Executive Summary
In December 2006, the Government released a draft New Zealand Energy Strategy (NZES) to 2050 for consultation with the public. The Ministry of Economic Development received 331 submissions on the NZES from the energy industry, major energy users, other commercial interests, community organisations, non-government organisations, local and central government, Maori, academia, research organisations and interested members of the public. Some of the key issues raised in submissions are summarised below.
On the vision
Many submitters sought clarity on the linkages between the NZES and other government initiatives such as the sustainable development programme of action, the Government's Growth and Innovation Framework and wider policy programme.
There was widespread support from organisations and individuals alike, for a greater focus on demand-side energy and transport management. There was a view that the NZES focused too much on efficiency at the expense of energy conservation.
Submitters pointed out that the objectives of security of supply, low cost and low emissions, rather than being complementary were in competition. There was much discussion of how these competing objectives could be balanced and traded off and mixed views on the balance and weighting that should be given to different aspects.
A cost benefit analysis was seen as an essential ingredient, missing from the NZES. It would make potential trade-offs between the objectives more explicit. Some submitters suggested co-benefits, rather then just least cost, should be taken into account in determining preferred policy choices.
There was comment about targets, or lack thereof in the NZES, from many submitters across sectors. However, there was little consensus on the nature or level of targets to use. The general view seemed to be that measurable targets are needed to drive the strategy by defining how much we want to achieve and by when and enable an assessment of the success or failure of different policy choices.
There was strong support for energy costs to include the cost of environmental externalities and general agreement that there had been a market failure to cost carbon that justified market intervention by Government
Submitters considered carbon costing initiatives should be broadly based and not focused solely on one sector.
There was concern that the critical and continuing role of oil and gas in the energy system was overlooked in the strategy. Greater clarity and acknowledgement of the ongoing role of gas in the energy mix, and its critical role in meeting long term energy needs through thermal electricity generation and direct use of gas, was sought.
Some submitters, particularly with commercial interests, have ongoing concerns about the impacts of policies on energy prices and consequently business competitiveness.
Maori organisations noted the NZES and other climate change documents failed to recognise the Treaty of Waitangi.
Submitters across the range of sectors called for policy stability and certainty relating to energy policy, possibly through cross party agreement.
The range of issues, lack of details regarding costs and benefits and the importance of the issues to the New Zealand economy prompted submitters to advocate for another round of consultation before the NZES was finalised.
Resilient low carbon transport
Submitters were critical of the limited focus of the objectives for transport. While recognising that in the short term using alternative fuels and increasing the fuel efficiency of vehicles (the main focus of the proposed actions) would help reduce greenhouse gas emissions from the sector, many submitters considered this insufficient to achieve significant emissions reductions. More focus is needed on demand management and modal shift.
Another criticism of the transport objectives was the under emphasis of the role urban land management and structural change in improving energy efficiency in the transport sector.
Views were mixed on biofuels. Those offering qualified support for biofuels had concerns about engine technology incompatibility, compatibility of biofuels with the imported vehicles, warranty implications, increased costs (and the impact on business competitiveness), delivery infrastructure concerns and the implications for small petrol distributors. Other submitters were concerned about the negative net energy equation if biofuels are generated from non-sustainable sources and rejected biofuels as an option.
The detailed actions on improving fuel efficiency (mandatory labelling, import restrictions, variable costs, sales weighted fuel standard, improving driver behaviour and commitment to fuel economy) were supported by the majority of organisations and individuals commenting as worth further consideration.
There was a high degree of support from many organisations and individuals for ongoing investment in public transport.
Many also sought more recognition and support for active transport modes such as walking and cycling, car pooling and other measures to reduce the number of vehicles on the roads.
Concern was expressed from several quarters about the NZES promoting a shift in the vehicle fleet from petrol to diesel vehicles to reduce CO2 emissions and the potential negative impacts on air quality.
A number of submitters noted that the strategy should include policies to limit emissions in the aviation sector.
Security of Electricity supply
There was a high degree of comfort with the role of the Electricity Commission as a market regulator and endorsement of the regulatory reviews currently underway.
Lines businesses continued to promote deregulation of their activities and support the direction of the Government's proposed changes to the Electricity Industry Reform Act 1998 (EIRA) to make it easier for lines companies to invest in generation in network areas outside their own. Major electricity generators had mixed views on liberalisation. The main concern was the potential for anti-competitive behaviour.
A recurring theme was that the NZES should focus on and recognise the range of and diversity of all New Zealand's indigenous energy sources – renewable and fossil fuel alike – and their ongoing importance in meeting the strategy's objectives. The critical role of thermal generation in providing security of supply should be recognised and the role of gas clarified. As it stands in the strategy has the potential to disincentivise exploration for both oil and gas and investment in infrastructure.
Submitters endorsed the work to be undertaken by the Electricity Commission on the impact of wind generation development and the impacts of this on the wider power system.
There was widespread recognition that a strong and robust transmissions grid was fundamental to implementation of the strategy. Four themes recurred:
- major investment in the transmission grid is required to enable the NZES vision, with its emphasis on an 100% renewables future, to eventuate
- investment in the transmission grid should precede development of renewable generation as the lead in times for transmission development are likely to exceed those for generation
- a high renewables mix requires a particular transmission grid formation given intermittency – planning needs to commence at an early stage
- investment in transmission infrastructure remains urgent and must be progressed.
Transpower provided a detailed submission on transmission issues. They considered the NZES should acknowledge the pivotal role that transmission will play in meeting the objectives and recommend a technical work stream be established to resolve complex and critical transmission issues.
Demand side management was supported by submitters from a wide range of sectors including local government, academia, environmental NGOs, interest groups, electricity and lines companies. Demand management was seen as a key to reducing emissions and pressure on supply networks.
Low emissions power and heat
There was support from all sectors and from individuals that energy suppliers and other emitters should increasingly face the costs of the greenhouse gas emissions they produce.
There was a clear preference for a price based measure though differences in the preferred mechanism, its characteristics, the timing of introduction and whether other complementary policy options are required to incentivise renewable development. Commonalities were that any price based mechanism should be broad-based, there should be strong links with international markets, and the competitiveness of New Zealand industry should be protected.
A key area of divergence was around the timing of introduction of measures. Some stakeholders, particularly with environmental interests, considered measures should be introduced without delay (and often promoted a carbon tax), others especially with concerns about competitiveness at risk continue to stress the importance of not moving ahead of our major trading partners.
There is support for the contribution distributed generation (DG) can make to security of supply. Cost of plant and equipment, was seen as a barrier to distributed generation along with, contractual and pricing arrangements for transmission and distribution, the price received for generated electricity and the regulatory environment.
Some suggested that if Government wants to promote DG then some form of intervention, such as feed-in tariffs, will be required to support a viable industry.
Fossil and electricity sector submitters noted that parts of the NZES focus on gas for electricity generation rather than an energy source in its own right, not recognising the efficiency benefits of direct use. They considered NZES should endorse the direct use of gas.
There were mixed views around carbon capture and storage, some saw it as a way to continue to use fossil fuels in the future and exploit New Zealand's indigenous resources (gas, oil, coal, hydrates, coal bed methane etc.) and reduce emissions, while others felt that the technology was still some way off and will remain uneconomic.
There were divergent views on the operation of the Resource Management Act in relation to renewable generation. Stakeholders who are applicants to the RMA (large and small renewable energy and fossil fuel generators, Transpower, and a few major users) continue to perceive the RMA as a barrier, despite recent reforms. These stakeholders tend to welcome initiatives to streamline and speed up the consenting process. Local Government considered the draft NZES should focus on improving the use and understanding of the mechanisms already in place through national guidance under the RMA for renewable generation and improvements to regional planning processes.
Using energy more efficiently
Submitters recognised the importance of energy efficiency measures in reducing energy costs, reducing emissions and improving security of supply. There was, however, divergence in opinion on whether Government leadership should be in the form of awareness-raising and provision of information, regulation or a combination of both.
There were divided views on the proposals to adopt a lower discount rate for cost benefit analysis of energy efficiency and other activities proposed in the strategy. Those supporting a lower rate viewed it as in accordance with social cost benefit analysis. Others suggested specialist advice on the correct rate should be sought and the outcome of the Treasury review of discount rates awaited. Justification for the rate chosen should be included in the strategy.
Major energy users, while generally supportive of energy efficiency proposals, want existing energy efficiency achievements acknowledged. Many firms are operating at word's best practise or close to it and there are strong commercial drivers for ongoing efficiency improvements.
Sustainable technologies and innovation
Two themes emerged in submissions on the preferred approach for Government support for research and development. A number of research organisations, business groups and local government favoured a broad approach to developing low emissions, energy efficient affordable technologies that refrained from supporting some technologies over others. Others preferred direct Government support for specific technologies.
Many submitters supported increased funding for research and development on a contestable basis.
Some submitters commented that the current research funding environment leads to competition, rather than collaboration, amongst researchers. Collaboration between universities, Crown Research Institutes, industry, and other technology partnerships, were recognised as central to a successful energy R & D strategy.
Comment on the proposal to establish a new sustainable energy research centre was generally positive though there were different views on the form this should take. A new organisation could be established or an existing centre of excellence in energy research supported and expanded.
It was recommended New Zealand maintain strong international links to maximise uptake of technology and technology adaptation.
Some submitters suggested the Government needs to encourage private sector involvement in energy-related R&D and uptake of emerging environmental technologies by way of tax incentives, capital grants and subsidies.
There was support for a fund for marine development but some concern that this alternative promising technology has been singled out over others. Submitters directly involved in marine research and development were in support.
Affordability and well-being
There was recognition from consumer groups, interest groups, local government and business groups that the variable impacts of policies, and effects of any price rises, on low and fixed income groups needs to be considered and mitigated. Fuel poverty was recognised by some as a growing problem.
Local Government and other submitters reiterated the need for Government to take a more active role in development of sustainable urban form and transport infrastructure.
Reflecting this they considered that the term "mobility" should be replaced with accessibility – accessibility implies access to services and localities but does not necessarily require or imply increased travel.
Other Matters
Grey Power recommended an officially recognised and properly funded consumer advocacy organisation be established to ensure the interest of individuals, households and small business are properly considered. Maori noted their capacity for engagement was also limited and needs support.
Local Government seek greater recognition of local government's role in implementation of the NZES and are looking for tangible support from Government in regard to implementation.
Other submitters noted skill shortages and lack of expertise in the area of energy efficiency services, in constructing new technologies, in the technical and engineering skill-base, in the building, architectural and engineering trades on solar and other energy efficient devices. Work needs to commence now to develop skills where shortages exist or are likely.
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