The Climate Change Commission envisages wind generation quadrupling by 2035. Photo / Whanganui Chronicle
OPINION:
If I had to choose one word to characterise the Climate Change Commission's draft road map to a decarbonised future, I would plump for "pragmatic".
It is certainly more pragmatic on the electricity sector, for example, than the Government it is advising.
Like the Interim Climate Change Committee, the commission is sceptical of the objective of 100 per cent renewable electricity, says chairman Rod Carr.
It is also agnostic on whether the better option for coping with dry-year risk would be pumped hydro storage, like the giant scheme proposed for Lake Onslow beside the Clutha, or keeping otherwise redundant gas-fired generation capacity operational as reserve.
Figuring that out should be part of a long-term national energy plan, to give industry players more investment certainty.
The conventional wisdom internationally is that a key strategy for eliminating carbon dioxide emissions is to electrify the consumption of energy as far as possible while simultaneously decarbonising the generation of electricity.
In New Zealand's case, for the time being it makes more sense to focus on the former than the latter.
Just over 40 per cent of New Zealand's gross greenhouse gas emissions in 2018 arose from energy use. That is a relatively small share by international standards, reflecting the outsized importance of gases emanating from the bodily functions of ruminant livestock.
Of the energy-related emissions, just over half come from transport, hence the focus on transitioning from internal combustion to electric vehicles.
Only a tenth of the energy-related emissions, or 4 per cent of total emissions, arise from electricity generation. That is set to shrink further when — and it is a case of when, not if — the Tiwai Point aluminium smelter closes, freeing up one-eighth of national generation for other, higher uses like propelling vehicles.
At the moment only 40 per cent of total energy demand is met from renewable sources.
The commission advocates a target of at least 60 per cent by 2035.
"At the moment helping New Zealanders understand that 40 per cent of our energy use is from renewables is better than almost hiding behind the fact that 85 per cent of electricity is from renewables, which makes us feel a bit smug," Carr said.
Meeting that 60 per cent target will require a lot of investment in renewable generation.
The commission envisages a 25 per cent increase in geothermal generation, which currently supplies about 17 per cent of the national load, by 2035 and a four-fold increase in wind (from a low base of 5 per cent now). It also expects solar to become increasingly competitive. Carr has recently installed photovoltaic panels on his Christchurch roof.
But the commission is also counting heavily on the output from the Manapouri hydro scheme, the jewel in the system's crown, no longer being pre-empted by the smelter, which is scheduled to close at the end of 2024.
That looks like a safe assumption. Given a global glut in aluminium smelting capacity, depressing the metal price, and the prospect of rapidly growing demand for electricity, the chances are slim that a price can continue to be struck that is low enough for Rio Tinto but not way below what Meridian could get for Manapouri's output in the national market.
But there are other risks to the commission's scenario.
One is that Manapouri's output will be diverted — that is, squandered — on some new power-hungry plant down south producing green hydrogen or storing data.
It would be perverse to end up exporting hydrogen to help Japan meet its emissions-reduction goals while continuing indefinitely to import its cast-off internal-combustion vehicles.
Again, the commission is pragmatic about this. It says that if New Zealand is to achieve a low-emission vehicle fleet by 2050, all light vehicles entering the country must be low-emission by 2035.
"One important constraint will be the availability of [electric vehicles], particularly those that are second hand. The country's vehicle market is small, remote, left-side driving and heavily dependent on used vehicle imports from Japan. However Japan is prioritising investing in hydrogen and conventional hybrids and has limited EV supply."
More broadly, Carr points out that for the period the commission is focused on now — the three carbon budgets out to 2035 — it sees the use of fossil fuels in meeting energy demand being cut, not eliminated.
"Our forecast is we reduce coal by about 65 per cent between now and 2035, we reduce liquid fossil fuels by about 33 per cent and we reduce [natural] gas by about two-thirds."
An overarching objective in all this is to avoid the deadweight costs of stranded assets.
On the one hand that means not doubling down on dead-end technologies like internal combustion engines or coal-fired boilers. On the other, it means not prematurely cutting short the economic life of, for example, the existing vehicle fleet.
Another potential obstacle to capturing the Tiwai dividend, so to speak, would be if it takes Transpower too long to upgrade the national grid, leaving Manapouri's output stranded in the South Island. In the past it has estimated the cost of the necessary investment at around $600 million.
That expense is one reason why consumers should not get too excited by the commission's forecast that when Tiwai closes, wholesale electricity prices will drop by as much as 30 per cent and only rise back to current levels in real terms by 2035.
Even if that forecast — the result, Carr says, of working alongside industry players in modelling the price path for electricity — proves accurate, wholesale power prices are only one component of retail prices. Upgrading the national grid, and rendering local distribution networks more flexible, will inevitably cost the consumer, as will the need for generator/retailers to fund the hefty increase in generating capacity.
"Our analysis suggests that overall household electricity bills for heating, cooking and lighting are unlikely to increase as a result of our proposed emissions budgets," the commission says. "However exactly how they could change is highly uncertain."
It says modelling undertaken by the Interim Climate Change Committee showed that instead of pursuing the goal of 100 per cent renewable electricity by 2035 — a target the Government has subsequently brought forward to 2030 — more emissions savings could be achieved through accelerated electrification of transport and process heat.
"However, while using natural gas in the electricity system may be an effective mechanism to minimise emissions and achieve security of supply until 2035, eventually all fossil fuel generation would need to be eliminated and the dry year issue addressed to contribute to efforts to limit the global average temperature increase to 1.5 degrees C above pre-industrial levels."
And that is the bottom line. The commission's task is to recommend pathways to meeting the statutory objectives of net zero emissions by 2050 of the long-lived greenhouse gases, with a more lenient target for biogenic methane, reflecting its short-lived character.
That is the law of the land. It was enacted by a nearly unanimous Parliament, the misgivings of the present leader of the Opposition notwithstanding.
The legislation could be changed, but the laws of nature and mathematics which it belatedly recognises, cannot.
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