Energy

How to electrify the economy before it’s too late

Analysis: The electrification of our economy is needed to reduce emissions, particularly from industry and transport. What will that look like?

In 2035, the way you get your power could be very different.

In the middle of the night, when power prices are low, your electric vehicle or home battery might switch itself on and charge up. In the morning, as you prepare for work and the price of electricity surges, your house may run on the power purchased overnight instead of drawing any from the grid.

While you're at work, solar panels on your roof could recharge the household battery such that, when cooking dinner or watching television in the evening, when power prices are highest, you can again rely on what's left in your car and what your solar panels produced.

There might even be situations where your solar panels generate more electricity than you need, allowing you to sell some power back to the grid for credit off of your future bills.

Perhaps best of all? For the average household, with one fossil fuel vehicle and one electric car, your power and transport costs could be 25 percent lower than they are today.

Transpower, the state-owned enterprise that manages the national electric grid, released a report projecting how our economy and electric sector needs to change to help us meet our climate goals. It entails massive long-term investment in renewable electricity generation, the replacement of nearly half of New Zealand's light passenger fleet with electric vehicles, the conversion of big industrial emitters to electricity and the regulatory and infrastructural framework to allow for the distributed generation grid described above.

Energy the best target for the short-term

New Zealand is already a world leader in renewable energy. Around 85 percent of our electricity is generated by renewable sources, mostly hydro and geothermal plants, and without any reliance on controversial nuclear power.

From that perspective, one might reasonably ask, why bother knocking out that last 15 percent? Surely there are more efficient places to focus? It seems reminiscent of the 80-20 rule, in which just 20 percent of the work results in 80 percent of the gains. That last 20 percent, however, takes the remaining four-fifths of the effort to achieve.

For New Zealand to reach net zero emissions by 2050, however, that last 15 percent does still have to be tackled. In order to reach the target for 2030 set under the Paris Agreement, which starts taking into account annual emissions in 2021, the energy sector becomes even more important.

"In order to achieve our net carbon zero by 2050, which we've committed to, and indeed to meet our 2030 Paris commitment, we need to electrify our economy," Alison Andrew, CEO of Transpower, told Newsroom.

There are four major contributors to New Zealand's emissions profile.

The two smaller chunks are waste, which produced 5.2 percent of the country's 2018 gross emissions, and industry, which made up 6.6 percent.

The largest is agriculture, which accounted for 47.8 percent of the country's 2018 gross emissions. But reducing agricultural emissions is complex - you can't just build methane-free cows like you could a wind farm. Some of the emissions reductions are being held up by a lack of effective technology. Some are being held up by lack of ambitious policy - agriculture is only slated to enter the Emissions Trading Scheme, the country's primary tool for reducing emissions, in 2025.

Either way, agricultural emissions aren't expected to fall significantly by 2030. In fact, according to the Government's own projections, agriculture will make up a slightly larger share of the country's emissions profile even in 2035.

That leaves most of the heavy lifting, at least for the next decade or so, to transport. The energy sector, which includes transport, makes up 40.4 percent of the country's emissions. That's a major contribution that paints a big target on the entire sector.

While emissions from the energy sector sans transport have been falling consistently since 2005 and are nearing 1990 levels, transport has more than offset those reductions. There are a million more cars on the road today than there were 16 years ago and transport emissions have almost doubled since 1990.

"We think everything has to play a part. Electricity's not going to be the only aspect, but we do think that electrification is going to be the main part of the energy puzzle because we have such a great endowment of it in New Zealand," Andrew said.

Dealing with increasing demand

The amount of energy needed for transport and industry is only likely to grow over the coming years. Transpower's report predicted that energy demand will jump by two-thirds over the next three decades. More than half of that growth is from the electrification of vehicles, while just under a quarter each will come from industrial heat needs and population growth.

Under that scenario, building new renewable energy generation isn't a choice - it's a must if New Zealand is to avoid running out of power.

The scale of the investment needed is massive. Around 40 new massive generation and battery projects will be needed in just the next 15 years at a cost of $8-10 billion, Transpower found.

"To put this in perspective, as much generation will need to be built in the next 15 years as was built in the past 40 years," the report stated.

This could be done greenly, Transpower said. It is possible that 95 percent of New Zealand's electricity generation could be renewable by 2035 and the country could be fully renewable by 2050.

However, despite the spike in demand, the amount of new generation that needs to be built won't be quite so high. The country's generation capacity only needs to expand to meet the increase in peak demand, which will rise by about 40 percent over the next 15 years, Transpower has found.

That's because a wave of new technologies will help flatten the peaks and troughs of the demand for - and therefore price of - power. In part, that comes from batteries.

"If we can do things like manage when we charge electric vehicles by charging them off-peak, using batteries to supply some of the discharge when there is peak demand, we can do a lot to actually smooth the demand on the network system. That way we can build less generation and build less wires and manage our infrastructure better," Andrew said.

As it stands, New Zealand's electricity system relies on fossil fuel generation as a backup for dry years when hydro plants don't produce as much, or in the winter when hydro and solar generators are hampered and electricity demand spikes. Coal-fired generators at the Huntly power station are frequently run to provide this backup, but batteries or other technology could fulfil a similar role.

After a major blackout in South Australia, the state commissioned Tesla to build a $96 million battery station, which would store excess power generated by renewables and feed it back into the system during blackouts and generator failures. While there's nothing of that scale in New Zealand at the moment, Mercury did launch a large grid-connected battery in 2018.

Now, Transpower estimates that five of the 40 projects over the next 15 years will have to be massive batteries. Smaller household batteries, which are a standard addition to solar panels sold these days, could also be drawn on during peak times by the household themselves or even by the grid. This move towards a system where each household is both a purchaser and generator of power is called distributed generation.

Newsroom also reported in January about the possibility of allowing the Tiwai Point aluminium smelter, which uses one seventh of the country's electricity, to flux how much power it uses in accordance with peak demands. In essence, this would transform the smelter into a battery that could be relied on instead of something like Huntly.

As peak demand becomes easier to manage, the price of peaks could come down.

"If you're building infrastructure that you only need to use when the peak is on and the peaks are very high relative to your troughs, that's quite expensive. The more you can base load your infrastructure and smooth your peaks into your troughs, you won't need as much generation and you won't need as much transmission system or distribution," Andrew said.

How to electrify the economy

Clearly, to meet our climate targets, we must massively electrify transport and bulk up the energy sector to be able to meet that increased demand.

But what if we're not on course to meet our climate targets? What if electric vehicles are too expensive and no one buys them?

That's where the Government comes in. During an Infrastructure NZ-hosted webinar on Tuesday evening at which Andrew, Energy Minister Megan Woods, Climate Change Commission chair Rod Carr and Genesis Energy chief executive Marc England spoke, a poll of the audience found a clear plurality (43 percent) saw Government intervention as having the biggest impact on climate change.

That applies to the transport and energy sector too, Andrew said. While electric vehicles are expected to reach price parity with fossil fuel vehicles in the mid-2020s, that could be too late for New Zealand to meet our climate goals.

"There are absolutely a number of things that the Government could do or policy could do to help stimulate [EV uptake]," she said.

"If we go now and go hard on transport and industry, we can go a long way towards meeting our carbon commitments and electrification has got to be one of the easiest ways to do that. If we don't, we won't meet the commitment - we've just got no ability to do that."

Earlier attempts by the Government to incentivise EV uptake have failed. The feebate scheme, which would have placed a fee on high-emitting vehicles and a corresponding discount on EVs, was nixed by New Zealand First. A National-era commitment to bring 64,000 EVs into the country's fleet by 2021 has been scrapped by the coalition Government.

Even a pledge enshrined in the Labour-New Zealand First coalition agreement to make the Government's own vehicle fleet emissions-free by mid-2025 was abandoned in October, only to be implausibly resurrected in March.

This chart from MBIE shows how far the Government is from meeting its own target on EV purchases.

This time last year, after the Government had been in power for 17 months, there were just 74 electric vehicles in a fleet of 14,955.

Since then, the fleet has swelled by 915 vehicles - just 34 of which have been electric. Still, the Government is convinced it will rotate the remaining 15,762 fossil fuel vehicles in the fleet into electric ones in just five years' time.

During the webinar, Carr cited a report from his predecessor organisation, the Interim Climate Change Commission, which saw electrification as a key part of New Zealand's emissions reductions efforts.

"It's not unreasonable, therefore, to assume that we will conclude that electrification represents a significant opportunity for New Zealand to address its targets in a timely, resilient and inclusive manner," he said.

The urgency of the situation also came through in Carr's remarks.

"The Climate Change Commission's work has barely begun, but it does include recognising that price alone cannot drive the extent and rate of change that wee need. That price, through the ETS, will play a part, but will also have some unintended consequences. Black letter regulation must also play its part, but regulation can sometimes be clumsy and sometimes alienate those who are regulated," he said.

"From the heart, I sincerely believe that we must act now - the 'we' is you and me and all of us - for tomorrow will be too late."

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