Simon Bridges: Speech to NZ Energy Conference
Hon Simon Bridges
Minister of Energy and Resources
Speech to NZ Energy Conference
Energy is an integral part of our lives.
It is the foundation on which we build economic growth, prosperity and progress in our societies.
Across the globe, we are all facing the same basic energy challenge.
We want our citizens and countries to continue to develop and prosper.
But we need to reduce carbon emissions from our energy use and respond to climate change.
We also need a supply of energy that’s reliable and affordable.
At the moment, the world is in a transition phase towards a low carbon future.
In this transition, fossil fuels remain an important part of the mix.
The International Energy Agency expects coal, oil and natural gas will continue to account for more than half the world’s energy needs until at least 2035.
The National Government’s energy policy understands this reality.
In the US, President Obama speaks of an “all of the above” policy on energy.
That is also what we have here in New Zealand.
New Zealand’s mixed and balanced approach to energy
Our balanced and mixed approach means that I am motivated by the opportunities petroleum and minerals development presents for New Zealand socially, economically and environmentally.
It is widely acknowledged that gas will play a critical role in reducing carbon emissions worldwide, and New Zealand could play a real part in this if a significant gas find were made.
This is why we have continued to work hard to attract major international companies to invest in petroleum and minerals exploration and development in New Zealand.
New Zealand has to compete with other countries for investment capital. And it’s encouraging to see world class companies like Statoil from Norway and Woodside from Australia choosing to invest in New Zealand.
But while I am motivated about petroleum development, I am also excited about renewables.
It is renewables and smart technology that will be the key to meeting longer term global energy needs. Innovation and competitive markets are the smart way to ensure this happens.
Innovation and competition is driving change in the sector
One of the best examples of a competitive and innovative market that’s already delivering secure, affordable and environmentally sound energy is New Zealand’s electricity market.
New Zealand is extremely fortunate to have abundant renewable resources, like water, geothermal and wind. We now generate 75 per cent of our electricity from renewables.
This put us at fourth in the OECD for renewable generation.
Renewables, particularly geothermal and wind, make up the vast majority of our new generation capacity being built.
Unlike a lot of other countries, this is happening based on competition between generators, without the need for government subsidies or incentives.
There is currently 166MW of geothermal capacity and 60MW of wind capacity under construction.
In the future, this means gas-fuelled plants are likely to be used mainly for peak periods and in dry years.
New Zealand is now a world leader in our use of geothermal resources for electricity.
The world’s largest binary cycle geothermal power station was recently commissioned here.
And in the past six years, New Zealand has doubled our geothermal electricity generation capacity and seen more than $2 billion invested in geothermal plants. In that period 1,100MW of geothermal energy was installed around the world – half of it here in New Zealand.
In addition to geothermal, we’re also making good use of our high quality wind resources.
A turbine on a New Zealand wind farm run on average 40 per cent of the time, compared to around 30 per cent internationally.
Wind contributed around 5 per cent of our electricity in the year to 30 September 2013, and given the large number of additional potential sites, wind and geothermal electricity generation could double or even treble over the next couple of decades.
It is the economics of wind and geothermal generation that have made them increasingly attractive to generators.
Generators compete with each other to build the next best generation option. A forward hedge market sends longer term signals to investors on what the market is prepared to pay for electricity going forward.
This competitive market for electricity generation delivers the lowest-cost sources of energy, for retailers to sell to consumers.
The move towards cheaper renewable capacity is increasingly crowding out the older thermal stations.
For example, the 30 year old Huntly power station has retired two of its 250 MW units over the past two years, which halved its coal-burning generation capacity.
In addition, gas plants is now increasingly used as