4. Electricity Efficiency
33. Maximising the contribution of cost-effective energy efficiency, conservation and renewable energy resources is a key means to achieving the vision set out in the NZES for a reliable, resilient system delivering New Zealand sustainable, low emissions energy services. A principle of the NZES is that investment in energy efficiency measures should occur where this is cheaper than the long-term costs of building extra generation and network capacity, including environmental costs. Energy efficiency measures are described in more detail in the NZEECS which identifies the main measures, policy instruments and responsibility for implementation.
34. Electricity efficiency and demand side management help reduce demand for electricity, thereby reducing pressure on prices, scarce resources and the environment. The Commission should ensure that it gives full consideration to the contribution of the demand side as well as the supply side in meeting the Government's electricity objectives.
35. A number of Government agencies have responsibilities that support improved energy efficiency in the stationary energy demand sector. These include EECA, the Commission, MED, MfE, DBH and Housing New Zealand Corporation.
36. EECA and the Commission have a common objective: to promote the use of electricity in an efficient and environmentally sustainable manner. In undertaking its electricity efficiency activities, the Commission should work closely with EECA. It is important that the Commission's activities complement the work of EECA and that duplication of effort is avoided. Through its membership of the Senior Energy Officials Group, the Commission will work with the group to develop priority energy efficiency programmes and will reflect this in its work programme to promote the efficient use of electricity.
37. EECA has expertise in the management of energy efficiency programmes and the Government expects the Commission to draw on this expertise in designing, administering and delivering its programmes.
38. The Government expects the Commission to use EECA to help deliver its electricity efficiency work programme unless there is good reason to contract another party - for example, if the relevant expertise is held elsewhere. The Government considers that this will promote concentration of expertise and coordination of effort. As EECA builds its capability in a wider range of areas, EECA will work as the delivery agent for more actions developed and funded by the Commission.
39. The Government notes that the two agencies have developed a Memorandum of Understanding outlining how they will work together. The Government requests that this memorandum be reviewed to clarify the respective roles of each agency and to reflect the arrangements above.
40. All purchases by the Commission of services from EECA should be formalised in contracts which should be made available on the Commission's website.
41. As part of its research and information activities, the Commission, in conjunction with EECA, has undertaken a comprehensive review of the potential of electricity efficiency to contribute cost-effectively to achievement of the Government's electricity objectives, including estimating the level of investment required to realise this potential. This report should continue to underpin development of proposed electricity efficiency activities.
Discount Rate
42. The Government has adopted a discount rate of 5 percent real per annum for cost-benefit analyses of energy efficiency and other measures under the NZES and NZEECS. This lower discount rate reflects the long-term nature of benefits, including those designed to address climate change and other environmental externalities.
43. The Government expects the Commission to include an assessment using a 5 percent real per annum discount rate, and to advise how this has been taken into account, when assessing the cost-effectiveness of electricity efficiency programmes or arrangements.
Other Arrangements and Programmes
44. The Government expects the Commission to participate in the delivery of the EnergyWise Homes package which is a suite of household energy efficiency initiatives set out in the NZEECS.
45. The Commission should also put in place arrangements and programmes to promote efficiency in the following components of the electricity sector:
Generation
46. Hydro, thermal and other fuels resources should be used efficiently in the generation of electricity. Disclosure of information, such as the amount of and reason for hydro spill, is expected to help avoid unnecessary waste of resources.
Wholesale Market
47. The Commission should facilitate and promote stronger demand-side participation in the wholesale market in support of the Government's overall objectives.
Conveyance
48. Electricity should be conveyed efficiently on the national grid and distribution lines. Transmission and distribution companies should have better incentives to manage transmission and distribution losses and constraints. The Commission should promote pricing structures that provide appropriate signals to manage those losses and constraints.
End-use
49. The Commission should promote and facilitate the efficient use of electricity by end users. It should pursue this objective in multiple and mutually-reinforcing ways, including:
- by providing financial incentives for investment in electricity efficiency where it is cost-effective to do so and in response to market failures and barriers
- by promoting cost-reflective pricing
- by seeking innovative ways to enable residential and other consumers to respond to pricing incentives to use electricity more efficiently
- by making recommendations to the Government as appropriate on the development of guidelines and/or potential rule changes to facilitate the progressive introduction of advanced/smarter meters for consumers
- by encouraging and facilitating demand-side participation in the wholesale, distribution and retail markets
- by promoting the efficient use of load management.
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