David Caygill, Chair, BusinessNZ Energy Council
David Caygill looks at working towards a sustainable energy future.
ENERGY IS CRITICAL FOR business and our standard of living. Without a sustainable supply of energy at an affordable price, business can’t grow and our standard of living is threatened.
The BusinessNZ Energy Council believes we need to start a conversation now about how we provide energy for our future.
To aid the conversation, we have launched a report on possible scenarios of what our energy future could look like (New Zealand Energy Scenarios: Navigating energy futures to 2050 on www.bec.org.nz).
By considering two likely options – or options somewhere between them – we can make informed, timely decisions to achieve the best possible energy future.
The two options are Kayak and Waka – two different futures depending on which type of boat we end up rowing.
The Kayak option would be nimble and flexible. It’s a future with free trade, open borders, strong immigration flows and a relatively low carbon price. A Kayak future could be expected to deliver social change and economic growth.
Kayak is about freedom, information and speed. In a Kayak future, businesses would drive supply chain decisions, and government policy would be focused on market facilitation. Innovation would be the result of freely-made choices in a free market. In a Kayak future, businesses could make informed decisions to meet energy needs based on price, quality and environmental considerations.
The Waka option would be more regulated, with a lower rate of growth. It would have a more protective approach to the movement of goods, services and people, and a higher carbon price.
Waka is about planned co-ordination, interdependence, and collective welfare. In a Waka future, business and consumers would rely more on the government to make decisions in the national interest, particularly to meet the country’s environmental commitments.
The Kayak and Waka scenarios are not roadmaps, but storylines. They paint a picture to help policy-makers, business and community envisage what the future might be like, and to ask the right questions to make informed choices.
For example, what must we do to aim for 100 percent renewable electricity? What would we do if technology costs reduce dramatically? Would we want to import gas or look for other options?
The contribution of liquefied natural gas, for example, has distinct differences under the two scenarios.
The world price of LNG is dropping, and depending on the carbon price, it may or may not be economic to produce our own.
In a Kayak future, with a relatively low carbon price, demand for LNG would remain strong, which could make it economic for New Zealand to gear up to exploit our own gas resources.
In a Waka future, with a higher carbon price, the demand for LNG would not be as great, but it would probably be used as a stand-by fuel to back up renewable electricity generation.
Under the Waka scenario it would probably be more economic to simply import LNG from overseas.
These energy scenarios also help us address questions of sustainability – for example, for how long will renewable electricity sources be sufficient to meet increasing demand?
Under the Kayak scenario, because of growing electricity demand, we would run out of new low-cost renewable opportunities (primarily geothermal and wind) by 2050. At this point, the scenario sees thermal-based generation re-enter the frame, possibly with carbon capture and storage to manage some emissions.
Waka charts a course to an almost exclusively renewable electricity system, but this is partly achieved through constraining demand, and also by continuing to build renewables at a higher overall cost to the consumer, including higher carbon prices. Affordability may be an issue under this scenario.
Another question might be: What part will electric vehicles play in our future?
In a Kayak future we would be likely to see a combination of traditional fuel cars and hybrids, but not much uptake of plug-in vehicles, because a low carbon price would mean they were uneconomic.
In a Waka future a higher carbon price would incentivise more people to switch to electric cars, and by 2050 we could see around two million electric vehicles on the road.
But if Waka’s high carbon price didn’t materialise, how would the government encourage uptake of electric vehicles? And why would it do that (if not to manage carbon emissions)?
This is the sort of questioning that is needed to create the best energy future for our country.
At present, on a combined world ranking for energy security, accessibility and sustainability, we are in the top 10 out of 129 countries.
But we can’t rest on our laurels. We must try to make the most sense out of a rapidly changing energy environment with its looming opportunities and challenges.
Envisaging our energy future is a good way to plan for, and take hold of a prosperous and growing New Zealand.