Future Energy Directions Workshop - New Zealand's Energy Outlook to 2030: Transport and Energy

Good Afternoon.

This is a very brief introduction to the current state of NZ Transport and more particularly its Energy use. In fact I have just 8 slides today – however as a bonus we offer this sneak preview of the title page of the transport chapter of our soon to be published "hard-copy" version of Energy Outlook.

I guess depending on your city this would seem either an empty or a congested motorway scene!

A good place to start this talk is to read the introductory sentence on the title page, which says "Issues surrounding oil are at the heart of New Zealand's energy policy debate"

Slide 1: Transport Uses the Oil

A statement which is confirmed by this chart which shows that 86% of Oil is used by the Transport sector.

And as Ralph showed earlier, Oil makes up half of all energy used in New Zealand .

Slide 2: Historical New Zealand Transport Energy

This chart shows transport energy by mode – Air, Sea and Land.

Some of the notable features would seem to be

• Strong growth in land, aviation and total energy use from around 1990 – much lower growth mind you in the early 1980s (but I'm trying not to mention oil crisis, car less days and import controls ….)

For any economists in the audience I have included a GDP index on the chart so you can debate the correlation of energy use and economic growth in the coffee break!

In my final slide I will present our base case projection of the future transport demand – in the cases of aviation and sea transport we have utilised some simple time series models which give the projections you would expect – continued strong growth in aviation and continued flat demand for sea transport.

Slide 3: Modelling the On-road Energy Demand

For Energy Outlook to 2030 we have used the Vehicle Fleet Emissions Model (VFEM).

The basic concept behind the VFEM is:

Fuel use = number of vehicles x kilometres per vehicle x average fuel economy

For example, in 2005:

Car fuel use = 2.31 million cars x 13,600 km per car x 9.3 litres per 100 km
= 2.9 billion litres

I will now talk in some more detail about our projection of On-road energy demand.

This year for the first time we have utilised an existing Ministry of Transport model, the Vehicle Fleet Emissions Model, to project the expected energy consumption of the vehicle fleet.

The V.F.E.M. combines vehicle numbers, kilometres per vehicle and litres per kilometre to derive the fuel requirement.

So for cars (refer to example)

Similarly the model looks at Light Commercial Vehicles, Heavy Commercial Vehicles, Buses and Motorcycles.

Slide 4: The Vehicle Fleet

A big positive in modelling with the VFEM is that we have gained a "look beneath the bonnet" – here we show the historical vehicle numbers together with our projection.

In building this projection the model fits "logistic curves" which allow the vehicle populations to grow as a proportion of population (and GDP in the case of HCV – Heavy Commercial Vehicles). We also model the expected level of new and imported used vehicles and the scrapping rate.

We see growth for all vehicle classes including motorcycles – which in recent years have become the fastest growing class after years of decline.

The VFEM actually works at a more detailed level with the vehicles split by engine sizes, year of manufacture and country of manufacture.

Slide 5: Vehicle Kilometres Travelled (VKT)

Vehicle Kilometres Travelled are a key driver of VFEM outputs.

The base data are Ministry of Transport estimates made from traffic count surveys. Projections of the future have been made with econometric models where population, GDP per capita & fuel price were found to be important explanatory variables.

Ralph has already discussed the assumptions we have made for these variables in our base case view.

We project

• flat growth for 2006 and 2007 – firstly because of the fuel price rise and in 2007 due to the New Zealand Dollar's expected depreciation.
• Lower growth at around 1.3% per year. This is largely explained by the lower population growth rates of 0.7% expected.

Slide 6: National On-road Fuel Economy

Finally we need a view of fuel economy rates.

Vehicle economy rates are input into the model based on "expert opinion". These are input at a very detailed level by vehicle class and size and also allowing for road type and traffic levels.

This chart shows the resulting national fleet average and how it has improved over the years. The rate of improvement that could have been expected in recent years has been somewhat reduced by the increasing size of cars over the last 15 years – a trend which turned in 2005.

Slide 7: The VFEM On-road Energy Projection

Combining the last three inputs the model produces this projection of future fuel use. We see

• no growth in demand over the next two years – the effect of the fuel price rises
• flat demand for petrol ….. for ever.
• as there is a continued migration from petrol to diesel

Slide 8: Base Case: Projected Transport Energy Demand

Finally we combine our base case projections for the three transport modes modelled (note that rail is included in Land).

• Land transport demand grows at a lower rate than in recent years
• Aviation demand continues its strong growth (3 to 4 %)
• Sea remains "flat"
• Overall growth at 42% ( that's a rate of 1.4% per year)

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