New Zealand’s largest industrial gas users, including its wood processors, now have a Crown-backed pathway to move off natural gas, after the Government launched a NZ $1.2 billion loan guarantee scheme, the wood products sector says could speed a shift towards biomass. Wood Processors and Manufacturers Association of New Zealand chief executive Mark Ross said the scheme offers a practical and timely answer for manufacturers facing uncertainty over the future cost and availability of gas.
Announced this week as a Budget 2026 initiative, the Gas Transition Loan Guarantee Scheme will see the Crown guarantee 80 per cent of each supported loan in return for banks passing lower interest rates to borrowers. Individual loans are capped at $50 million, the scheme runs for three years, and Budget 2026 has set aside $48 million to cover potential losses.
For a wood processing sector exposed to rising energy costs and shortening gas contracts, the scheme offers a financing route to alternative fuels such as biomass, produced from wood residues and forestry by-products. Ross said the insecurity created by energy demands had become a serious threat to manufacturing growth in New Zealand, and welcomed the Government making up to $1.2 billion of bank loans available to cut that dependency.
While the scheme is only a partial answer to the country’s longer-term energy challenges, Ross said it gives companies exposed to gas shortages a practical mechanism to shift towards alternatives such as biomass, produced from wood residues and forestry by-products.
Extending the loan facility to biomass supply, and not consumption alone, would help accelerate that progress, with WPMA arguing that investment in processing, logistics and infrastructure remains essential to a reliable and cost-effective fuel supply. Many regions already have the raw biomass resource, but the capacity to convert it into delivered fuel determines whether manufacturers can realistically switch.
Pointing to the Budget’s $5.9 million allocation for the Energy Efficiency and Conservation Authority to investigate pathways away from gas, Ross called the commitment timely, given that WPMA has worked with the agency to help members cut energy costs across their operations. Supporting both the supply and demand sides of the biomass equation, he said, would be central to a durable solution.
The scheme follows a sharp tightening in New Zealand’s gas outlook, with 12 of the country’s 17 operational gas fields expected to stop producing within a decade, and energy officials estimating that the full $1.2 billion in lending could cut gas use by up to 10 petajoules a year. To qualify, businesses must consume at least 1000 gigajoules of gas annually and demonstrate savings of at least 15 per cent whilst maintaining or increasing production.
With the scheme expected to open from July or August, Ross said WPMA would continue to back cross-party consensus on a long-term energy strategy that keeps businesses operating. “The opportunities to solve our energy challenges are already within reach,” Ross said, describing the loan guarantee as one important piece of a wider effort to build a more secure and affordable energy future for the industry.
