Objective 4: Using energy more efficiently
The Strategy states as a principle: "investment should occur in energy efficiency measures where this is cheaper than the long-term costs of building extra generation capacity, including environmental costs".28
This principle applies more widely than simply to electricity; investment should occur in energy efficiency measures for use of all forms of energy where this is cheaper than investment in energy or the costs of new energy infrastructure.
Energy efficiency programmes have been underway for some time. The launch of the Strategy and the second-generation NZEECS gave a stronger mandate for improving energy efficiency across all sectors and a new boost to energy efficiency work programmes.
New Zealand has considerable potential to use energy more efficiently.29 The NZEECS targets actions for homes, products, industry and commercial sectors, the transport system, central and local government. Most of the benefits quantified in this section are expressed as ‘per annum' savings which will continue into the future.
This section reports on chapter 10 of the Strategy, the actions relating to energy efficiency for homes and businesses in chapters 2 and 3 of the NZEECS, and actions relating to central and local government in sections 6.2 and 6.3 of the NZEECS.
2.4.1 Target and indicator
Target: Energy is used efficiently across the New Zealand economy.
Indicators: One indicator of energy efficiency is the trend in the energy intensity of an economy,30 calculated as the ratio of total energy consumed against gross domestic product (GDP) (see Graph 5).
Since 1990, New Zealand's GDP has grown faster than the total quantity of energy consumed. By this indicator, our economy has become less energy intensive (or, it could be inferred, more energy efficient) by about 15%. However, also since 1990, total energy consumed has increased and the quantity consumed per person has increased by 10%. In 2007, 120 GJ (or the equivalent of approximately 3,400 litres of petrol) was consumed per person. Total energy consumed increased by 1% between the calendar year of 2006 and 2007.31
Graph 5: Consumer Energy Intensity32
→ Full size version of Graph 5 [11 kB JPG]
EECA estimates energy efficiency in the economy using the Divisia decomposition methodology. This analysis takes the total increase in consumed energy and separates out the influences of factors such as activity growth, structural changes (such as industries starting up or closing down), weather, and the type of energy used (fuel quality). The quantity remaining is taken to be the change in energy efficiency. This method relies on complex data from a range of sources, and the data availability and quality are variable so the results are less reliable.
In the period March 2001 to March 2006, EECA estimates energy efficiency improvements to have reduced energy demand by 42 PJ across the economy – an improvement of 1.8% per annum on average.33 (Data for the 2007 year is not yet available.) The sectoral analysis that underpins these economy wide changes is provided in the underlying report.
Graph 6 shows the estimated trends for the factors driving total energy use in New Zealand from 2001 to 2006. Over that period the economy grew substantially, requiring a gross increase in energy of 96 PJ. However, other factors reduced the demand for energy. Improvements in energy efficiency offset demand growth by 57 PJ in this period. Other effects, such as structural change, fuel switching and weather also had a small impact on energy use.
Graph 6: Factors affecting economy-wide energy use growth, March 2001 to 2006 years34
→ Full size version of Graph 6 [8 kB JPG]
2.4.2 Activity
Highlights of NZEECS actions for the year to June 2008:35
For homes:
- 11,000 homes were insulated36 through the ENERGYWISETM home grants scheme, which co-funds insulation for low-income residents in older homes. EECA funded $7.3m towards the retrofits. Every dollar granted by EECA was matched by an average of $1.90 by partner funding agencies.
- 2,962 Housing New Zealand Corporation homes were retrofitted with insulation to specified standards and another 88 received heating upgrades in the year to 30 June 2008.
- EECA launched a new offer of subsidies on interest payments or grants for homeowners to insulate and heat their homes: (the new ENERGYWISETM interest subsidies and grants scheme). This programme has had a slower start than expected, but is underway now with 15 partners marketing the subsidies to homeowners. The scheme is delivered through partner organisations who market the loans and grants directly to homeowners. Contracts with the first partners were signed in February 2008 and by 30 June 2008, 47 homes were insulated and/or had more efficient heating installed, and a further 1100 applications had been approved. This scheme provides an interest-free loan or small grant to encourage moderate-income home owners to invest in better insulation and clean heating in older homes.
- Clean heat for homes: 571 homes were retrofitted with clean heat appliances (mostly heat pumps) through grants of $0.895m, contributing to the NZEECS target of 4,000 upgrades for low income families in areas of poor air quality by 2012. (The target to 30 June 2008 was up to 800 homes funded by up to $1.1m.)
- A voluntary Home Energy Ratings Scheme was introduced. Rating schemes are recognised internationally as a way to provide homeowners with credible, comparable and objective information on the energy efficiency of their homes. The information can also assist people to improve the energy efficiency of their home.
- Higher insulation levels were required by the Building Code for houses and small buildings from 31 October 2007.
For products:
- Better consumer information: Energy Star efficiency labels were introduced on computers, imaging equipment, fridges and freezers.
- Minimum standards being developed: Minimum Energy Performance Standards (MEPS) for 13 additional product categories are under development. Once developed, these will require all products in these categories to meet minimum efficiency standards to be allowed to be sold in New Zealand.
- 3,455 old fridges were retired in a pilot programme aimed at removing inefficient appliances from operation, saving $550,000 in energy costs a year.
- Efficient lighting: During 2007/08 the Electricity Commission subsidised the sale of 2.2 million bulbs.37 Its CFL (compact fluorescent lighting) programme was incorporated into the new Efficient Lighting Strategy, broadened and renamed the efficient lighting programme. This programme is now delivering 370 GWh (1.33 PJ) of annual electricity savings (including pilots and programmes from previous years). Of the annual savings, 173 GWh stem from bulbs sold during 2007/08. The calculation is based on the savings estimated to be achieved by replacing inefficient lights.
- The Efficient Lighting Strategy, involving EECA, the Electricity Commission and the lighting industry, was launched in June 2008.38 It aims to reduce lighting energy consumption by 20 per cent by 2015. By setting minimum efficiency standards for lighting products, less efficient products such as energy-hungry incandescent light bulbs will slowly phase out from late 2009.
Energy savings of 1.8 PJ worth $71m were achieved from EECA's product efficiency programmes from July 2007 to June 2008. This is calculated from sales data of electrical products showing trends towards more energy efficient models.
For industry:
- Energy audits and improvements: EECA committed $1.2m through its Emprove programme to audit businesses that spend, in total, $175m per year on energy. EECA's client companies reported 362 GWh or 1.3 PJ in energy savings from efficiency improvements made during the 2007/08 year.
- Capital grants for efficiency technology saved an estimated 0.06 PJ annually. Cost: $1.04m across 27 projects in energy intensive businesses.
- Compressed air systems: Auditing standards and an accredited auditor scheme for compressed air systems, used in many larger industrial processes, was established and 37 larger industrial sites were audited or scheduled for audit by August 2008. The programme has delivered or committed electricity savings of 9.6 GWh p.a. (0.03 PJ).
- Electric motors: A pilot programme from April 2008 encouraged companies to replace inefficient electric motors with newer, MEPS compliant (higher efficiency) 3-phase electric motors through a bounty scheme and education. The delivered or committed electricity savings from the three-month pilot to 30 June is 1.2 GWh p.a. (0.004 PJ). The programme will be rolled out nationally in September 2008.
- The Building Code required more energy efficient lighting in commercial buildings from 31 October 2007.
- Building Energy End-use Study: A six year study was started which will identify how and where energy is used in non-residential buildings.
- A new commercial buildings programme developed by the Electricity Commission was launched in April 2008 and generated 13.6 GWh (0.05 PJ) of committed annual electricity savings by 30 June 2008. Partners were contracted to undertake efficiency projects within pre-agreed economic criteria.39
During 2007/08 the Electricity Commission invested $4.6 million in developing and implementing a range of new programmes (excluding establishment costs). These programmes are the efficient lighting, commercial buildings, compressed air and electric motors programmes. It achieved an estimated 198 GWh (0.71PJ) of annual energy savings. The new programmes are on track to achieve the NZEECS target of 3 PJ of annual energy savings by 2012.
The Electricity Commission requires its programmes to be more cost effective than the long run marginal cost of building new generation. The Commission's programme costs range from 0.7–4.7 cents per kWh, which is significantly below the long run marginal cost of new generation of 7–8 cents per kWh.
Working with business sectors to improve energy efficiency40
Through its Energy Intensive Businesses and Emprove programmes, EECA signed an agreement with Plastics New Zealand resulting in financial assistance to plastics businesses to improve their energy efficiency.
The 12 companies currently participating in the programme have, through conducting energy audits, identified average electricity savings of 13% (5,890 MWh). The companies have so far completed about 25% of their implementation programmes delivering savings of 928 MWh.
For example, through one audit a manufacturer found that compressed air represents 38% of its annual energy bill – a cost of $120,000 p.a. The company saved $40,000 of these annual costs by fixing air leaks, reducing the pressure set point, and by using electric blowers rather than compressed air in some areas.
A web-based benchmarking tool has provided an opportunity for plastics companies to monitor their energy use data over time and compare their performance against other plastic manufacturers with similar processes.
EECA developed projects with four more industry sectors in 2007/08.
For government and local government:
- Crown loans scheme – $2.0m was allocated to support four projects improving the energy efficiency of operations run by the Taupo District Council, Dunedin Hospital, Nelson City Council and Palmerston North Hospital.
- Govt3: Energy efficiency improvements delivered through the Govt3 programme will be surveyed annually. The first (baseline) report is due in March 2009. Emissions reductions achieved through the Carbon Neutral Public Service programme can be accessed online.41
- Urban design case studies: The Ministry for the Environment published nine case studies relevant to local government that promote reduction in energy consumption through the delivery of high quality urban design. Urban Design Protocol publications [link to Ministry for the Environment website].
Transport energy efficiency improvements are reported under Objective 1 and electricity system efficiency improvements are under Objective 2.
Progress on the full list of actions is in Appendix 1.
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