Can history guide New Zealand’s path through energy transition?

Energy, infrastructure and industrial, are all part of a group of interdependencies that are vital to any (progressive or successful) functioning economy, and inevitably require succession planning to meet anticipated and future societal needs. In part one of a three-part series, Nick Cozens, Technical Director – Energy and Infrastructure, considers energy generation as a crucial interdependency in the nation’s practical infrastructure.

Means of energy generation, upgrading of infrastructure, and enhancing while decarbonising industrial output are of national importance; should one of these pillars reduce in capacity the two remaining must shoulder the load.

It is under these reducing circumstances that overstretch becomes quite visible to Aotearoa’s electrical power generation capabilities – as has been recently observed. Detrimental global economic cycles during the 1920s and 1970s required various forms of State intervention to correct the failed market mechanisms. It would appear the 2020s reflects a 50-year return cycle of similar economic volatility, where once again our national energy generation requirements need attention.

The current energy landscape in Aotearoa

Aotearoa is starting from a position where much of our energy generation capacity is nearing or exceeding natural limits. If capacity is not diversified and expanded, it will affect our future infrastructure cost and industrial competitiveness. To counter this prospect, the question arises - where does the new additional capacity sufficient in scale, resilience and delivered at affordable prices come from?

Analysis of the past 100 years of installed generation capacity quickly reveals a recurring pattern – as one type of generation reaches a natural limit, it is replaced by the next. For example, thermal generation intensified during the late 1990s, providing additional baseload electrical supply, as seasonal hydro-electric generation was reaching either natural or imposed political limits. As natural and imposed political limits bring a close to thermal generation capacity, greater geothermal capacity or alternative forms of baseload generation will be needed.

To put this in absolute terms, an important observation is revealed. That is, the almost doubling of installed capacity, which took the past 45 years to achieve, must again double, this time within 30 years to meet stated and forecast demand, and emission reduction targets.

Not since the 1970s has Aotearoa required decadal (every decade) replacement at such scale, as now forecast (see below), to achieve favourable levels of energy security, widespread electrification and affordable and competitive pricing.  A re-evaluation of contemporary practise is required to enable innovation to continue contributing to a more sustainable future.

The role of creative destruction

Stating the necessity of a re-evaluation is perhaps being simplistic, and risks understating what successful energy generation technologies have achieved and make possible. However, baseload capacity has in fact decreased in recent years while seasonal generation has increased, making the national ability to bridge baseload to support dry years increasingly difficult. A new combination of resource generation capacity needs to be introduced, and the systems boundaries of thought should broaden – and quickly, to avoid maintaining the status quo.

The well-regarded and influential political economic historian Joseph Schumpeter called this requirement creative destruction. This is where the dismantling of long-standing practices is needed to make way for new technologies, new kinds of products, new methods of production and new means of distribution.

One such technology capable of delivering baseload scale, which relies on a new combination of existing resources and knows no natural limits, is offshore wind generation which is rapidly expanding. Now projecting beyond long-established offshore wind regions in Europe, offshore wind generation and abandonment legislation was passed in Australia last year, and similarly has also occurred throughout the APAC region. As one the world’s largest offshore wind resources, Aotearoa’s potential has gained the attention of European offshore wind developers and policy makers alike.

The next thought leadership article in this three-part series will provide an overview of the large infrastructural requirements, outcomes, and benefits of increasing energy capacity in an Aotearoa context. This will view the subject through a lens not too dissimilar to that taken by entrepreneurs, engineers and political decision makers during the post-war years, who devised large scale and legacy building energy projects. As Aotearoa continues to develop and implement national infrastructure projects big and small, complex and routine, new methods of generating power at scale must also feature in our national fabric. Although the concept of so-called ‘creative destruction’ may disturb the complacent, it is a necessary tool to prepare for the future of Aotearoa’s energy generating needs and competitive, environmentally desirable capacity.