Frank Duffield: Natural gas can smooth transition

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Turning too quickly to renewable energies creates precarious supply.
Liquefied natural gas has lower emissions than other hydrocarbons. Photo / Supplied
Liquefied natural gas has lower emissions than other hydrocarbons. Photo / Supplied

The Royal Society has called for urgent action in New Zealand on carbon emissions. The good news is that low prices at the petrol pump are pointing to the end of the hydrocarbon age. Cheap oil is making new oil development projects unviable. Meanwhile, progress on renewable energies continues.

But the transition from fossil fuel to renewable energy won't be quick or easy. Already, ill-conceived policies in many countries are having consequences that threaten, perversely, to increase emissions. The Royal Society's alarm should not distract New Zealand from learning from these mistakes.

Despite significant progress, current renewable energy technologies cannot, on their own, meet the world's energy needs. The International Energy Agency has just forecast further growth in global oil demand. This cannot be wished away.

A case in point: very many of Indonesia's 260 million people have no access to electricity. Unrest is stimulating its government to speed development, with plans for 70 gigawatts of new power generation (New Zealand's total capacity is 9.5GW).

Sixty per cent of Indonesia's new generation will be coal-fired.

The emissions from these plants, and similar in China, India and the Philippines, will more than offset emission savings elsewhere.

We are seeing advances in electric cars. But what impact will electric cars have when just a score or so of the world's largest ships, moving goods to markets globally and burning heavy oil to do so, account for more harmful emissions than the entire global car fleet? New Zealand is more dependent than most countries on sea freight.

In Germany, costly subsidies have enabled wind and solar energy to develop strongly. This has discouraged investment in back-up capacity needed when renewables are not available. The upshot: Germany is continuing to operate high carbon coal-fired plants, grandfathered under an ill-planned carbon credit scheme.

Britain has a similar problem. Carbon policies make UK energy prices among the world's highest. About 2.3 million UK households spend more than 10 per cent of their disposable income on energy. A factor in the threatened closure of Britain's only large steel mill is that it pays 120 per cent more for electricity than its US and Chinese competitors.

Yet uncertainty on utilisation, due to patchy renewable supply, has meant little investment in generating capacity in Britain for 10 years. A major blackout was only just avoided in November. Britain too is importing coal, and struggling to launch a new nuclear plant and 20 new gas-fired plants.

South Africa suffers regular shutdowns of the grid. Lack of progress on all energy options, including significant renewable potential, has combined with Africa's difficulty in maintaining infrastructure.

Nearer home, a study by the University of Auckland's Business School highlights the risk of pushing solar power without careful planning. As more people switch to solar, fewer will be left to share the fixed costs of maintaining the power grid. And Genesis has just announced extending the life of its coal plant at Huntly to cover national supply in dry years.

This is not to argue against renewable energies. They are playing a big and growing role. But it is crucial that energy policies prioritise national infrastructure outcomes, avoid unintended consequences, and are seen as fair. It will not be an easy process. But in an era of political distrust it is worrying that expensive and insecure energy supply is already generating scepticism, just as the hardening evidence of climate change demands reductions in carbon emissions.

A hard-headed approach needs to recognise that in emerging countries, economics will trump environmental concerns. We have to accept that hydrocarbons will continue to play a large role. In New Zealand, we have to realise that freight will not switch back to rail or people to daily public transport, as the Royal Society advocates.

There is a way forward. Among the hydrocarbon energies, natural gas produces by far the lowest emissions. Gas plants also provide greater flexibility to work with intermittent renewable supply. If growing economies invest more in natural gas-fired power and less in coal, emissions can be brought quickly down. This has happened in the US. Switching the world's shipping fleet to liquefied natural gas would also make a huge contribution. And natural gas is abundant.

Of course, gas production must be managed very carefully. It is right that governments are implementing more rigid regulations around its production and distribution. But to argue that natural gas is just another hydrocarbon is too dogmatic. Gas can provide a viable pathway to a lower carbon future, giving the world time to develop technologies that will truly enable a secure and affordable, carbon-free energy future.

New Zealand, with its renewable capabilities, is well positioned to play a world-leading role.

Debate on this article is now closed.

- NZ Herald

Frank Duffield is an honorary fellow at the University of Auckland business school and a partner in a natural gas shipping business.

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