Present Approach to Sustainable Energy
14. The government is addressing sustainable energy through a wide range of policies, programmes and institutional arrangements that impact on energy use, for example regulatory arrangements for electricity and gas, incentives for oil and gas exploration, transport and climate change policies, measures to promote the uptake of renewables and energy efficiency and underlying issues such as the effect of the RMA on infrastructure development.
15. The sustainable energy programme, launched under the sustainable development programme of action in January 2003 and given impetus in October 2004 with the release of Sustainable Energy, is not intended to replace ongoing work programmes in individual energy policy areas. Significant improvements have been, and are continuing to be, made in key areas, e.g. the formation of the Electricity Commission, aspects of climate change policy, the operation of the RMA etc. The effects of some of the changes will take time to bed in, e.g. rule-making by the Electricity Commission.
16. Instead, the programme aims to raise awareness about upcoming challenges in energy, provide a coherent picture of actions the government is taking to meet those challenges, and to provide an assessment of where current government actions are sufficient and where more might need to be done.
Objectives
17. Sustainable energy is about placing New Zealand's energy system on a more sustainable basis over time, i.e. a system that is reliable and resilient, environmentally responsible, and in which prices are fair and efficient. These objectives do not exist in isolation but in relation to the government's overall goals such as a growing and inclusive economy and more specific objectives such as those for climate change and transport.
18. Energy security is something that New Zealand wants to ensure all of the time. We want a high level of assurance that supply will be maintained. A standard has been set for electricity supply in dry years and a minimum level of oil stocks have to be held to comply with International Energy Agency requirements.
19. An energy system that is more environmentally responsible in terms of emissions and local effects is something that can only be achieved over time. Making significant energy emissions reductions and energy efficiency gains are very much dependent on such factors as the pace of technological developments, the nature of international commitments, and how consumer preferences will evolve. A similar level of uncertainty exists with respect to decisions under the RMA. The RMA requires decisions on proposals to be considered using principles of "sustainable management" which can lead to debates about balancing social, economic and environmental objectives.
20. The government wants to keep energy prices as low as possible consistent with meeting the objectives above. It is also important to manage effectively the effects of price changes on particular groups in society.
21. Stakeholders expressed a range of views on the meaning of a "sustainable" energy system. To some, this meant only environmental sustainability. They tended to favour the elimination of non-renewable, greenhouse gas-emitting fuels such as coal. This point is further addressed below.
Setting Direction While Maintaining Flexibility
22. There is no single path to sustainability: there are too many uncertainties to make this possible. For example, the government cannot say precisely what climate change obligations the country will have to face over the next 10-30 years. But short of a radical reversal of the science or a step change in technology, it could reasonably expect that such obligations will become progressively more onerous. The sooner the economy is prepared for a future in which greenhouse gas emissions become progressively more costly, therefore, the better.
23. Similarly, the government cannot say precisely when the supply of oil and gas will become constrained to the point where price rises make existing uses uneconomic. But it could reasonably expect alternative technologies such as bio-fuels and hydrogen to move slowly closer to commercialisation. If a hydrogen economy eventuates, it can be expected that while much of the technology for storage and utilisation will be imported, technology for production will have to be developed or adapted in New Zealand to meet local circumstances.
24. In the face of such uncertainties, the government's general approach to sustainable energy has to be pitched at a level that balances the need for direction with the need for flexibility.
25. Direction involves setting and articulating clear objectives, establishing "anchor points" to help ground policies and programmes and provide a basis on which progress can be measured, and introducing measures that encourage investors, producers, transporters, and suppliers of energy services to make decisions that support these objectives. It requires the government to act consistently and provide as much certainty about policy settings as possible. As the United Kingdom white paper on energy puts it: "It is the government's responsibility to set the overall goals for…energy policy and to ensure that…energy markets and other policies deliver those goals."
The white paper goes on to note the importance of "a clear, settled, long-term framework within which [energy producers, investors, business and consumers] can plan and make decisions with confidence."
26. Flexibility involves keeping as many options open as practicable given the direction set and maintaining a diverse portfolio of policy responses to challenges. It also requires the government to prepare for possible long-term changes to the extent this is sensible based on the information available, taking into account the relative costs of moving sooner rather than later.
27. For example, flexibility would caution against the government setting out a plan for how specific fuels such as coal should feature in New Zealand's energy future. The government's approach would be to set a general direction for the control of emissions (through a carbon tax and possibly such things as support for technology collaboration on carbon capture and storage) and to manage local environmental effects (through the RMA) rather than to try to control or influence the use of the fuels directly.
28. In particular circumstances, the government may decide to give more weight to one particular aspect of sustainability than another. While individual decisions are obviously important, it is the balance of decisions over time that counts, i.e. whether the country is moving progressively in the direction of sustainable energy. High quality information is needed to help gauge whether New Zealand is moving in the desired direction and to assess the performance of particular policies and programmes.
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