Monday, February 11, 2013

The future needs more details

Today Greenpeace released a report pushing for "green growth". According to The Future is Here: New Jobs, New Prosperity and a New Clean Economy, switching to a 100% renewable electricity system by 2025, and 100% renewable transport by 2050 would give us 28,000 new jobs, save $7 billion a year in oil imports, and result in the creation of a $4.5 billion geothermal technology export industry. Which is a big promise, but sadly its not backed by any details on the costs of transition. Similarly, there's few to any details on the policies to get us from here to there. They've got the vision, but the details are... sketchy.

The vision itself is good. We are a world-leader in geothermal technology, with 7% of the world's installed capacity (vs 0.06% of the world's population). We do have an enormous potential transport biofuels resource in the form of woody biomass. We are well-positioned to decarbonize our economy and make the transition to the future Greenpeace is talking about. But making that transition is going to cost, and it is going to require serious policy. Greenpeace gives no detail about the costs (they say they are trying to "spark a discussion" rather than getting " too bogged down in the numbers", which tells you those numbers are dodgy), and their policy prescription boils down to a higher carbon price and a "green investment bank" to push investment in the right direction. Those are good policies, which will get us part of the way there - but nowhere near the whole story.

Shifting to 100% renewable electricity generation in just 12 years is going to require more than just "higher carbon prices". Looking at the energy data file, we need to shut down 2,500 MW of installed dirty generation capacity, which currently provides 23% of our total generation. Which means replacing that capacity, as well as meeting expected demand growth. Its a massive task, and one MED's modellers don't think can happen just with higher carbon prices. A ban on the new construction of thermal generation gets us part of the way, but it doesn't deal with the tail of older gas generation capacity which will still be in the system. In order to meet this target, we will need to actively shut down some stuff while its still useable - which means higher transition costs than if we just let it age out of the generation poll. And those should not just be handwaved away.

(At this stage I should point out that Greenpeace thinks that "the potential electricity cost savings to the country in 2025 are NZ$600 million after the costs of energy efficiency measures are factored in". Which tells us that those unspecified "energy efficiency measures" are doing all the work in the cost-benefit analysis, and that the transition is a losing proposition cost-wise. Its a shoddy and deceitful way to push policy, and I expect better from Greenpeace).

To push its transport transformation, Greenpeace suggests the government should "reform transport planning" while funding R&D. That's part of the answer, but it isn't going to cut it by itself. If we want to build a second-generation biofuels industry from the ground up in New Zealand, we're going to need regulation. Labour's biofuels obligation, which forced fuel suppliers to blend an increasing percentage of biofuel into their petrol and diesel, is an example of what's needed to get things started. It creates a market, it builds capacity, and it provides certainty, so investors can make the long-term investments needed to fund the transition. We'll also need to regulate imported vehicles so they're capable of running on the biofuel mixes we plan to have in ten or fifteen years' time. These will result in moderate costs, but it will pale next to the cost of the required investment in public transport (OTOH, Greenpeace are right on that: we can just fund it with the money National are currently wasting on vanity roads).

Radically transforming our economy may be necessary, but it is not easy and it is not free. Pretending that it is either does us all a disservice, while providing free ammunition to those opposed to it. Greenpeace needs to lift its game if it wants to persuade people to follow these policies.