3. The MED Submission
3.1 The Ministry of Economic Development Seeks:
- greater certainty around the contribution that geothermal energy will make to achieving a sustainable energy future for New Zealand and national energy security;
- that systems classified for development fully contribute to achieving the government's energy policies and objectives; and
- clarity for both existing and potential organisations undertaking development in geothermal systems.
3.2 Overview: Government Energy Policies and Objectives
The following overview provides some background for MED's position and context relating to national energy policy.
The government's objectives for the energy sector emphasise energy efficiency and security of supply with an increasing focus on renewables.1 These objectives sit alongside the government's principles for sustainable development.
The government's policies and objectives seek to create certainty and security around New Zealand's energy future for both consumers and industry.
3.2.1 Sustainable Development Programme of Action for Energy
The Sustainable Development Programme of Action is one of the government's major over arching documents designed to guide and underpin policy development. Energy has been identified as one of the target areas for sustainable development because of its correlation to economic growth, potential environmental impact, and because both consumers and industry are heavily reliant on its supply.
The major objective of the programme of action for energy is to ensure continued delivery of energy services to New Zealanders. It acknowledges that renewable energy sources, such as geothermal, will become increasingly important in providing security of supply. Three desired outcomes are identified:
- energy use in New Zealand becomes progressively more efficient and less wasteful;
- renewable sources of energy are developed and maximised; and
- New Zealand consumers have a secure energy supply.
3.2.2 Security of Supply
Ensuring security of electricity supply is a critical issue for all New Zealanders and for the government. It is imperative to minimise the risk associated with dry years and to ensure that New Zealand has the generation capacity over the long term to meet the projected growth in energy demand.
- Dry Year Risk
- Heavy reliance on hydro-generated electricity leaves New Zealand vulnerable to the effects of dry years. Dry years indicate the dependence of both consumers and industry on energy as a key element of infrastructure and, consequently, how essential security of supply is.
- Ongoing development and utilisation of geothermal resources will help ensure continued electricity supply for both New Zealand consumers and industry during dry periods, and at other times, to reduce the likelihood of future energy crises.
- Growth in Energy Demand
- The most recent Energy Outlook provided by MED predicts that the composition of energy demand will change as the demand for energy increases, the Maui gas field declines and new technologies for the production, delivery and use of energy become more economically viable.2
- It is important that, as the means become available, New Zealand undertakes the transition to renewable energy sources to ensure that we have the capacity to accommodate the growth in demand and to compensate for the inevitable decline in non-renewable sources, such as the Maui gas field. Ensuring ongoing development and utilisation of geothermal systems for electricity generation would contribute to the increased generation capacity required to satisfy demand, while at the same time reducing New Zealand's dependence on non-renewable energy sources.
- The geothermal resource is of great importance for New Zealand's energy supply. Geothermal energy makes the second largest contribution of renewable sources to national energy supply, contributing approximately 7% of total electricity generation and 38% of primary renewable energy supply.3 The Waikato region is particularly important, as the majority of high temperature fields, with the greatest energy potential, are located in this area.
3.2.3 Government Policy Statement: The Electricity Industry
- The Government's overall objective for the electricity industry is to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all classes of consumer.
- The government has identified a number of desired outcomes consistent with the above objective. Continued development of geothermal resources would particularly help ensure the following outcomes:
- the use of new electricity technologies, renewables and distributed generation is facilitated and generators using these approaches do not face barriers;
- generation is consistent with government policies on climate change and energy efficiency; and
- risks relating to security of supply are properly managed.
Further discussion of national energy policies, in particular the National Energy Efficiency and Conservation Strategy and the Resource Management (Energy and Climate Change) Amendment Bill, is included under Section 3.3. RPS: Section 3.7.1 - Summary of Significant Resource Management Issues
3.3 Submissions on Particular Aspects of the RPS and Proposed WRP
3.3.1 RPS: Section 3.7.2 Policy 1 and Policy 2 and Section 3.7.3 Policy 4
The proposed RPS appears to represent a departure from the established approach to managing the geothermal resource. In particular, section 3.7.2 policy 1 and 2 appear to apply the sustainable management test to each system individually, including to the energy-producing aspects of Development systems, rather than adopting an overall-judgement approach to the regional resource.4
If it is intended that "cross-system" mitigation options are still to be available, where possible, then this should be made more explicit in section 3.7.2 policy 2 of the RPS in order to provide greater certainty for developers. The proposed policy in the RPS (3.7.2 policy 2) is not sufficiently clear on this matter.
Given the likelihood of natural change to fields and that a development system generally lacks significant or valuable surface features, or that these features have already been affected by development, the Ministry submits that Environment Waikato continues to allow developers to mitigate any adverse effects on Development systems, caused by use or development of that system, by enhancing or maintaining aspects of Protected or Other systems, where possible. The existing approach, which promotes sustainable management of the geothermal resource as a whole, better accommodates competing conservation and development uses.
In addition, the section 3.7.3 policy 4 requirements to preserve, as far as practical, virtually all geothermal features, including those in Development systems, represents a practical impediment to energy development.
3.3.2 RPS: Section 3.7.1 and 3.7.2
The Ministry considers that there is insufficient clarity around the 100-year sustainability criterion. In particular, this lack of clarity is likely to provide significant uncertainty for industry and potential developers and may deter long-term investment in the geothermal resource.
Particularly important are the implications of the criterion for new developments and the potential effects it could have on investment in fields and their economic viability.5 It is likely that all new developments of geothermal systems will be staged. In other words, any initial take or use of fluid or energy contained within a system will be a fraction of the capacity of that system and highly likely to be sustainable over a 100 year period. Is this sufficient to meet the 100-year criterion or would higher subsequent takes also be required to be proven sustainable for 100 years? Alternatively, would higher subsequent takes only be required to be proven sustainable over the remainder of the 100-year period? The policy appears to invite multiple interpretations and, therefore, creates uncertainty about the availability of the geothermal resource for industry and for the government.
The Ministry also has the following concerns about the choice of 100 years as the required sustainability period:
- 100 years is considerably longer than the period identified in the section 32 report in which alternative technologies are expected to become widely available and cost effective. The report does not provide sufficient evidence to assume that such technologies will not develop as expected;
- it is inconsistent with both the maximum duration of a resource consent and typical long-term planning horizons for resource use;
- 100 years is beyond the physical life, normally expected, of a mechanical and electrical plant to be installed; and
- proving this level of sustainability may be difficult especially prior to any development.
3.3.3 RPS: Section 3.7.1 - Summary of Significant Resource Management Issues
3.3.3.1 Renewable Energy, Sustainability and Efficiency
The proposed RPS and WRP both proceed on the premise that geothermal resources are not renewable but can be used sustainably over a given period if extraction is suitably limited (refer RPS 3.7.1 Overview - Summary of Significant Resource Management Issues)
To clarify, it is government policy that geothermal resources are a renewable source of energy. This is reflected in the following key government initiatives:
The NEECS is the government's primary means to achieve outcomes sought in the sustainable development programme of action. It stated purpose is to facilitate the move towards a sustainable energy future for New Zealand by promoting energy efficiency, conservation, and a transition to the use of renewable energy sources. Geothermal (with certain conditions) is included in the NEECS as renewable source of energy.
The NEECS contains two key targets - an energy efficiency target and a renewable energy target. The renewable energy target requires that, by 2012, renewable energy sources will generate an additional 30PJ of energy above 2000 levels. The target was set to be ambitious but achievable. Notwithstanding this, the government anticipated, when setting the target, that energy from geothermal sources would play a valuable part in its successful achievement.
In particular, when developing the target and the likely contribution of geothermal energy, the medium confidence level estimates in the table in Appendix One to this submission was used. For geothermal resources in the Waikato region, this meant that expanded use of existing developed fields was assumed, plus an additional 9MWe from Horohoro and 70MWe from Tauhara coming on-stream.
Resource Management (Energy and Climate Change) Amendment Bill.
The Resource Management (Energy and Climate Change) Amendment Bill [link to MFE website] has recently been introduced into Parliament. The Bill seeks greater alignment between local government plans and national energy objectives and aims to ensure that councils consider the contribution their regions can make to meeting New Zealand's commitments under the Kyoto Protocol.
Of particular relevance are the proposed amendments to section 7 of the RMA to require decision-makers to have particular regard to the efficient use of energy, the effects of climate change, and the benefits of renewable energy.
The definition of renewable energy in the Bill is "energy from a source that occurs naturally and the use of which will not permanently deplete New Zealand's energy sources of that kind, because the source is generally expected to be replenished by natural processes". The definition then goes on to specifically include geothermal in a list of renewable sources of energy.
Proceeding on this basis that geothermal energy is renewable, the government expects that this energy source will contribute to achieving its objective of ensuring a sustainable energy future for New Zealand.6
3.3.3.2 WRP: Section 7.2.2 Policy 1
The Ministry supports the reclassification of the Atiamuri, Mangakino and Ngatamariki systems into the development category. Ngatamariki in particular is a field with high temperatures, a good prospect for electricity generation (140-240 MW potential), and likely to make a positive contribution to the government's renewable energy target.7
The Ministry considers that those fields classified as Other systems (Reporoa, Tokaanu/Waihi) should be re-classified as either Development or Protected. While they remain in their current classification, any potentially significant energy development is prohibited, and, therefore, Other fields, from a practical perspective acquire an "effective" Protected classification. We note that simply acquiring a Development classification does not necessarily presume that the system will be developed. A potential developer must first prove the economic or commercial viability of any development and fulfil resource consent requirements. However, re-classifying Other systems (either as Protected or Development) will provide a measure of certainty for industry and allow for initial investigation into the viability and sustainability of those reassigned for development.
The Ministry proposes that the Reporoa and Tokaanu/Waihi systems be included in the Waikato Regional Plan as Development systems.8
Reporoa
The Reporoa system has development potential particularly for direct heat supply to the adjacent Reporoa dairy factory. During the 1990s work was undertaken with the dairy company investigating the possibility of utilising the system to provide geothermal steam for processing. The system proved economically viable but was not pursued due to uncertainties around the future of the dairy factory.
Bloomer and Maxwell [2003] believe that a suitable monitoring programme can be developed in order to investigate the system while at the same time monitoring any potential affects on the Waiotapu-Waikite-Waimangu system. They consider it unlikely that an effective link exists between Reporoa and Waiotapu-Waikite-Waimangu.9
Tokaanu/Waihi
A number of factors mean that Tokaanu represents a good development prospect both for power development and direct heat supply.10 Its estimated potential is between 150 - 310 MW.11 In particular, the system is already utilised for domestic purposes and the Ministry understands that there is interest in its further development by Ngati Tuwharetoa and others.
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