermal 1,170 MW, and gas 434 MW, underscoring renewables’ dominance during peak periods. Total renewable electricity generation is projected to reach 38.39 billion kWh in 2025, with an annual growth rate of 0.49%. The country is on track to meet its 90% renewable electricity target by the end of 2025, with predictions of achieving 100% by 2040. This mix positions New Zealand well for a sustainable future, though gas remains crucial for baseload during dry hydro years.
Cost of Electricity in New Zealand
Residential electricity prices in New Zealand have seen upward pressure in 2025, with the average cost reaching around 34.25 New Zealand cents per kilowatt-hour (kWh), equivalent to about $0.20 USD/kWh. For a typical household consuming 7,084 kWh annually, this translates to an average monthly bill of approximately $202 NZD, though bills can spike in winter due to heating demands.
Prices have risen by about 11% since the start of 2025, driven by increases in lines and transmission charges, which added roughly $10 per month (excluding GST) to household bills from April onward due to infrastructure investments and rising material costs. Compared globally, New Zealand’s residential rates are mid-range among OECD countries, at around 31-34 cents per kWh, higher than some peers like Australia but lower than high-cost nations. The Ministry of Business, Innovation and Employment (MBIE) monitors these costs using sales-based data, noting that commercial and industrial rates are generally lower.
Long-term, transitioning to all-electric households with EVs could reduce total energy costs for consumers, potentially saving thousands over time as renewable integration deepens.
Implications and Outlook
The decision to lift the oil and gas ban could alleviate short-term energy security concerns by encouraging exploration and potentially stabilizing gas supplies, which are vital for bridging gaps in renewable output. However, it risks conflicting with New Zealand’s climate goals and drawing international scrutiny. As the country pushes toward 100% renewables, balancing fossil fuels with aggressive renewable expansion will be key. With electricity demand set to surge, policies promoting investment in grid resilience and offshore wind could define the next phase of New Zealand’s energy landscape.
This policy shift underscores the ongoing tension between economic pragmatism and environmental ambition in New Zealand’s energy sector.
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