A closer look: the New Zealand Energy Strategy

I spent most of yesterday digesting the draft New Zealand Energy Strategy [PDF]. On a closer reading, my initial reaction may have been a little harsh. Overall, the strategy is excellent, but the lack of a firm policy for putting a price on emissions is more than a little disappointing.

The goal of the energy strategy is "a reliable and resilient system delivering New Zealand sustainable, low emissions energy". It aims to achieve this by laying out broad policy the government will follow in the energy sector. Obviously, its success or failure depends on whether that policy is implemented and funded by future governments.

The accompanying action plan is divided into seven sections:

• Low-carbon transport: A key goal is to reduce greenhouse gas emissions from transport, while allowing an increase in demand. This seems contradictory, but it can be done by both higher efficiency vehicles and switching fuel types, to diesel and (most importantly) biofuels. There's also an emphasis on increased public transport funding, but it comes far behind fuel switching in terms of emissions reductions; instead its more of an investment in the future and ensuring that cities such as Auckland have the basic infrastructure expected of them.
• Security of supply: This is mostly about ensuring that there is adequate dry-year backup and tinkering with the market structure. The good news is that investment in new generation is more than keeping pace with demand growth; the better news is that two-thirds of all new generation (and pretty much everything after 2007) is renewable. Interestingly, the table of new projects does not include the coal-fired Marsden B plant - does the government know something we don't?
• Low emissions power and heat: otherwise known as "tackling climate change". There's a clear vision here for a move to a more sustainable energy system, with greater use of renewables and reduced use of fossil fuels (at least until carbon capture and storage is invented, however far away that might be). And there's no question that vision is achievable - we have more than enough potential for cheap renewables to see us through to 2030 (and much longer, if we can make a swift move to wave power), and wind and geothermal are already cheaper than coal and gas - something which will only be reinforced by the internalisation of carbon costs. But there's no concrete policy to make this happen; instead, the government lays out some principles to guide policy development (which basically amount to "policy should move us gradually towards a carbon market without putting electricity prices through the roof"), but punts the entire question to another round of consultation. This is more than a little frustrating. As I've noted previously, we have been circling around these issues for the last ten years. There are no new options in the accompanying Transitional Measures discussion paper [PDF]; every single one of them has been considered before (and often more than once). The problem is not in deciding what the best policy is - we know the answer to that question (short answer: carbon taxes or emissions trading, either works perfectly well, and if they're not politically achievable, regulations, renewable obligations and feed-in tariffs work well enough) - the problem is biting the bullet and actually implementing one. CP1 starts in a little over twelve months; this is not something we have time to piss about on.

  That said, it looks as if the government is moving to a narrow cap and trade regime for the electricity sector over CP1, and it seems to favour auctions over grandparenting. But there's no mention of sinking caps or other measures which would ensure a gradual shift towards carbon neutrality (in electricity generation) over the long-term. It's a glaring failure of vision at the heart of the policy, and one they should correct before finalising it.

• Energy efficiency: This is being handled through the development of a replacement National Energy Efficiency and Conservation Strategy (the previous version of which promised too much and delivered too little, partly due to systematic government underfunding, and partly due to EECA following the government's lead in circling endlessly around known problems rather than actually doing anything about them). But there's also talk of further information and promotion campaigns. The big change, however, is a significant reduction in the discount rate used for energy efficiency projects, which will result in more getting government funding.
• Sustainable technology: Basically a research roadmap, laying out what avenues we should be pursuing domestically, what we should be keeping a close eye on overseas (CCS), and what we should ignore (nuclear). The headline policy is $8 million over four years for research into marine energy, which has significant potential in New Zealand. That should be enough to map the resource and run some trial projects; hopefully it will be enough to ensure early uptake as the technology matures. And if the government retains a projects mechanism (one option they are considering to reduce greenhouse gas emissions) we may be able to use it to kick-start wave power in the same way that it has already kick-started wind.
• Affordability: Not much here, given that we have a market-based system where prices are set by market forces rather than centrally by the government. The key measure here is targeting energy efficiency programmes at low-income households, achieving both energy savings and reducing the impact of increases in electricity prices.

So overall a solid document, if frustrating on the climate change front. And while National is (predictably) criticising it as more hot air, its worth noting that their "plan" for the energy sector is to leave everything for the market to work out - which isn't much of a plan at all.

You can submit on this thing, and I suggest that everyone who wants to see a greener future does. I will be stressing the need for steady increases in the biofuels obligation, and a "sinking cap" on electricity sector greenhouse gas emissions. Submissions are due by 30th March.

Hardcopies of the Energy Strategy can be requested here.