BEC’s Breakfast with the Minister of Energy and Resources, Hon Dr Megan Woods

Come and hear Hon Dr Megan Woods talk about her strategic priorities for the energy sector in 2019.

The BusinessNZ Energy Council (BEC) is delighted to invite you to attend the BEC’s annual Ministerial breakfast. We have the pleasure of hosting Hon Dr Megan Woods, the Hon Minister for Energy and Resources, Minister of Research, Science and Innovation, and Minister of Government Digital Services.

Delivering balanced energy outcomes across the ‘Trilemma’ dimensions of energy equity, energy security and environmental sustainability requires transparent and effective communication and collaboration between government and industry. The Minister will speak about her priorities for the energy sector over the coming year and the opportunities she sees to work together with the sector to achieve them.

This will be followed by a discussion with the audience and a chance for you to address the Minister directly and ask your own questions.

On arrival we will provide you with breakfast and you will have the chance to network with leaders from across the energy industry.

We are delighted to bring you this breakfast event in conjunction with NZX.

Doors will open and breakfast will be served from 8.00 am.

Registrations are limited to four per organisation.

Press by invitation only.

Megan Woods Business New Zealand Energy Council Speech

Tena Koutou Katoa

Thank you so much for having me along today.

David, thank you for that introduction.

Can I also acknowledge Executive Director John Carnege, as well as Ambassador Kobayashi from Japan.

Today, I want to give you an insight into my thinking about the energy portfolio in the coming year.

This is the year we start pulling together the different threads of our policies and initiatives into our comprehensive work programme.

That work programme is about enabling the long term transition of our economy towards renewable energy.

And it’s about making sure we continue to have a secure, affordable and sustainable energy sector over both the medium and long term.

I want to acknowledge your organisation for the exceptional work you have done advancing thinking around the energy trilemma. I found your 2050 Energy Scenarios work a very helpful contribution to the evidence base in this area and I’m looking forward to your 2060 work.

We start from a good space.

New Zealand is ranked 8^th in the World Energy Council’s trilemma index.

As a Government we’re ambitious for our energy system.

We’ve set the ambitious goals for our country– 100% renewable electricity by 2035 (in a normal hydrological year) and a clean green, carbon neutral economy by 2050.

Our work programme this year is about how we move towards those goals.

So today, I want to talk you through the different strands of our work programme, show you how they fit together, and how they interact with other parts of the Government’s agenda.

And I want to show you where you fit, where you’ll have opportunities to engage with us and be part of this programme of work.

Renewables Strategy

A major piece of work for us this year will developing a Renewables Strategy for New Zealand.

This is about the detailed strategic planning of how it is we chart out that pathway to 2035 and 2050.

We’re looking into the areas where Government action can make the biggest difference – identifying the incentives that may be needed, the roadblocks that need to be removed, and how we can help new technologies come on stream.

It’s about what are the regulatory and policy settings our country needs to make the most of the opportunities around renewables

At a time when I’m hearing from business leaders that they want to invest in new generation, that the price signals are there – we want to make sure we’ve got the settings right to enable it.

One issue I hear a lot for example is the issue of wind consents that might need to be reconsented now because the technology has moved on so rapidly that blade sizes are outside the terms of the consent. That’s an example of the type of roadblock we are looking at.

Our aim for the year is a series of cabinet papers and a renewable energy plan for public consultation this year.

We’ll look to work towards introducing legislation for 2020.

Green Hydrogen Strategy

One part of this work will also be a strategy on Green Hydrogen.

We’ll look to go public with a green paper on this in the first half of the year.
Multinational professional services firm Arup has been contracted to assist.

This strategy is about how we grab the opportunities that exist for New Zealand in this space.

And I acknowledge that, like any developing or emerging technology, the debate about hydrogen is a contested space.

We’ve seen the Concept Consulting report recently which wasn’t as bullish on the economics as some reports I’ve seen.

For example, the UK Climate Commission released a very positive report and in recent political debates across the Tasman, we’re seeing talk of a $1 billion fund in Australia.

The technology is developing fast. One company in Norway I visited last year claims the cost of their electrolyzers for producing green hydrogen will be competitive with the alternative non-renewable generation method using steam methane reformers by 2020. Combine that with cheap renewable electricity and there’s real opportunities.
The key for me is making sure we are keeping pace with developments in this space, poised to grab opportunities.

Last year I signed the Memorandum of Co-operation with Japan. There’s a huge desire there to support an export industry here in New Zealand.

Resources strategy

This year, we will also work to provide stability and certainty for the resources sector as an element of my work programme for 2019.

A broad resources strategy will be developed to underpin the review of the Crown Minerals Act, focused on the Government’s long-term vision for the sector.

This approach also allows for targeted engagement with iwi partners and other stakeholders including industry and environmental groups on how New Zealand can sustainably derive value from its resources.

Scope and timing are still being developed by officials, but I anticipate this strategy will be delivered before the proposed release date of the CMA discussion document in the second half of the year.

This work comes off the back of our long term decision about oil and gas.

I do want to acknowledge there will be people for whom that decision is still a struggle.

But we make no apology for having the courage to look beyond the 3 year electoral cycle and send a clear signal about where the world is going, and beginning to plan for it.

There are certainly those, and they email and tweet me all the time, who would have liked us to take more drastic action.

But as a Government, we chose a long term, managed transition. We very much see a role for gas in peaking through to at least 2035.

As part of our decision, we’ve protected 100,000 skm of existing permits. Many of these can run through to at least the 2030s, and then have the possibility of extensions.

The medium term picture is also firming up. We’ve seen Todd invest $100 million in a new gas peaking plant I opened last year. We’ve seen OMV in recent weeks talk about investing an extra $500 million in Taranaki, extending the life of existing producing assets. We’ve seen Methenex sign a long term gas contract and announce this week taking on 14 more staff on good salaries. Tamarind’s got a strong 2019/20 drilling programme at the Tui field.

We’re also proceeding with an onshore block offer. Since 2005, the commercial discoveries have all been onshore.

We’ve also made the offer to existing operators to discuss an extension to their drill or drop commitments – we’ve already had 12 operators respond so that’s an option around flexibility that people see as useful. The Government is also continuing work on a discussion document for the no new mines on conservation land commitment, which will be released in the coming months.

Just Transition Work

And while we make this transition, we are actively planning for an economy that’s going to look very different in 30 year’s time.

We’ve established a unit within MBIE to work in partnership with regional economies. To do that on the ground transition planning, identify where regional economies have strength now, where there’s opportunities for the future. And we’re identifying what we need to do in terms of workforce planning.

We’re beginning in Taranaki.

This year will see a draft economic roadmap for Taranaki produced in partnership with the local leaders and community workshops. Hands on public engagement, 24 workshops with locals.

We’ll have an update on progress on this work at the National Just Transitions Summit in Taranaki in May.

EPR

Another area of interest this year is the Electricity Pricing Review.

The options paper is imminent. I know this will generate debate, really encourage you to have your say.

You’ll all have seen the first report. Two things about the panel’s work I think stand out: great engagement and real depth of data. Coming off the best evidence base we’ve had available to us.

Two key things for me: fair outcomes for consumers + future proofing the sector.

I’m on record commending Meridian for removing PPD’s which are really late payment penalties. I’m very interested in seeing other ideas on how we alleviate energy poverty.

In terms of renewables and emerging technology, I’m very keen to hear how you think we structure markets and regulations and policies to guide the next 30 years.

In terms of process, we will have an options paper shortly, then public submission, and then I expect a final report in May.

Will look to move to policy implementation in late 2019. But we’re not ruling out any more immediate changes if there’s a strong consensus and opportunity.

Gas Act Changes

Another part of that medium term picture is improvements to the Gas Act.

This comes out of real concerns we had during the gas infrastructure issues last year.

We’ve identified a need to improve communication between parties in the sector, especially in the event of unplanned outages.

One thing to address for example is the low financial penalties that can be applied to industry participants during gas critical contingency event. The current maximum fine that can be imposed is $20,000 for failing to comply with gas curtailment orders which is not in keeping with maximum penalties applicable under similar legislation. For example the equivalent under the Electricity Act 2010 is $200,000.

A discussion document is expected to be released in March 2019 to seek submissions on potential changes to the legislation. That work will also will seek stakeholder views on the suitability of the Act in regulating the use of emerging technologies and alternative fuels in New Zealand.

Process Heat

Process heat is an area where we see big opportunities in terms of GHC reductions. It accounts for 27% of all energy related emissions and 34% of our energy consumption.

This is an area where we see opportunities and a growing will from business to take action – recently I opened Fonterra’s bio boiler, and I’ve had really good discussions about electrification with major players, am sure you will see more this year.

MBIE has published its technical paper on this issue last month, and is currently accepting submissions until Friday. So if you leave your homework to the last minute, now’s your chance.

Backing Emerging Technologies

As well as the larger scale strategic work, there’s tactical interventions we can make to support emerging technologies.

The R and D tax incentive kicks off on April 1 which is just six weeks away. We had great engagement on developing phase one of the R&D tax incentive.

This year we’ll be rolling out our plans for how we treat pre-profit and loss making companies, tax exempt organisations, and option for the future of the tax loss cash out scheme.

Engagement on phase two begins in a few weeks and I really encourage you to be involved in the development this. Some of the best innovation happens in the pre-profit phase and that’s vital for our energy system.

The other way we’re backing new technologies is the renewed focus we’ve brought to Low Emissions Vehicle Contestable Fund.

We’re using it to trial new technologies as proof of concept. We’ve seen hydrogen projects at the Ports of Auckland, smart battery to home Chargers for EV’s with Vector in Auckland and EV’s for heavy transport like Fonterra’s milk truck.

All up we’ve put $17.2 million into different projects, backed by $45 million in matching funds from partners and I note that round 6 will be opening soon.

There’s also the Provincial Growth Fund investing in new energy projects including $1 million for hydrogen in the Taranaki. And alongside this, this year will see the first projects rolled out through Green Finance Limited.

Allied Work

There is allied work not in my portfolio that supports and underpins our work programme.

Zero Carbon Bill

The Zero Carbon Act will drive meaningful climate change action in New Zealand.

It sets out how we will get to zero carbon by setting legally binding long-term targets and establishing a five-year carbon budget pathway.

The Independent Climate Commission will guide the transition and the Government will be required to produce policy plans to meet carbon budgets.

We expect to introduce the legislation early this year and have it passed the House in this calendar year.

ICCC

The Interim Climate Change Committee has been considering how NZ can transition to 100 per cent renewable electricity and more broadly a low emissions energy future.

At the end of April ICCC will report back to the Government on its recommendations

Once the ICCC’s recommendations are available, the Government will map out the next steps and make announcements in due course

Conclusion:

Our work programme this year is comprehensive. It’s about setting that detailed strategic work about how we move to into an energy future that’s built on greater renewables while ensuring affordability and security.

Our plan is all about moving us towards that affordable, renewable future.

• Getting the high level settings of policy and regulation right to move us in that direction.
• Making sure consumers get a fair deal and the electricity market is structured right for that future.
• Looking for opportunities to reduce emissions in the wider energy space.
• Backing the new technologies to help us get there.
• Planning to support our workers and communities through this change with proactive regional development.

So I hope this gives you a sense of the year ahead, where we are focussing, and the type of future for our energy system we are working to build.

I look forward to working with all of you to make it happen.

Thank you.