He Pou a Rangi, the Climate Change Commission’s (CCC) Draft Advice published on 31 January 2021, proposes preliminary emissions budgets and direction of policy to achieve the targets agreed to under the Zero Carbon Act through to 2035. This think piece discusses a number of initiatives Beca believes will be needed in Aotearoa to meet the magnitude of the climate change challenge when it comes to our future energy.
We strongly support CCC’s recommendation for a National Energy Strategy. A planned and measured phase down of fossil fuels, scaling up of renewal electricity generation and new low emissions fuels is a critical step towards achieving New Zealand’s decarbonisation goals. A dedicated strategy can help drive these actions. Such a strategy will go a long way to provide increased certainty to public and private investment. It will generate job opportunities, and offer co-benefits such as affordable energy, clean air, and lower the cost of public and private transport.
Our experience gained from working across multiple sectors has led us to the same conclusions as presented in the Draft Advice; that a broader focus on renewable energy (as opposed to renewable electricity) will provide the highest decarbonisation return on investment. The following observations are offered within the context of this emphasis on energy.
The Energy Hierarchy – Minimise Demand
In parallel with efforts on how to best deliver clean energy to Aotearoa, we must also consider opportunities to minimise energy demand and peak demand, through a combination of change in behaviour and new technologies. We need to understand the answers to questions such as how much impact can changing urban form have on total passenger kilometres travelled? How much energy is wasted through inefficient building and industrial plant operations? What is the carbon footprint of the production of low-quality products?
It can be challenging to quantify the benefits of initiatives that remove or reduce the need for energy. However, such initiatives present a significant opportunity for low-cost decarbonisation. For example, a recent project (see video below) with Wellington City Council (WCC) saw gas consumption reductions of 55% and electricity consumption savings of 27% through improved building controls (B-Tune) and minor system upgrades, which resulted in a payback period of less than a year. The energy reductions achieved across two buildings are equivalent to the annual energy consumption of 50 homes and have resulted in significant cost savings for WCC.
Demand response could play a role in reducing peak demands and therefore the consequent risk of both generation and transmission overbuild through building for the peaks. Mechanisms are presently available in the electricity market and include interruptible load and dispatchable demand. Interruptible load allows electricity users to sign contracts with power supply companies, enabling them to break the power supply under different conditions – similar to distribution companies controlling residential hot water heating. Dispatchable demand enables wholesale electricity purchasers to participate in the spot market in a similar way as generators and respond to market conditions.
In short, demand response enables medium-to-large electricity consumers to reduce their electricity demand for a period in exchange for a payment. It is a win-win situation, enabling consumers to avoid higher prices and be compensated for reducing their demand during peak load events, while helping manage generation and transmission/distribution constraints. Greater adoption and greater incentivisation of demand response participation by medium-to-large electricity users will benefit the economy, reduce energy waste and accelerate the decarbonisation of our economy.
Embracing Technology and Innovation
The Draft Advice proposes pathways that use current proven technologies to decarbonise the energy sector that are considered technically achievable, economically affordable, and socially acceptable. Another exciting aspect is the role Future Energy solutions might play in helping to achieve our climate change targets.
Many emerging technologies such as biomass, are at our doorstep and could support immediate transition plans. Implementation of others, such as green hydrogen, may not yet be commercially proven technology, but could offer benefits in the short to medium term. These could be critical to achieving our goals. A National Energy Strategy should include provision for research and development (R&D) to support development and ultimately commercialisation of Future Energy solutions.
Key Principle 3 of the Draft Advice promotes the creation of options to meet the targets and the ability to adjust course as the transition proceeds. To enable this principle, current government incentives to support innovation through increased R&D could be complemented with additional funding mechanisms to encourage the development and investment in emerging technology.
New Zealand is proud of its innovation culture and New Zealanders have an opportunity to accelerate our actions to reduce emissions by applying that innovation. As a country, we need to harness our hunger for pushing the boundaries and use this to accelerate the use of technologies which might get us to our goal faster and more sustainably.
By combining near term emerging technology with our passion for innovation, New Zealand can accelerate decarbonisation of the economy, particularly in Heat, Industry and Power (HIP). The Draft Advice suggests we may need to be more ambitious with our Nationally Determined Contribution to align with expectations for developed nations. Our experience suggests that in the HIP sector, we have the potential to be more ambitious with our targets.
The sorts of things we may consider include increased use of sustainably managed pine forests in New Zealand to displace base load thermal generation and process heat. Of course, land use and biodiversity needs to be taken in account. Our estimate to cover against a hydro ‘dry year’ risk requires the redirection of 17% of NZ’s annual pine harvest of mature forest, albeit we would anticipate a much smaller portion might be used as part of the mix in the dry year solution. Further assessment should be given to options like transitioning Huntly’s coal-fired boilers to accept wood chip – which would repurpose existing infrastructure, while also creating employment and opportunity in the region. An international example of this is Ontario Power Generation’s Thunder Bay Plant coal plant, which was converted to wood pellet to provide 170 MW of generation.
National Energy Strategy Stakeholders
At Beca, we agree with the Draft Advice, Section 2.6, which states that all New Zealanders, businesses, industries, communities, and regions will need to play their part in addressing climate change. Furthermore, it recommends that cross partisan support is provided to give businesses and individuals the visibility they need to make decisions.
We believe it will be important to consult widely with stakeholders, including private enterprise in addition to the currently proposed contributions from Central Government, Local Government and Iwi. To establish a robust National Energy Strategy, we need representation from public and private enterprise. Participants should include Electricity Generators, Distribution Companies, Transmission Networks, Charging/fuelling Network Owners, major energy users, the Transport Sector and Fuel Source Owners (forestry) etc.
The high-level conclusion of the Draft Advice recommends that transformational and lasting change across society and the economy is needed. We agree with the Commission's approach of pursuing cross-sector initiatives, as we know this will be fundamental to enabling systemic solutions and changing the ways we operate.
Beca is excited about the opportunity to play a part in this. We look forward to providing our contribution to the National Energy Strategy through our broad insight and expertise across multiple sectors and strong relationships with most stakeholders.
To find out more about Beca's initial observations on the CCC Draft Advice, click here.