Taranaki has been one of the most prosperous regions in New Zealand over the last 20 years, with GDP per capita consistently higher than anywhere else in the country. But with challenges ahead for the region’s two major industries, what will things look like in another 20 years? And what other sectors can we expect to see grow?
Taranaki’s GDP per capita has been the highest in New Zealand for 15 of the last 20 years, and at times by a significant margin. A 2008 surge to above $75,000 per person was driven by the oil and gas industry, specifically major fields such as Pohokura coming on stream. The next closest regional economy at the time was Wellington, with a GDP of $53,480 per person.
However, the most recent Statistics New Zealand figures show that gap has been all but wiped out. Taranaki was still the country’s top region in 2020, and relatively steady at just above $76,000 per person, but Wellington was less than $2,000 per person behind in second, and a group of other regions weren’t much further back.
Looking forward, Deloitte’s 2019 Slice of Heaven report identified five regions of opportunity expected to see greater than average economic growth over the next 20 years: Auckland, Waikato, Hawke’s Bay/Gisborne, Wellington and Canterbury.
Venture Taranaki says Taranaki’s three main industries — energy, food production/farming, and the manufacture of products from those primary sources — make up more than 42 percent of the region’s economy. Having such a high reliance on a few key industries has undoubtedly benefited the region immensely in the past, but this may present an economic challenge in coming years.
Issues such as climate change, water quality, animal welfare, soil productivity and the rise of plant-based proteins are challenges for farmers and primary producers, while the effect of the New Zealand government ending new offshore oil and gas exploration will be particularly hard-felt in Taranaki.
A report from the NZ Institute of Economic Research (NZIER) in 2019 concluded that without intervention, real GDP in Taranaki would drop by between 35% and 53%, or $16 billion and $40 billion, over the next 30 years. That figure equates to a loss of income of $623,000 per household, or nearly $21,000 each year over that time.
Not only that, but New Zealand’s commitment to being carbon neutral by 2050 means Taranaki fossil fuels that have literally powered the country in the past will be phased out.
Despite the challenges for both industries, Venture Taranaki CEO Justine Gilliland believes they are likely to remain the strongest economic sectors in the region going forward.
“These industries aren’t going to disappear, and actually we can answer our own challenges, and also the world’s challenges too. It’s about utilising those smarts that we’ve had in the region for a long time, and continuing to build and leverage what we’re good at,” she says.
Federated Farmers Taranaki president Mark Hooper believes the demands of the international market present opportunities, not obstacles.
“Taranaki has a natural competitive advantage in our combination of climate and soils, and these aren’t going to change in a substantial, material way,” he says.
“That combination enables us to run stock and feed stock year-round on natural pasture. We can do it without irrigation, with sustainable levels of nutrient inputs, and with minimal infrastructure. The things that are becoming increasingly important in the world market are the same things that have been at the heart of Taranaki farming for 100 years.”
Hooper doubts plant-based food will replace the need for animal products in the future too. He refers to a 2020 study by food research body The Riddet Institute, which found that it’s not feasible to feed the world with only plant-based food.
Some studies have concluded that plant-based proteins could feed the predicted 10-billion people in the world in 2050, though many admit it would be hard to achieve.
Taranaki farmers are also making concerted efforts to farm in harmony with nature and answer environmental concerns.
Taranaki Catchment Communities is a group working to empower rural communities to be sustainable in three key fields: environmentally, from a people perspective, and financially. It was founded last year by Awatuna farmer Donna Cram, and already has more than 300 people on board.
While reluctant to compare the environmental efforts of Taranaki farmers to those in other regions, Cram says they’re doing really well.
“There’s a huge amount going on, and it just shows that farmers care,” she says. “When you think about all the fencing and planting off rivers and streams, recycling water, constructing wetlands, going predator free…all this stuff is being done voluntarily. I don’t know how much it will have cost people all up, but it’ll be phenomenal.”
The Taranaki Regional Council’s Environmental Awards illustrate the widespread efforts that farmers in the region are making to prioritise the environment. Its 2019 list of winners include six farmers that, combined, have planted well over 20,000 trees to stabilise land, protected more than 60 kilometres of waterways with fencing and riparian planting, retired more than 1,200 hectares of farm land for native bush, undertaken significant predator control initiatives and transformed 650 hectares of farm land into native or productive forests.
Forestry is an obvious solution for farmers looking to become more environmentally friendly, and is also a new revenue stream. As well as an investment that pays off when trees are harvested in the future, forestry plantations can earn carbon credits or be used to offset emissions and avoid paying penalties.
Forestry is grouped with mining and fishing in Statistics NZ figures, in Taranaki’s most valuable sector. There are signs of a brighter future for the wood processing industry in Taranaki too, and that could encourage farmers to plant and grow more trees.
Taranakipine has innovated its own prefabricated timber products to provide a value-add solution to the construction industry, without having to export New Zealand logs.
Its subsidiary, Woodspan PLT Panels, has engineered new technology to provide sustainable, high quality building products direct to the construction sector from New Zealand pine plantations.
Taranakipine CEO Tom Boon says this has the added benefit of being a low carbon emitting material, which is becoming increasingly sought after.
“There is very little waste in our process,” he says. “Residues such as bark goes into garden products, wood chips go to pulp mills, and shavings from the timber goes to the planers to use as fuel for our kilns. Or it goes to bedding for the local chicken farms — that’s a big industry here too.”
Plainly, forestry offers a diversified revenue stream, and a handful of local success stories illustrate the opportunities that innovating can present.
Greenmeadows Beef has successfully cut out the middle man as a direct-to-consumer red meat provider, while Egmont Honey’s success utilising nearby manuka plantations has brought increased value to sheep and beef farms.
Roebuck Farm is not only a sought-after provider of organic crops by local eateries, it’s also become an authority on sustainable food systems and hosts popular workshops helping to teach production methods.
Its Roebuck fork, which aerates soil without disturbing it, has sold exceptionally well, and the company is developing even more garden tools and looking to widen distribution into overseas markets.
This kind of agritech, or the innovation of products for primary industries, is seen as having big economic potential in the future.
Deloitte’s aforementioned 2019 report also identified agritech as one of five industries likely to experience higher than average growth over the next 20 years.
Taranaki has some history in agricultural innovation — such as the infamous Taranaki gate, and local tailor William Broome inventing the Swanndri — but the region isn’t currently regarded as a leader in this space.
That’s according to David Downs, a Venture Taranaki board member who’s also heading an all-of-government agritech taskforce looking into opportunities for the sector.
He says that because farmers know what they need better than anyone, they are in the best position to make these innovations, and that could signal an even greater opportunity for creative Taranaki producers.
“More could be done to encourage innovation and the commercialisation of it. It’s almost a surprise given the strong farming history of the region that we haven’t seen more.
“Taranaki has all the right conditions for success, but the ecosystem hasn’t yet created the same number and type of agritech innovations as other parts of the country. That isn’t to say there aren’t pockets of innovation, but I think we are yet to see the full potential of the region realised.”
While the issues — and opportunities — for farming are about adjusting to political, environmental and social factors, the adjustment for the energy industry is perhaps a far greater pivot into clean energy.
That transition is expected to take around 30 years, so the sector will still need fossil fuels during that time. However, that need will gradually become less and less as alternative fuel sources are scaled up.
Energy company OMV’s New Zealand General Manager Henrik Mosser believes the energy sector will continue to be strong in Taranaki as the country transitions towards zero carbon energy, but sees its role as an evolving one.
“Ensuring adequate gas supplies is not only important for existing customers like Methanex, but also to provide back-up for electricity generation during the transition to a zero carbon economy,” he says.
“Naturally, our long-term prospects are constrained by the fact that no new offshore permits will be awarded, and by the success or otherwise of our future exploration programme in our existing permits.
“Having said that, internationally, OMV is actively researching hydrogen and other energy sources, so there are many options for the future. We have also committed to being carbon neutral by 2050.”
A spokesperson for Todd Energy declined to comment on its long term plans in Taranaki.
But having at least one major energy producer publicly aligned with the new direction for the sector is significant. That’s because our major energy distributor is already committed to making the transition to zero carbon energy, and it needs to have producers on board to be able to do it.
Firstgas, the company that owns gas pipelines across the network, has committed to having 100% hydrogen fuel in its lines by 2050. Its first goal on the road to achieving that is to have a 20% hydrogen blend by 2030.
In its favour is the fact that existing energy pipelines will be able to be repurposed for different fuels. Add to that experienced local energy personnel, particularly in important fields of engineering, which will be hugely important in a successful transition.
“Taranaki has the best energy engineering resources available globally,” said Dr Cristiano Marantes, CEO of Ara Ake, the New Plymouth-headquartered organisation charged with accelerating the commercialisation of energy innovation in Aotearoa.
Ara Ake being located in Taranaki is a good early sign for the region. Dr Marantes says Ara Ake is working to create new opportunities in the energy sector, both in Taranaki and around Aotearoa, to support the transition to a low-emissions future.
“We are a national centre but because many of the energy sector players are located here in Taranaki, it’s a great place to develop and demonstrate energy innovation.”
But how is that energy going to be sourced?
Dr Marantes believes technologies including hydro, solar, wind, geothermal, wave & tidal and hydrogen will all have roles to play, but the exact makeup of tomorrow’s energy mix is uncertain.
While some technologies have been around for many years and are proven, others are still in the early stages of development. Ara Ake also has a global focus looking outwards for innovative energy solutions that could be deployed locally.
Hiringa Energy is a Taranaki company at the forefront of developing hydrogen energy. It’s focusing on starting that transition in heavy transport, where it seems well suited, and the first zero carbon trucking fleets are due in New Zealand next year.
CEO Andrew Clennett says there is a huge opportunity for New Zealand and Taranaki to be world leaders in this space, but politicians and decision-makers need to empower the industry to get on with it.
“The world is going crazy for clean energy right now — it’s the new black. We can be an early mover and set ourselves up as a clean energy hub, but we need to actually move. There’s a real risk that we lose that early mover advantage — we’ve got it now, but we need to go for it.”
Clennett says not only are there opportunities in being able to produce clean energy, but also in storing and exporting it too. So while the hurdles facing the energy sector are significant and make-up of energy in the future is unknown, the possibilities on the other side of those hurdles could be significant.
And that’s the big question: can the energy sector of the future be as strong as it’s been in the past?
Clennett, like others, believes it would be a “significant achievement” to innovate clean energy solutions in Taranaki, but he’s guarded in his outlook.
“We’ve got to be careful assuming the industry will be as strong as it’s been in the past, particularly when it comes to jobs.
“So much in new technology is about being less labour intensive, and the jobs that do exist will be very different. Things may well be similar to what we’re used to, but there’s certainly no guarantees.”
However, “there is a lot to be optimistic about if we can get it right,” said Dr Marantes.
While energy and farming are expected to remain Taranaki’s economic pillars, there are plenty of opportunities in other sectors too.
Justine Gilliland sees Taranaki’s construction, health and wellbeing, data and financial technology sectors as all having growth potential.
Venture Taranaki has seen a big spike in entrepreneurship and people starting new businesses. Its startup clinic bookings are through the roof, and its PowerUp ideas competition, which gives out funding for new business ideas, is heavily oversubscribed, Gilliland says.
“More than half of the existing enterprises we work with are very strongly focused on growth. In the six months to December, we had $4 million that we put through the region for R&D funding, and we normally do $2 million per year. And you don’t invest in R&D unless you’re thinking about new opportunities.
2020 taught us all about essential workers, and essential industries. With food and energy well and truly essential, the challenges of providing both in the future may well lead to significant economic benefits for Taranaki.