Experts warn 100pc renewable electricity target will hurt New Zealand's wider climate goals

Monday, 24 June 2019

The confidence and supply agreement between Labour and the Green Party requires the development of a plan for 100 per cent of New Zealand's electricity generation to come from renewable resources by 2035, in 'normal hydrological conditions'.However a committee asked to develop a plan to get there warned such a move could ultimately make it harder to achieve New Zealand's wider climate goals.

A committee tasked with developing a plan for New Zealand's electricity generation to be from 100 per cent renewable sources has delivered confronting advice.

While it can be done, it will be very expensive and will undermine New Zealand's efforts to reduce greenhouse emissions overall.

A draft copy of the Interim Climate Change Committee (ICCC) report, obtained by Stuff, warns that while eradicating fossil fuels entirely was 'technically feasible' it was also 'very costly', with the final few per cent of the target coming at enormous cost with little carbon saving.

Household prices were estimated to be 14 per cent higher in current terms under the plan, while the price to industrial users would be 39 per cent higher.

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The Huntly Power Station, New Zealand's largest thermal power plant.

The committee, headed by former Opus International chief executive Dr David Prentice, said the impact of higher prices would likely mean that New Zealand as a whole would generate more emissions as a result.

High electricity prices would slow the decarbonisation of the wider economy, making it more difficult for New Zealand to meet its target under the Paris Agreement to cut greenhouse emissions, the ICCC argues.

Dr David Prentice, the chairman of the Independent Climate Change Committee, reportedly told a conference in Palmerston North this year that the eradicating the final per cent of fossil fuels from the electricity generation system would be 'prohibitively expensive'.

Instead of focusing on 100 per cent renewable electricity generation, the committee urged the Government consider New Zealand's energy use as a whole, with industrial heat and the transport sectors generating far more in terms of carbon emissions than electricity.

To underline the advice, which arguably sits outside the terms of reference given to the committee, the committee titled the report 'Accelerated electrification', the name of the policy it advised the Government to follow.

The Government has had the report since April.

As part of the confidence and supply agreement, Labour and the Greens pledged to develop a plan to get to 100 per cent renewable electricity by 2035, including a caveat that the target was for a 'normal hydrological year'.

While the Government is insisting the commitment remains, the Energy Minister acknowledges there is likely to be use of natural gas beyond 2035 to provide 'peaking' generation, to cope with short term demand when demand is very high or when other generation is unavailable.

Energy Minister Megan Woods said the 100 per cent renewables goal remained in place, but the Government saw a continued role for the use of natural gas for periods of strong demand.

National's climate change spokesman Todd Muller said the report exposed the 'economic lunacy' of being fixated on greenhouse emissions from electricity generation, which formed only a small part of New Zealand's overall emissions.

Net gains

The committee argued that by focusing on accelerated electrification, New Zealand's electricity system will continue to burn fossil fuels - around 3.6 million tonnes of carbon dioxide a year by 2035.

Such a policy would see around 8 per cent of New Zealand's total electricity generation coming from fossil fuels by 2035.

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The ICCC's modelling argued that overall there would be a net emission reduction, by pressuring companies to use electricity to generate industrial heat and by increasing the uptake of electric vehicles.

The report claims such an approach could avoid 6.4 million tonnes of carbon dioxide a year from transport and another 2.6 million tonnes from process heat.

Overall, the policy would cut net emissions by 5.4 million tonnes of carbon a year by 2035, compared to the scenario where the Government pushes for 100 per cent renewable electricity sources.

'The committee therefore recommends that the Government prioritises the accelerated electrification of transport and process heat over pursuing 100 per cent renewable electricity by 2035 in a normal hydrological year,' the report said.

Prentice declined to comment for this story, however prior to delivering the report he is said to have spoken extensively in public about the problems with targeting 100 per cent renewable electricity resources.

More than 80 per cent of New Zealand's electricity already comes from renewable resources, mainly from hydroelectricity.

That figure is expected to increase to around 93 per cent by 2035 even under a 'business as usual' approach, with no change in Government energy policy.

The modelling undertaken by the Independent Climate Change Committee suggests that the optimum way to reduce New Zealand's overall carbon emissions would have around 92 per cent of electricity from renewable sources by 2035.

Plan or aspiration?

The advice, which effectively sees the committee ignoring the task it was given, will be difficult for the Government.

In the confidence and supply agreement between Labour and the Green Party promised that an independent Climate Commission would 'plan the transition to 100 per cent renewable electricity by 2035 … in a normal hydrological year'.

It has had the report since April and is yet to decide exactly how it will respond, with indications it does not plan to respond until July.

Back in April, Prime Minister Jacinda Ardern began referring to the 100 per cent renewable target as 'aspirational', which some in the industry took as clearing the ground to soften the position.

'We're making those aspirational targets to try and reduce down our emissions profile and just make sure we're on a sustainable footing,' Ardern told NewstalkZB.

'So if [the committee are] making the point … that actually you can get to a certain point in terms of renewables, but then actually whether or not you get better bang for buck by addressing some other parts of your emissions profile, then that's something that you have to look at.'

Although the Government has leaned heavily on the caveat of a 'normal hydrological year', the report claims that the term has no clear meaning.

Without building a very large amount of new generation, natural gas would continue to be used every year, based on 87 years of rainfall records.

National Party climate change spokesman Todd Muller said the committee's report showed the 'economic lunacy' of focusing on emissions only from electricity generation, rather than taking into account the emissions from industry and transport.

In an interview, Woods maintained that the target had not changed.

'The 100 per cent in a normal hydrological year is certainly still our target,' Woods said.

However the way the target is now being defined opens the door for gas to be used in relatively small quantities up to and beyond 2035, possibly every year.

'We always envisioned that there was a role for gas peaking within that 100 per cent target,' Woods said.

'When we get to points where there is a shortage, then we can have some peaking. That is exactly why that caveat was put into the policy. It wasn't a straight 100 per cent renewable target.'

Woods said energy policy would focus on the overall picture of emissions, rather than just electricity generation.

'We know that we need to decarbonise not only our electricity system but our energy system as well and that's what our work programme is focusing on.'

As part of the plan, the Government would conduct checks ensure affordability and security of supply were being maintained, Woods said.

Muller said the roughly two months that the Government had been sitting on the report suggested it was struggling to find a response.

'The report talked to the economic lunacy of seeking 100 per cent renewable energy in the first place,' Muller said, with New Zealand's large generation from renewable giving a significant strategic advantage.

'The idea that you needed to drive to 100 per cent is completely the wrong question. The right question is 'how do you efficiently move your heavily fossil fuel dependent industries to a decarbonised renewable future?''

The committee had effectively overlooked its terms of reference in coming up with the report, Muller said.

'It was always a nonsense question to ask a commission to be reflecting on what is essentially a political question,' Muller said.

The committee should have been asked about how to best use New Zealand's oil and gas reserves as a transitional fuel 'instead, they were asked a political question by the Greens'.

Green Party co-leader James Shaw, who is also the Minister for Climate Change described 100 per cent renewable electricity as an 'aspirational goal'.

While the ICCC report made it clear that on current understanding the target would be difficult, it was not being dropped.

'It says… that the final 1-3 per cent, based on what we currently know, is going to be very challenging and very expensive and … right now, the best investment is in industrial heat and transport,' Shaw said.

Shaw said over the past two decades, the economic assumptions on renewable electricity generation had turned out to be 'wildly conservative' and there was merit in having the target.

'If you set a target and say 'we're not planning on being 100 per cent renewable, for sure, you will never get there,' Shaw said.

'Of course we've taken on board what they've said, but we don't intend to give up on the long term target because of what we currently know' that the final few per cent would be very expensive, Shaw said.