Thursday, December 16, 2010

Targets without policy equal failure

Back in July, the government released its Draft New Zealand Energy Strategy [PDF] for consultation. The strategy retained Labour's target of 90% renewable electricity by 2025, but without any policies to make it happen. National was basically leaving it to the market. Gerry Brownlee (who won't be in office in 2025, and so will never be held accountable for his lack of policy) doesn't see this as a problem; however, the Ministry of Economic Development's latest Energy Outlook, released yesterday, shows it is.

The Energy Outlook is a regular publication which models energy supply, demand and prices in New Zealand. The core of this modelling is a "reference scenario", the Ministry's picture of what is likely to happen under current policy settings. This has been updated in the latest edition, to reflect the passage of the ETS, and it shows that we will fail to meet the 2025 renewable energy target. According to their model of electricity generation and capacity [XLS], only 78% of our electricity will be generated renewably in 2025 - only 2% more than last year. As for the 90% target, we don't meet it any time in the forecast, which extends all the way to 2040.

(We might make the target - just - if carbon prices average $100 / ton rather than the expected $25 / ton. The government's gutting of the ETS and imposition of a below-market price cap tells us that they will not let that happen. In other words, having set a target, they are going to actively work against achieving it).

The culprit? Gas. While the government expects coal generation to be phased out (and no new coal or lignite to be built) under present policy settings, it expects (and allows) further gas-fired power plants to be built. This sees the amount of electricity generated by gas increase 25% from present, unsustainable, levels. But even banning new gas-fired power plants (as Labour did) isn't enough if we want to make the target - we need to reduce them, relegate them to peaking plants and dry-year backup. In other words, we need policy settings which not only require all new electricity generation to be renewable, but also to force the replacement of those unsustainable gas plants with new renewable generation. That simply isn't going to happen under this government. The question is whether it will happen under a different one.