Solid Energy has connected its coal seam gas well in Huntly to the national grid, providing enough energy for up to 500 homes.
A one-megawatt electricity generator is being fed from four wells that take gas from a 32ha section of coalfields.
The state-owned company estimates coal seam gas could provide 10% of the nation's energy.
Solid Energy chief executive Don Elder says it is the first time New Zealand has had coal seam gas in its energy mix.
He said the wells contain 98% energy-rich methane and that coal seam gas has a lower carbon footprint that conventionally-produced natural gas.
Mr Elder told a public meeting in Auckland the gas can be produced from deep coal seams that cannot be mined, and there is significant potential for development around the country.
He said Solid Energy will continue to assess the commercial viability of the coalfield at Huntly, and will decide on the next stage of its development within a few months.