We’re Not Leaving Our Energy Future to Chance – But In Which Direction Will We Paddle?

Date Added: 23 Apr 2015 from BusinessNZ

By John Carnegie and Dr Rob Whitney

Energy is vital to our prosperity as a society, and our energy needs are changing, and rapidly. This is presenting us with a challenge as we try to plan and prepare New Zealand's energy supply for the future.

It's unclear what our energy mix will look like in the future. Globally, consumers and businesses are quickly adapting to new technologies which are having a big impact on supply and demand. With the introduction of technologies such as smart grids and LED light bulbs, consumers and businesses are quickly changing their consumption behaviours. Electric vehicles and biofuels also have the potential to power our transport fleet in alternative ways.

Over the coming years, climate change is also likely to have a major impact on how we use energy. Economies around the world are debating how to provide secure, affordable and sustainable energy services and lessen their dependence on fossil fuels. Increasingly, this will mean a transition to cleaner energy alternatives.

We're already undergoing a shift in the way we generate electricity in New Zealand. Recently the Ministry of Business, Innovation and Employment released figures showing that renewable generation has grown to 80 per cent of our total electricity consumption. Geothermal electricity generation in New Zealand has overtaken gas for the first time.

But despite having a strong track record in environmental policy and low-carbon electricity generation, New Zealand is still facing a range of challenges. The pace of change is making it increasingly difficult for energy leaders and policymakers to look ahead and predict what is going to influence our energy mix, and therefore where to focus investment.

And the answers are anything but simple. The BusinessNZ Energy Council is spearheading a project called BEC2050 that will build two scenarios modelling New Zealand's energy future to 2050. The process now underway brings together the best minds across a range of sectors, thirty-seven leading - energy sector companies, universities, government agencies and NGOs - to help develop a set of critical uncertainties that could significantly alter New Zealand's future energy mix.

Predictions are extraordinarily difficult to make over these long time frames. Using scenarios means we can evaluate a range of future situations. Well thought-out scenarios help decision makers plan wisely by allowing them to test different policies or investments against multiple futures, instead of making a single prediction which is subject to bias.

Scenario outcomes are based on things that we can measure, like the cost of building energy infrastructure, new transport modes or carbon emissions, and others that are more difficult to define, such as the public's attitude toward different technologies. It is also extraordinarily difficult to predict what will be the next winning technology or the extent it will impact upon the way we live and do business in New Zealand.

The BEC2050 scenarios are based on the 'Jazz' and 'Symphony' scenarios published in 2013 by the World Energy Council, of which the BusinessNZ Energy Council is the New Zealand Member Committee. New Zealand's scenarios - 'Kayak' and 'Waka' - will broadly follow the market-driven versus government co-ordinated framing of the two WEC scenarios.

Kayak and Waka will be the first country-specific scenarios to be produced under the internationally respected WEC framework, and considers supply and demand across the entire energy space: transport, liquid fuels, coal and electricity. The BEC2050 report will use a sophisticated energy model first roduced by the International Energy Agency.The BEC2050 modelling will be carried out in partnership with the Paul Scherrer Institute, the largest federal research centre in Switzerland.

Some of the uncertainties modelled are largely out of our hands, such as whether a global agreement on climate change is signed or not. The terms of an agreement like this could force businesses and government around the world to change course dramatically.

Other uncertainties are more specific to New Zealand, such as the role of the agricultural sector, or whether we will continue to rely on a broad base of renewable energy sources. But our distinctive geographic and economic situation means we might experience very different results from the rest of the world and early results are bearing this out.

Initial modelling results suggest we will increase our penetration of renewables to 90% and beyond in both scenarios.In our high carbon price Waka scenario, modelling suggests 97% can be reached by 2050; this begs the question of whether this is feasible from a technical or operating perspective, given our reliance on hydro. Again in the Waka scenario, there are a range of alternative transport fuels (electricity, hydrogen and natural gas) all present in the light fleet in 2050. The level and make-up of our energy sector emissions also vary between Kayak and Waka with emissions inWaka falling below 1990 levels by 2050. Emissions in the market-driven Kayak scenario continue to hover around existing levels.

Despite increases in population (31% and 22% in Kayak and Waka respectively) and real GDP (85% and 73%), initial results also suggest that demand for thermal energy (effectively space and water heating) in the residential and commercial sectors will not grow greatly, reflecting the efficiency uplift provided by technologies such as heat pumps. However, the results suggest that demand from other appliances, electronics and lighting will grow significantly, overtaking thermal demand by 2040. At first glance, this appears plausible, but we are reviewing in detail the role that technologies such as LED light bulbs will have.
However, there is no single measure of success in the energy challenges we face today, and often we face trade-offs between energy equity (access and affordability), energy security, and environmental sustainability.

New Zealand is considered a global leader in energy performance across these three measures, with well-balanced performance in all three areas and currently ranked 10th out of 129 countries. However, our ranking, relative to other leading nations, has slipped and could fall further without addressing some of the underlying drivers.

Developing New Zealand's Kayak and Waka scenarios will allow us to look into the future. By looking at the alternative scenarios, we will be able to more clearly see the trade-offs and the direction and manner in which New Zealand might choose to paddle.

New Zealanders need assurances that business leaders, politicians and policy makers are well-informed. This BEC2050 scenarios work will help them make the best possible decisions about the future of our energy use and that we are navigating our turbulent energy waters in the best possible way. Final results will be published later this year.

The BusinessNZ Energy Council's John Carnegie and Dr Rob Whitney are leading a project developing a set of future energy scenarios for New Zealand.

Email: