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Take care to avoid unnecessary cost in electrifying economy

Take care to avoid "unnecessary" cost in electrifying economy - Vivid

By Gavin Evans

Dec. 10 (BusinessDesk) - Relying on electrification of heavy industry and transport to meet the country’s emission-reduction goals would risk “unnecessary” cost and may close out hydrogen export options longer term, Vivid Economics says.

Expanding renewable electricity generation and using that power in light transport and industry, and using large-scale afforestation to offset emissions from more challenging sectors, appears a “sensible strategy”, the London-based consultancy says.

But focusing on electricity when the relative costs of hydrogen, carbon capture and storage and the upper limits of afforestation to cater for hard-to-treat sectors are unknown is risky. Difficult sectors include dry-year power supply, high-temperature industrial heat and long-haul transport.

Meeting the country’s 2050 emissions targets using a diversified mix of afforestation, gas for winter peaking generation and more renewables and biomass for industry could cost $3.8 billion to $4.6 billion, or $800 per person, Vivid said in a report commissioned by First Gas and Powerco.

But if hydrogen or electrification is needed for those hard-to-treat applications, the cost rises to between $6.2 billion and $7.2 billion, or $1,250 per person.

“If innovation in hydrogen technologies outpaces innovation in electrification technologies, then ruling out this option could reduce the affordability of meeting the net zero target.”

The government is keen on getting New Zealand’s power generation system 100 percent renewable by 2035, despite strong warnings from the industry and the Interim Climate Change Committee that such a strategy would be prohibitively expensive and inefficient in terms of emission reduction.

But the government has also backed biomass projects and hydrogen trials. A string of hydrogen projects are getting underway, with some of them reliant on natural gas – at least initially - and some also relying on carbon capture and storage to manage their emissions.

Vivid says hydrogen could offer additional advantages over electrification if it helps establish an export industry for the fuel. Development of a hydrogen export sector could also help meet the country’s unique dry-year generation problem, which occurs when the small lakes that store water for hydro-electricity generation are low. In dry years, surplus hydrogen exported during normal years could be used domestically instead.

“It is therefore a policy and commercial priority to carry out further investigation into the costs and technical potential of forestry, hydrogen and electrification options in New Zealand,” Vivid says in its 54-page report.

“Greater certainty over the relative potential for hydrogen and electrification to address GHG emissions in hard-to-treat sectors is needed before long-term decisions can be made on the role of gas infrastructure in meeting the net zero emissions target.”

Further research should include a comprehensive study of afforestation, particularly ‘tipping points’ where small additional increases in afforestation might create large impacts on economies, ecosystems and communities.

A technical-economic assessment should be undertaken to assess the potential applications of hydrogen and electricity. Trials under way in the UK and Australia on the blending of hydrogen into the existing gas network should also be considered.

Vivid says a full feasibility assessment of carbon capture and storage is also needed, including the availability of suitable storage sites, operational safety and long-term integrity of CO2 storage.

First Gas chief executive Paul Goodeve says the report highlights the need for policymakers to take a cost-effective approach in the transition to a low-carbon economy if the public are not to be over-burdened.

“What this research shows is that there is no easy answer to achieve a low-carbon economy,” he said. “A key element is affordability. We need to find affordable ways to meet winter electricity peak demand and maintain the competitiveness of large industries that use gas for production.”



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