New Zealand Engineering 1999 June

Energy

Uncertain Outlook for Both Renewable Energy and Energy Efficiency in New Zealand

Attitude
Investment climate

In February this year the Canterbury Regional Council brought Dr Anita Fenichel, an independent energy consultant from the USA, to New Zealand to help formulate an energy strategy for the region. Included in her visit was a public seminar on "Energy Efficiency and Renewable Energy in the New Market Environment - Some US Experiences".

The Council said in introducing the speaker that it sees energy as one of its twelve core activities. It is somewhat disturbed at what is happening in the energy scene nationally and believes that it has a regional responsibility to encourage new energy efficiency measures and the use of renewable energy technologies locally in the Canterbury Region.

In discussion following Dr Fenichel’s presentation it was noted that our national goal should be to transform the energy market in favour of producing more of our energy from renewable sources and encouraging the much greater uptake of energy efficiency measures. This would be in accordance with New Zealand’s commitment made at the December 1997 meeting in Kyoto, Japan, where representatives from 160 nations negotiated to limit greenhouse gas emissions, followed by further negotiations a year later in Buenos Aires.

New Zealand has become committed to stabilising our greenhouse gas emissions at their 1990 levels on average over the five-year period from 2008 to 2012. We are most unusual internationally in that methane produced by ruminant animals is our main greenhouse gas emission, but carbon dioxide emissions from man-made sources are fast catching up. Methane emissions have been gradually falling since 1990 whereas carbon dioxide emissions have been rising quite rapidly. Ministry of Commerce figures show that for the first four years in the period since 1990, gross carbon dioxide emissions increased from 25.5 million tonnes to 27.4 million tonnes, an increase of seven percent, and there is as yet no evidence of the rate of increase slowing down since then. By the year 2000 it is now estimated that our carbon dioxide emissions may have increased by almost 30 percent since 1990.

Hence it is obviously in our national interest to more actively encourage both renewable energy projects and energy efficiency measures to help counter this increase in carbon dioxide emissions, but there is as yet very little evidence that this is happening.

Dr Fenichel said that in contrast to the New Zealand situation, in the USA the "home of free markets", there is both Federal and State intervention in energy markets which has been remarkably effective in encouraging both renewable energy and energy efficiency. The conclusion is that New Zealand is still in a state of Reaganomics as far as "level playing fields" in the energy market are concerned, whereas, under President Clinton the USA has moved towards more active intervention in the market place, especially environmentally.

Attitude
Also, there appears to be a difference in attitudes between people in the USA (especially in California) and people in New Zealand. At the Solar ’98 Conference held in Christchurch last November, a speaker from California spoke of the significant progress being made and incentives provided in that State for the installation of photovoltaic panels on houses and other buildings to generate electricity. Yet in New Zealand to date there are very few such examples apart from one recently installed as a demonstration project at Rangiora High School, funded by Mainpower. In opening the same conference, the Minister of Energy, Max Bradford, noted that the electricity market is tough for non-traditional renewable energy in New Zealand because of competition driving electricity prices down and also some excess of supply.

Studies in the USA have suggested that many electricity consumers are now prepared to pay a premium of up to 10 per cent for so-called "green energy" from renewable sources but some preliminary studies have suggested that this is not yet the case in New Zealand. (For the purpose of these studies large hydro stations as a "traditional source" are not regarded as a renewable energy source).

Also while many householders in the USA are now prepared to actively invest in energy efficiency measures in their homes, this is much less evident as yet in New Zealand, where people are generally not interested in incurring costs in either new or existing homes for energy efficiency measures unless they can recover costs in about one year.

Hence further education of the public about the benefits of energy efficiency is still very important in New Zealand and our price of electricity is still relatively low compared with that in the USA. Although many New Zealanders wouldn’t mind a 20 percent saving on their electricity bill, the cost of achieving this is very important to their decision making.

In response to a question as to whether the climate change argument might persuade people to invest in energy efficiency measures in their homes, Dr Fenichel responded that this is not done much in the USA and promoters of energy efficiency measures concentrate on the economic arguments. Dr Fenichel also noted that house insulation requirements are now becoming more stringent in the USA. There are Federal standards for insulation but States can make their own changes in these standards - either compulsorily or voluntarily - as far as home owners are concerned. By contrast, there has been no move to tighten up house insulation standards in New Zealand in recent years.

Also in the USA, Dr Fenichel noted that in contrast to New Zealand, a large proportion of the people use gas to heat their homes which is cheaper for them and a much more efficient use of gas than burning it to generate electricity.

What of the future? It seems to me that there is unlikely to be a significant shift towards the greater uptake of new renewable energy projects and energy efficiency measures in New Zealand without a change in present government policies on energy.

In opening the Solar ’98 Conference Mr Bradford said that the Tararua and Wairarapa wind farms prove that with innovative marketing, renewable energy sources can compete on a level playing field for electricity generation.

Investment climate
Yet in an article on the Tararua wind farm published in the May 1999 issue of New Zealand Engineering, the authors note that the recent electricity reforms together with surplus capacity have dramatically changed the investment climate for power projects, and it is now expected that further development of wind energy is some way off. Also, the recent division of the lines and retail functions inhibits many of the players who previously invested in small generation projects.

In another move, the Government has recently (April 1999) signalled its intention to end the Energy Saver Fund, despite studies having shown that it is a very cost effective intervention in the marketplace that saves money, reduces carbon dioxide emissions, and increases household comfort levels.

Since it was introduced a few years ago, the Energy Saver Fund has so far saved nearly $30 million in energy for a $5 million government investment. Over 140,000 tonnes of carbon dioxide will not now be released into the atmosphere as a result of the Fund’s activities. The Fund has been used, usually in partnership with local government funding, to improve the energy efficiency of 28,400 New Zealand households. It pays for hot water pipe insulation, hot water cylinder wraps, compact fluorescent light bulbs, and other energy saving devices.

But it is intervention in the free market and as such the government has apparently now decided that this Fund must be terminated. We will therefore need a significant shift in Government thinking to be more like that in the USA before both renewable energy projects and energy efficiency measures will achieve their rightful "place in the sun" in the nation’s overall future energy strategy.

John Blakeley, is executive director of the Centre for Advanced Engineering at the University of Canterbury.