The government may be willing to shift ground on its 2035 renewable electricity target if the Interim Climate Change Committee feels there are better targets to pursue, Climate Change Minister James Shaw says.
The committee, established last year to examine ways of delivering the 100 per cent renewable electricity target and bring agriculture into the emissions trading scheme, is due to report back to the government in April.
In December, committee chair David Prentice said that while the government's 100 per cent renewable target was technically achievable, it would be expensive and made little sense given the industry only accounted for about 5 per cent of the country's emissions. The country was better to focus on electrification of industry and transport, he said.
Shaw told delegates at the Downstream energy conference in Auckland today that the electricity sector has a "great opportunity" to meet a potential doubling of electricity demand projected out to 2050 and to meet that without using fossil fuels.
Speaking after his presentation, he insisted the government is not fixed on its view on the 100 per cent renewables target and will consider any advice the ICCC delivers.
He said the committee had protected its independence "fiercely". The government may not pick up every aspect of the package of recommendations it may deliver, but it is open to any advice on how to deliver the most effective emissions reduction.
"We set them up for a reason, and so I would think we will be pretty strongly guided by what they say," Shaw told BusinessDesk.
"The thing about the transition is that we kind of have to do everything, so the question is really one of sequencing and resourcing and cost."
The government's 2035 100 per cent renewable electricity target is subject to normal hydrology. Many in the energy industry have argued that the country should instead target a lower percentage – 90 per cent-plus renewables from about 85 per cent now – so that a declining share of gas and coal-fired generation can remain available for winter and dry-year back up as the electricity sector expands.
Concept Consulting director Simon Coates told delegates that the work his firm did for the Productivity Commission last year showed that by 2050 coal and gas could be meeting just 2-3 per cent of the country's power demand
But that "residual, small" percentage was critical in order to keep power costs low, balance variable wind and solar generation, and encourage greater electrification across the economy.
"Lower cost electricity facilitates the far bigger prize of decarbonising process heat and decarbonising transport," he said.
Forcing 100 per cent renewables into the system, rather than allowing carbon prices to determine generation investment, would increase costs and could leave emissions higher than they would have been otherwise, he said.
Shaw told delegates he was sceptical of the role for carbon capture and storage in the power system, but acknowledged the recommendation of the Productivity Commission that regulations be prepared to enable carbon storage as a complement to the country's tree-planting efforts.
He said solar and wind would meet most of the increased demand for electricity, but would not be the whole solution. The industry also needed to deliver generation options that didn't "scour the landscape" or result in other "horrendous" impacts from new technologies.
Hydrogen is also an area being investigated and there may be a need for phased introduction before "green hydrogen" – made from renewable sources – is widely available, he said.
Dry-year risk remains a challenge, he told BusinessDesk.
"You need vast amounts - especially if you are doubling demand - you need vast amounts of long-term storage and then the question is, what's on the horizon that can plug that gap and over what period of time?"
Shaw said the government is aiming to respond to the Productivity Commission's recommendations in March or April.
In the next couple of months it will announce another eight or nine changes to the emissions trading scheme.
The "huge" work to reform the ETS – and establish a robust and transparent market for the next 30 years – will see legislation go to Parliament mid-year, Shaw said.
That will follow the Zero Carbon Bill which the government is aiming to introduce in May.
Shaw told BusinessDesk that legislative timetable does not leave a lot of time to consider the Interim Climate Change Committee's recommendations on how agriculture should be treated in the ETS.
But officials have done a lot of work so that they can respond quickly, he said. If that isn't in the legislation for its first reading, then it will be available for the select committee's review of the bill.
Shaw told delegates the government is "close" to completing talks on the Zero Carbon Bill within the next few months.
He doesn't know if cross-party support will be secured, but he said all the parties understand how important such agreement would in providing the certainty that the business community is seeking over the future framework.