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Parker: Way forward on biofuels, electric vehicles

Hon David Parker
Minister of Energy
Minister responsible for Climate Change issues

2 April 2008

Speech notes

The way forward on biofuels and electric vehicles
Address to the EECA Biofuels and Electric Vehicles Conference
4pm, 2 April 2008
Te Papa Soundings Theatre, Wellington

Good afternoon. I am pleased to be here closing the conference and I trust you have spent a very interesting day listening to the many very qualified and interesting speakers that EECA have organised.

It is important to recognise that the government’s support for biofuels and electric vehicles is part of our broader agenda for economic transformation and environmental sustainability.

We are mindful that we must respond in a competitive way to the global imperatives of climate change, energy security, and to fast-changing international markets.

The importance of our clean, green image to our exports and to our economy internationally cannot be underestimated.

Our economic transformation must be environmentally, socially and economically sustainable, and our energy sector must be a part of this transformation.

Carbon emissions from transport energy comprise 19% of New Zealand’s total emissions – the second biggest wedge – and the fastest growing wedge.

NZ needs to work on all aspects of its carbon emissions, including transport, to meet Kyoto Protocol obligations.

We have set a clear direction for the nation to respond to climate change, and we are pursuing actions across all sectors.

The Emissions Trading Scheme establishes the framework for pricing all greenhouse gas emissions. It is a comprehensive scheme which will, over time, include all sectors of the economy, including the energy and transport sectors, and all greenhouse gases. Legislation to enact this Scheme is currently going through the Parliamentary process.

The scheme will eventually include every sector of the economy, starting with forestry in 2008 and followed by liquid fossil fuels – primarily transport – in 2009, stationary energy and industrial processes in 2010, and agriculture, waste and other sectors in 2013.

Very simply, the ETS will make it more expensive to behave in ways that increase emissions, and make it relatively cheaper to behave in ways that don’t.

Price changes will influence the decisions of investors, producers, and consumers across the economy, driving emission reductions and the expansion of more environmentally friendly alternatives.

The New Zealand Energy Strategy, or NZES for short, is our climate change policy for the energy sector, which includes transport energy.

The NZES has a target of halving emissions from domestic transport by 2040, relative to 2007 levels. The NZES has highlighted a future low carbon energy scenario for transport which assumes widespread adoption of second generation biofuels and electric vehicles.

This wedge diagram shows that we are expecting to be able to achieve reductions in carbon emissions from reducing travel demand and shifts in travel mode away from private vehicles to public transport, walking and cycling. We are also expecting improvements in vehicle efficiency to make a significant contribution.

However, as you can see by far the largest contribution we hope to see is from the uptake of new fuels, be they electricity, biofuels or hydrogen. Of these, electricity and biofuels appear closer in practice. We don’t know what the mix will be yet, but we are expecting a significant shift towards alternative fuels over the coming years. In fact, achievement of our emissions target for transport requires this shift to happen.

As you’ll know, over the past year world oil prices have risen dramatically,

The International Energy Agency is projecting a tight oil market, at least to the year 2012.

The prospects for the oil market clearly pose a challenge to our economy and our way of life.

They therefore add further urgency to the initiatives we are undertaking under the NZES to move to a more sustainable transport system.

You will probably be aware that the government has before Parliament a Biofuel Bill which covers the implementation of our biofuels sales obligation policy.

This is an essential initial step in moving towards increased use of biofuels, which will contribute to a reduction in our net greenhouse gas emissions, and will reduce reliance on oil by increasing the use of renewable fuels in the transport sector.

The proportion starts at 0.53 percent and rises to 3.4 percent by 2012.

Significant production of biofuels in New Zealand and elsewhere without undesirable impacts on sustainability will require the utilisation of non-food based feedstocks such as wood, which will be enabled by developments in 2nd generation biofuel technologies.

As was highlighted in a recent report by Scion, the long term potential for New Zealand in this area is significant. To support the development of advanced energy technologies in New Zealand the Government has introduced a Low Carbon Technology Fund. This fund is administered by the Foundation for Research Science and Technology, and has an initial emphasis on funding second generation biofuels.

However, to enable us to take advantage of the opportunities presented by biofuels over the medium to long term it is important that we start our transition to the use of renewable biofuels now.

When I spoke to this conference last year the biofuels sales obligation policy had only been recently announced in its final form. Since then it has been given legislative form. The Biofuel Bill was introduced to Parliament in October last year and is currently being considered by the Local Government and Environment select committee.

I understand there have been a number of comprehensive submissions provided by industry and I appreciate the time taken to contribute to the development of this important piece of legislation.

Ensuring the environmental benefits and sustainability of biofuels is one of the key issues that has come through strongly in submissions on the Bill and it is being considered carefully by the select committee.

The Bill already includes a clause that enables environmental sustainability standards to be developed and the government wants to ensure that biofuels supplied in New Zealand come from sustainable sources. That clause was included because the Greens and Labour were alert to the need to take care not to create a new environmental problem as we fix another.

Submitters have asked us to tighten this part of the Bill and we are open to this. I have asked officials to explore the possibility of including more sustainability criteria in the Bill itself and how mandatory reporting provisions can be incorporated.

Since last year’s EECA Biofuels Conference Gull has introduced biofuel blends to the retail market, and I congratulate Gull for taking the initiative. With the commencement of the biofuels sales obligation I expect to see renewable biofuel blends being made more widely available.

Other recent steps to improve fuel efficiency include the provision of fuel efficiency information at point of sale for the trade and internet sales of new and used light vehicles.

We also have launched of a discussion document on options for a Vehicle Fuel Economy Standard for all new and used light vehicles entering the fleet. The proposed standard aims to deliver fuel economy and emission improvements while ensuring vehicle choice and availability is maintained for consumers. The fuel economy standard should influence importers and consumers to buy vehicles with better fuel economy and includes a proposed methodology to include biofuel blend compatible vehicles and electric vehicles.

The NZES sets out the government’s vision that New Zealand be one of the first countries in the world to widely deploy electric vehicles. There are technological challenges to overcome to ensure that the vehicles and the necessary electricity infrastructure are available.

In the case of electricity, while the fuel is already widely available, safety-compliant passenger and commercial vehicles are not widely available – yet. I am aware that this audience is well aware of the development of biofuel vehicles and that they are they are certainly on their way.

In early years their sales will no doubt be limited by availability and by price.

The price premium will be determined largely by the battery cost, which can be expected to reduce markedly once production ramps up.

Between 2010 and 2015 we’ll see electric cars starting to arrive and being used in New Zealand. The numbers will grow slowly at the start, but I expect volumes will increase as supply increases and costs decrease.

Our NZES scenario assumed a slow ramp-up in sales of light electric vehicles starting from 2015, assuming that by 2030 17 percent of the light fleet will be plug-in hybrid, then growing to 60 percent by 2050, with 80 percent of their travel in full electric mode.

And how much electricity would this require?

Currently our light vehicle fleet consumes around 130 petajoules of energy.

A key point in this discussion is the inherent efficiency advantage of the electric motor over the internal combustion engine.

So allowing for growth in travel demand, this 60 percent of the light vehicle fleet might be expected to require less than 30 petajoules of consumer electricity for this transport task – that is, around 8 TWh.

We are expecting that the typical annual electricity demand to be about 60 TWh by 2050, so this additional 8 TWh is a not too daunting additional 14 percent.

Certainly there will be issues for the power industry in both generation and transmission planning areas, and in ensuring that not everyone plugs their vehicle in at the same time that they are cooking dinner.

In terms of managing peak load, there is a potential benefit from having so many batteries connected to the grid with the ability for power to be drawn from the batteries to the grid – the so called “V2G” or vehicle to grid arrangement.

And during the off-peak periods, there will be benefits in enabling more ‘must-run” generation to be dispatched.

Perhaps electric vehicles will enable more of the normal electricity demand to be met from intermittent renewables than would otherwise be the case.

Within government, work has already begun in modelling the implications of this level of electricity in transport.

To ensure the best cooperation between industry and government the Minister of Transport has appointed a group of individuals to meet regularly with Ministers and officials. I was pleased to attend at the first meeting of the Vehicle Energy and Renewables Group on Monday, and I am confident that it will provide sound advice on a pathway to widescale electric vehicle deployment.

Our goal is to position New Zealand to leverage the benefits of our highly renewable and low carbon electricity supply to provide for our transport needs once electric vehicle technology reaches maturity. Electric vehicles can provide a positive contribution to our trade balance and energy security.

We believe it will be beneficial for New Zealand to be one of the first nations to adopt plug-in hybrid and purely electric vehicles. There is a unique opportunity to combine electricity and transport sectors with net benefits for both.

Whilst it will be up to industry to develop electric vehicle technology there is a role for government in establishing an environment that facilitates their uptake.


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