Renewable electricity for New Zealand's future
New Zealand could easily reach the goal of nearly 100% of its electricity from renewable energy in the coming two decades. And it would be folly not to. The country already receives about 70-75% of electricity from hydro and geothermal, and another 5% from wind and biomass. So New Zealand already enjoys one of the highest shares of renewable electricity in the world. But that share could be much higher with further additions of wind, solar and geothermal.
In reaching for higher shares of renewables, we would be far from alone. Denmark is planning 100% renewable electricity by 2030, and its utilities and companies are already actively working towards this goal. Germany plans 50% by 2030 and 80% by 2050, up from 20% today. Germany is serious about this target and believes it's achievable. Over 120 countries around the world now have targets for future shares of renewable energy, along with policies to support those targets.
New Zealand has seen modest growth in renewables in recent years, but still far from its potential.
Why isn't more being done? Certainly national policy is to blame, as New Zealand lags well behind other developed countries in the strength of policies to support renewable energy. But more fundamentally, it's the conventional wisdom that is to blame.
There are many myths that persist about renewable energy that are simply no longer true. Conventional thinking is out of date with the reality of where renewable energy technologies, costs, markets, and investments are today, and where they are going in the future. For example, most would be shocked to learn that the $250 billion invested annually in new renewable energy capacity is now more than the world invests each year in fossil-fuel and nuclear power generation combined. And projections show a doubling to $500 billion annually within 10-15 years, led by China and developing countries.
Last year in Europe, 80% of new power capacity added was renewable, and only 20% was fossil fuels and nuclear. China added 13 gigawatts of wind power last year alone, more than the capacity of New Zealand's entire power system. Wind power in China now generates more energy each year than nuclear power. And South Africa is planning for 38% of all added capacity to be renewable by 2030.
The myths of renewables
Among the many myths about renewables, perhaps the most persistent is the "intermittency" or "impossible to balance" argument. Many claim that large shares of variable wind and solar are too difficult to balance (provide stable power when needed) on power grids due to their intermittent nature. Not true. There are a dozen practical options for balancing, and all of these are already being used by power utilities around the world today.
For example, the U.S. state of Texas gets half of its reserve power capacity from "demand response" - the ability to switch on and off millions of "smart" customer loads, per agreement, that are partially flexible as to when they can operate - such as some industrial processes, and electric vehicle charging. To a power company, demand-response acts like a power plant, but is a much cheaper option for balancing.
In China, there is an explosion in the use of cheap conventional batteries with solar panels among many types of consumers. Large-scale energy storage projects are emerging on grids in the U.S., built by third-party developers who sell the flexibility to utilities at profit. And emerging forms of energy storage will become cheaper and play a bigger role in the future.
Another common balancing measure is sophisticated weather forecasting to accurately predict wind and solar power output for the following days. Such forecasting is used in Spain, for example, where on some days, wind and solar now supply more than 50% of Spain's daytime power demand.
For New Zealand, these options, and others, are possible. Natural gas will continue to play a part, and is a good balancing fuel, which can be applied to distributed electricity production in combination with solar power, for example with building-scale micro-turbines that also supply heating. Rooftop solar can reduce daytime-peak demand, even on cloudy ways. Wind farms can be built in different regions which, when aggregated, provide more balance. Wind, solar, and hydro can naturally balance each other in New Zealand's climate, on both long and short time scales, if their development were coordinated and intelligent, with additional transmission and pumped-hydro storage.
Power grids historically have been designed and regulated with three fundamental assumptions: that power only flows from central producer to distributed consumer; that electricity can't be stored; and that supply must follow demand. None of these assumptions are true any longer, and the power industry in many countries is beginning to face the reality that many changes will be needed.
The future of power grids is one of flexibility, modularity, balancing, innovation, and new pricing and business models. A whole new generation of policy and market reform will be necessary to bring about this transition. New Zealand is going to have to face this too, one way or another.
Another persistent myth is that there's "not enough land." In New Zealand's case, the co-existence of wind power with farm land is obvious and widespread, and provides extra revenue to farmers. But part of the problem with early development of wind power in New Zealand is that developers have pushed to build on the absolute best sites, which has led to problems of social acceptance. New Zealand's wind resource is among the very best in the world. There are so many good opportunities for development that it is unnecessary to develop on high-visibility sites that invoke the public ire. (Other countries do far more on much-less-optimal sites.) Policy changes are necessary to channel wind power development in more productive directions, and the 2011 National Policy Statement on renewables is a good start.
Finally, the myth still persists that renewable energy is "too expensive." Renewable energy costs continue to decline and comparisons with fossil fuels are not being made properly. Wind power costs have declined 25% in recent years, and contracts are being signed in the U.S. at prices competitive with gas and coal. Solar panels only cost one-third of what they did four years ago. In fact, solar panels are now so cheap that their price is almost irrelevant - the main cost of solar power is now the installation and labour cost, the mounting materials, the wiring, and the balance-of-system electronics. Such costs can be reduced given the right business models, economies of scale, solar-integrated building materials, and changes in building codes and labour requirements.
Solar "grid parity" is spreading around the world. That means the cost of solar power without subsidies is no more than retail electricity prices. Grid parity now exists in Hawaii and Spain, for example. More places will see grid parity in the coming years, including New Zealand.
But why wait? The country could be innovating solar applications already with modest policy support.Beyond the myths lies the reality that business opportunities for renewable energy are vast, and not limited to manufacturing solar panels and wind turbines. Many business opportunities exist for a wide variety of companies in applying and integrating renewable electricity and heating. This includes IT companies, building-materials manufacturers, construction companies, system integrators, energy-service companies, micro-utilities, and demand-reduction aggregators.
Renewable energy is fundamentally becoming a design, integration, service, and business-model problem, not a technology or manufacturing one. New Zealand can more easily participate and prosper in that than most realise. And of course there are many benefits, such as independence from future price shocks in global fossil-fuel markets, carbon emissions reductions, and a green image for tourism.
Renewable electricity will also allow New Zealand's transport system to become sustainable, using a combination of electric vehicles, plug-in hybrids, and biofuels (see following articles). That would mean New Zealand could save fossil fuels for essential purposes only; freight, shipping and air travel.
New Zealand needs much stronger policies for renewable energy. The 90% policy goal established some years back was a start, but many other policies are possible, drawing from international experience. Putting a price on carbon emissions is not the best approach; it won't be enough by itself, and it is not working in Europe. Rather, policy needs to focus on integration - into power grids, buildings, transport, and industry.
The world is about to see an entire new generation of such policies, and New Zealand should not be left behind.
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Dr. Eric Martinot is senior research director at the Institute for Sustainable Energy Policies in Tokyo and a teaching fellow at Victoria University of Wellington. He is a widely-known international expert on renewables with over 70 publications. His most recent publication, the REN21 Renewables Global Futures Report, is a pioneering synthesis of current global thinking on the future of renewable energy based on recent energy scenarios plus personal interviews with 170 leading experts and industry executives from around the world (available for download at ren21.net and martinot.info).
