Monday, July 13, 2020

The Greens' energy policy

Yesterday the Greens released their second big election policy - on energy. The short version is "more solar, less coal". They'd stick solar panels and batteries in every state house, and network them together to form a virtual power plant. They'd use grants to fund rooftop solar installations just as they did for insulation. They'd ban new thermal generation and coal-fired boilers, and sunset existing ones. And they'd throw money at training and community grants to push things even further.

Looking at the solar part of the equation, its a no-brainer. While people complain about clouds and latitude, it turns out that New Zealand's solar resource is better than southern Germany or the south of France - parts of Europe with high solar uptake. Its already cheaper than coal in those places, and since coal is our marginal generator and sets our electricity prices, that means that it is probably cheaper than coal here as well. So why aren't people installing it already? The same problem as insulation: lack of information and capital costs. And that suggests the same solution: grants, and a public campaign to normalise it, followed eventually by building standards which require it (because really, if you're building a new house, why wouldn't you put solar panels on the roof? Its the cheapest time to do it). The virtual power plant idea also means that this will gradually lower power prices for everyone, not just the households with solar panels. And with batteries as the default, its going to make it much easier to smooth demand and cope with all the electric cars they'll no doubt be pushing in their transport policy.

The community energy projects fund is also a good idea. We're already seeing solar panels pop up on schools, and there are multiple companies offering finance to help them do it quicker (essentially they front the capital and its paid for by a long-term electricity supply contract). Weirdly this sort of arrangement doesn't seem to be being used much for things other than schools, which looks to be a case of market failure, and government funding or financing is a way of fixing that failure.

In terms of paying for it, the important thing to remember is that this is an investment, which generates ongoing revenue and savings. Those benefits accrue primarily to individuals rather than the state, but the government should still see substantial benefits in the form of lower health and welfare costs and better social outcomes for state housing tenants. I guess we can work out how that stacks up against a negative BCR road.

On coal, what they're suggesting is pretty conservative, and was actually floated late last year in an MBIE discussion document on Accelerating renewable energy and energy efficiency [PDF]. Transpower and the Climate Change Commission have also been doing work in this area, looking at why businesses aren't electrifying even when it is profitable to do so. And the answer seems to be a mix of ETS subsidies, having no clue about their energy costs, conservatism and stupidity. Announcing a phase-out is a way to actually get them off their arses and force them to change. They go further than MBIE in applying the phase-out to gas (which MBIE thought would be required in the future, but too expensive now, so the Greens have taken them at their word and given gas a few more years), and of course they couple it with support to help cover the costs. As for the thermal ban, its another no-brainer, especially after the Tiwai shutdown, and will ensure that once Huntly and the rest close, these dirty fuels will be out of our energy supply for good.