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Parker: Wind energy in a sustainable New Zealand

8 April, 2008
Wind energy in a sustainable New Zealand

Address to the New Zealand Wind Energy Association conference
9am, 8 April 2008, Soundings Theatre, Te Papa
Wellington

Slide 1: (Introduction)
Good morning – and thank you for inviting me back again this year to your annual conference.

You will all know by now that the government has set a goal for New Zealand to be a sustainable nation, and as part of that we have set in motion a number of strategies to reduce our carbon emissions across all sectors.

This morning I’ll touch on the direction the government has set in the New Zealand Energy Strategy for a carbon-neutral electricity sector, and discuss some of the actions that are underway to get there.

The role of government in support of this has evolved over the last year, and we are grateful for your input and ideas as well as your actions.

Slide 2: Climate change solutions
First, let’s look at the broader goals of this government.

We have set an agenda for economic transformation that puts us on a path to an environmentally sustainable and prosperous future.

The government has set a clear direction for the nation to respond to climate change, and is 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 sector, and all greenhouse gases.

Legislation to enact this scheme is currently going through the Parliamentary process.

The New Zealand Energy Strategy – and the New Zealand Energy Efficiency and Conservation Strategy as an action plan under the Energy Strategy – also contain complementary targets and actions to reduce energy emissions.

Slide 3: NZ Energy Strategy: Our vision
The Energy Strategy responds to the major challenges that we face in our use of and supply of energy.

These are ensuring we have a reliable and resilient system delivering New Zealand sustainable, low emissions energy.

Slide 4: Renewable electricity target
Specifically, in relation to electricity, the government has set the target that by 2025, 90 percent of our electricity generation – in a normal hydrological year – will be from renewable sources.

Currently between 65 and 70 percent of our electricity is from renewable sources.

Most of this is supplied from hydro generation, which varies depending on rainfall – while some comes from geothermal, and a small proportion from wind.
The proportion of our electricity from renewable resources has been dropping since 1980, as coal and gas generation plants were built over the last 20 years have been used to higher capacity factors.

We have now sent a clear signal to the electricity sector that the ship has to turn.

We have enviable natural resources, and the economics of investment in renewables – particularly geothermal and wind – are already viable.

Slide 5: Renewables future makes economic sense
Having a high renewables target makes economic sense for us.

This graph shows the expected costs for new electricity generation from various sources.

It assumes a medium-term emissions price of $25 per tonne of CO2 emissions and a medium term gas price of $9 per gigajoule.

It shows that there are substantial additional quantities of new geothermal and wind generation that are competitive with fossil fuel alternatives.

So let’s talk about the 90 percent target in relation to how much new electricity generation will actually be needed.

We currently have around 6100 megawatts of renewable generation capacity, and 2800 megawatts of fossil fuel generation – providing around 40,000 gigawatt-hours of electricity.

Electricity demand is expected to grow by around 20% by 2025, which would require approximately 3500 megawatts of additional generation capacity.

To achieve the proposed renewable electricity target, the majority of new generation investment would need to be renewable.

This implies that we need around 175 megawatts of new renewable generation capacity every year. Already this year we’re building 300 MW.

Slide 6: Forecast electricity generation
Modelling done to support the Energy Strategy suggests that a mix of all renewable generation types will make up the renewables portion.

The actual proportion of geothermal to wind to hydro – and other sources – will depend on commercial decisions outside the control of government, and will themselves be subject to a range of factors.

There’s a lot of investment in renewables already occurring – for instance:

Geothermal
Three more geothermal plants are being constructed now by Contact Energy, Mighty River Power and Top Energy, and these are expected to add 125 megawatts of capacity in the next two years.

Another 130 megawatt plant has been consented in the central North Island, and another project, Te Mihi, is currently seeking consent.

Yet more proposals are being prepared.

Contact Energy, Mighty River Power and other companies are actively developing the resource.

Geothermal energy is consistent and reliable, and not weather-dependent, so it is an important and stable baseload source. It runs at higher average load factors than any other generation source – including gas, hydro and wind.

Wind
As I’m sure you all know, two more wind projects, in Manawatu and Wellington, are now under construction and are expected to deliver 188 megawatts.

A further five wind farms, collectively totalling 312 megawatts, have been consented, and applications for resource consent are being processed for nine more projects totalling almost 1700 megawatts – with more on the way. Our wind resources are world class. We are a windy country. Our costs of integrating wind are lower than for almost all other countries because our hydro provides great balance.

Hydro
With respect to hydro, resource consents have been lodged for five South Island hydro projects that would deliver collectively up to 415 megawatts of capacity.

Slide 7: Electricity emissions reduction opportunities
Without action, emissions from the electricity sector would have continued to climb.

With energy efficiency measures and more renewables, we can be 90 percent renewable by 2025, with modest residual emissions being offset to achieve carbon neutrality.

We are predicting that the bulk of reductions will come from a greater proportion of renewable energy. Technologies like carbon capture and storage or new generation renewables could well take our total emissions from this sector down close to zero.

Faster reductions in emissions may occur if the Genesis-owned Huntly plant can be economically retired into a drought year reserve role, or switched to gas.

Slide 8: Role of fossil fuel generation
We didn’t go for a 100 percent renewable target by 2025, in order to maintain security of supply and to keep costs down.

Fossil fuels provide security, versatility and stability in the supply of electricity.

And fossil fuels, especially gas, will continue to have an important role for some time to come.

But we don’t need lots more of it, and we don’t need baseload.

Our view is that all new generation should be renewable, except to the extent needed to ensure security of supply.

The government considers that investment in a major new fossil-fuelled baseload plant during the next 10 years would not be consistent with its vision of transitioning to sustainable low emissions energy.

Our modelling predicts significant volumes of cost competitive renewables, with no major baseload fossil-fuelled thermal generation needed for 20 years. We have advised the state-owned electricity generators of our preference for renewable generation – and have introduced legislation which will amend the Electricity Act to limit new baseload fossil fuel generation over the next ten years.

These provisions will create a ten-year restriction on the construction of thermal generation of 10 megawatts and above whose fuel source contains 20 percent or more of fossil fuels.

Exemptions to the restriction will be allowed under specific criteria related to ensuring security of supply.

This restriction on thermal generation will be complementary to the Emissions Trading Scheme.

Over time, the pricing of emissions will give a strong economic signal to investors to build renewables rather than more gas or coal fired stations.

Slide 9: Integration of wind power
As I’m sure you’re all aware, one of the challenges facing us in the development of significantly higher percentages of wind power is integrating it with our national power system.

With this in mind, the Electricity Commission commenced work on two wind generation projects in 2005.

A Tactical Project was set up to consider whether any immediate changes to the Electricity Governance Rules were required, in order to accommodate connection of further wind generation in the lower North Island – while still maintaining the integrity of our power system and electricity market.

Several rule changes clarifying immediate issues were made.

The second and more strategic project, the Wind Generation Investigation Project, was established to determine the appropriate means of accommodating the connection of further wind generation over the next five to ten years.

Considerable research and analysis has been carried out by the Commission since then, culminating in a discussion paper on high-level options which was put out for consultation towards the end of last year.

As expected, your Association made a substantial and valuable submission, along with 13 others from various interested parties.

The Commission has considered these submissions and decided on a series of priority workstreams to address both short-term and long-term operational integration issues.

There is no doubt that our existing hydro generation will allow us to integrate more wind generation into our system more cheaply than is the case for most other countries. There is no doubt that we can integrate significantly more wind power than we currently have.

Slide 10: Key actions for renewables
To achieve our 90 percent renewables target, it’s essential that suitable renewable energy projects gain resource consents.
We will therefore be providing guidance for local authorities on the importance of renewables, through a National Policy Statement on Renewable Electricity Generation.

This will influence consent decisions, as well as regional and district plans as they are revised.

Drafting is well underway, and I know that many of you have provided feedback on the direction it should take. Thank you for your involvement.

We intend to notify this NPS in July and have it in place early next year, in order to influence the many renewable energy projects that are being proposed.

This does not mean renewables at any environmental cost, and we don’t need to dam every river or have wind turbines on every ridge line.

But the government’s commitment to renewable electricity, and to reducing energy greenhouse gas emissions, requires a substantial increase in renewable capacity overall.

As many of you will be aware, the government can play a role in ensuring that consenting processes are completed in a timely way.

The Minister for the Environment can “call-in” consent applications for nationally significant projects and refer them to a Board of Inquiry, or directly to the Environment Court – speeding up decisions that would in all likelihood be appealed anyway.

Using call-in processes is not a criticism of local authorities, and does not undercut environmental protections.

The same environmental rules apply, but the one-step process can save developers, objectors and councils the time, stress and cost of two hearings where an appeal seems almost inevitable.

In January, the Minister for the Environment called in the Te Waka wind project in Hastings and referred it to the Environment Court, and the Te Mihi geothermal project, and referred that to a Board of Inquiry.

Last month we issued an important new National Policy Statement on Electricity Transmission.

This requires decision makers to consider the national significance of a reliable and secure electricity supply - as well, of course, as adverse environmental effects - when they assess proposals for our national transmission grid.

And it gives guidance to local governments across the country about the management and future planning of the national grid.

Its main purpose is to make explicit that electricity transmission is a matter of national significance under the RMA, as an efficient and well-managed national grid is vital for communities, the environment and businesses right across the country.

This NPS is designed to ensure that there is a balanced consideration of these national benefits and the local effects of electricity transmission.

It contains 14 policies intended to facilitate the operation, maintenance and upgrading of the existing network and any new transmission networks – while at the same time managing adverse environmental effects of the network and adverse effects of other activities on the network.

Slide 11: Concluding comments
The path that the New Zealand Energy Strategy sets out will take us to a future that is sustainable, where we emit less and where we have a system that is reliable and resilient.

For electricity in particular, it sets out the path to a carbon-neutral future with a strong target of 90% of electricity being from renewables by 2025.

This target is achievable. If we build 175MW of renewables per annum we will get there.

We have the natural resources for sufficient renewable electricity generation. It is economically viable.

But it’s still a challenge – and we rely upon support from those who believe the government’s vision is correct.

I wish you every success with your conference and the exchange of ideas that it will no doubt generate. The prospects for your industry are positive under the policies which the Labour-led government is pursuing. Your support for these policies has been important, and will be particularly so until the relevant legislation passes. Keep up your good work.

* David Parker
* Energy

Related Documents

* Wind Energy conference slides.PPT (PPT, 1521 Kb)


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