Future Energy Directions Workshop - New Zealand Energy Strategy

Slide 1: Developing the NZES: Scope

• Build on the Sustainable Energy Programme of Action
• Encompass core energy sectors
• Integrate with NEECS, climate change policy and New Zealand Transport Strategy
• Feed into assessment of relative R&D priorities and to evolving international relationships
• Support wider government strategies, e.g. economic transformation

Slide 2: Key Objectives / Challenges

Sustainable Energy is:

• Reliable and resilient
• Environmentally responsible
• Fairly and efficiently priced

Need to respond to:

• Climate change
• Energy security

Whilst supporting a vibrant economy and New Zealander's quality of life

Slide 3: Linkages with Climate Change and the NEECS

The NZES and NEECS are being developed concurrently:

• NZES- long-term strategic direction for the energy system to create a stronger national policy framework to respond to sustainable energy issues
• NEECS– focus on how we manage energy demand into the future, and encourage the uptake of renewables
• In effect, NEECS will be an integrated subset of the NZES

NZES and NEECS form the core of the energy sector work programme and will contribute substantially to New Zealand's overall response to climate change

Slide 4: Key Deliverables from the NZES

The NZES aims to:

• Deliver a strategic vision out to 2050 and set priorities to focus government and market actions
• Promote a favourable investment climate
• Address greenhouse gases in the energy sector and enhance the contribution of research and development
• Galvanise stakeholder cooperation for the transition to a sustainable energy future

Slide 5: Approach

• Direction and goals – medium and long term
  • Specific targets, where appropriate
• Energy scenarios
  • Explore alternative futures and their implications for policy choices
• Policy issues, options and choices
• Action plans

Slide 6: Developing the NZES: Whole of Government Work Streams

Slide 7: Stakeholder Engagement

• Phase 1: developing the strategy (to Oct)
  • NEECS comment seeking
  • Invited feedback on TOR by 4 Aug
  • Workshop on Future Energy Directions (today)
  • Informal stakeholder meetings
• Phase 2: formal consultation on draft strategy (Nov – Dec)
  • Roadshow draft NZES & NEECS
  • Sector engagements
  • Submissions close 15 Dec

Slide 8: Stakeholder Feedback on NZES Terms of Reference

• Broad agreement on high-level sustainable energy objectives
• Challenges / rationale
  • General consensus on key issues and need for proactive response to energy security, climate change, supporting economic development and environmental responsibility
  • Need information on reconciling trade-offs
  • Clear vision to provide investment signals but allow flexibility to adapt to future technological, economic and social developments e.g. renewables future versus carbon neutral
  • Strategy needs to be strongly action focused with clear accountabilities

Slide 9: Stakeholder Feedback on NZES Terms of Reference (2)

• Time horizon and role of goals / targets
• Long-term vision needs to be complemented by challenging, achievable and measurable interim milestones
• Also focus on near-term action to kick start transition
• Clear policy direction (possibly goals / targets) needed in relation to:
  • reducing emissions
  • role of carbon-intensive energy sources
  • potential for renewable energy
  • energy efficiency
  • investment
  • transport options
  • research and innovation
• Consistency of the NZES objectives with other institutional arrangements and work programmes

Slide 10: Key Messages from NEECS Comment Seeking

• Desire for certainty of future policy settings for investment
• Support for cost effective energy efficiency measures
• Support for greater use of renewable sources of energy
• Desire for insight into how tradeoffs across objectives will be made
• Security of energy supply is a concern of many
• Impact of energy efficiency and renewables promotion measures on vulnerable groups (e.g. fuel poverty and affordability issues) a concern

Slide 11: Long-Term Vision and Direction

Slide 12: Key Issues for the NZES

Some key issues identified in the terms of reference include:

• To what extent can New Zealand reduce its dependency on oil (or fossil fuels) by 2030?
• Whether non-transport energy can and should be 100% renewable or carbon neutral over the long term?
• What is the scope to reduce primary energy demand by 2030 while meeting the needs of a growing economy?
• What role should thermal generation play in the transition to more sustainable energy sources?

Slide 13: Implications from Seeking Solutions Scenarios

Transport

1. Biofuels meet up to 80% of road transport energy demand by 2030
2. Plug-in hybrids meet 60% of light vehicle kilometres traveled by 2030 (reducing energy demand by 37%)

Stationary Energy

1. 95% of electricity supplied by RE energy sources by 2030
2. 95% of electricity from low-carbon generation by 2030

Overall Emissions Reductions

1. Biofuels and RE electricity reduce emissions to 47% below the base case or 5% lower than 1990 levels by 2030
2. Plug-in hybrids and CCS similarly reduce emissions 43% below the base case or 2% higher than 1990 levels by 2030

Slide 14: Implications from Seeking Solutions Scenarios (2)

• Size of the challenge significant
• A more sustainable energy future appears broadly achievable but highly dependent on assumptions
• But there are trade-offs e.g. possible impacts on prices
• However scenarios will not articulate what propelled the change e.g.
  • the policy settings to coordinate actions across energy system
  • the drivers of technical change and uptake
  • public acceptance
  • changes in attitudes and behaviour around energy use.
• In reality a mix of all the elements from the scenarios could be considered

Slide 15: Development Framework: Long-Term Vision, Mid-Term Goals and Near-Term Targets

Slide 16: Hierarchy of Vision, Goals, Targets and Actions – An Example

Slide 17: Long-Term Vision for 2050

• An aspirational long-term policy direction out to 2050 (in a sustainable energy context) e.g.
  • 'low carbon and secure energy system to support vibrant economy and New Zealanders' way of life'

Why?

• Uncertain future but likely obligation to mitigate climate change impacts of using fossil fuels
• Climate change and international carbon pricing will impose costs on carbon-intensive energy systems
• Reducing our reliance on oil will decrease exposure to volatile prices arising from any shifts in demand/supply
• Potential balance of payment advantages

Slide 18: Goals / Milestones for 2030

• Significant improvement needed to achieve the vision
• Will require system-wide coordination of policies, markets, investment decisions and consumers' actions
• Goals are mid-term milestones for transitioning to a sustainable energy system in the long run
• Goals provide a sense of direction, confidence, long-term commitment and guidance on sustainable energy issues
• A 20-25 year timeframe sufficient to provide a “way forward” for investment decisions
• Also conducive for near-term policy settings and identifying evaluation criteria

Slide 19: Goals / Milestones for 2030 (2)

• Key task of NZES to set NZ on transition path is to determine challenging but achievable sector goals for
  • Electricity and direct use
  • Transport
  • Energy efficiency
• One difficulty for setting medium-term goals is allowing enough flexibility to deal with the inherent unknowns such as:
  • New Zealand's future climate change obligations;
  • future supply/demand balance of imported fuels; and
  • timing and costs of future technological developments

Slide 20: Near-term targets for 5-10 years ahead

• Performance indicators for specific initiatives
• Need to be measurable and achievable
• Able to reassess the relevance of policy actions relative to achieving 2030 goals

Slide 21: Scenarios

• Will use scenarios to illustrate potential pathways to achieve goals
• Explore impacts of external events and shifts in key drivers for NZ's energy system
• Examine the impacts of a range of risks and opportunities
• Model alternative pathway scenarios and assess relevant measures or proxies for policy objectives such as
  • RE percentage, carbon intensity, vulnerability to external shocks, diversity of fuels, household level changes etc

Slide 22: Discussion groups

• What are participants looking for from the NZES?
• Are the proposed timeframes appropriate for the hierarchy vision, goals and targets?
• Are there any other factors or elements of a vision that need to be taken into account?
• Is the approach to goals and targets appropriate?
• What is the preferred balance between generality and defining detail around pathways/policies?
• Any themes or suggestions for pathways/scenarios?

Wrap up

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