Source: New Zealand Government
Thank you James for the introduction.
Thank you also to the organisers of this event, it is pleasure to be back at Downstream in 2023.
It has been – yet another – dramatic start to the year.
You may have noticed that every year of this decade so far has thrown us significant challenges and drama
Some – like the pandemic – we knew could happen.
While we’ve known for some time that climate change is happening – the surprise for many is how quickly it has manifested to have such devastating impacts in our corner of the world.
Auckland’s extreme flooding event and the impacts of Cyclone Gaberielle across the north-east of New Zealand has changed the narrative on how long we have until we need to mitigate and adapt.
More extreme weather events are here – and they are here to stay.
I had a first-hand look a few weeks ago at the flooding damage at Transpower’s Redclyffe site, as well as the work Unisys was doing to fix broken power lines in Puketapu.
I want to acknowledge here how well the lines sector pulled together in the aftermath of the cyclone with offers of help from other parts of the country – and Orion group’s Connetix team travelling all the way to Northland to help get the power back on. Well done, and thank you. I know you worked extremely hard to make that happen.
So, the footage we have all seen of flooded homes and land, broken roads and land slips is a powerful reminder of how vulnerable infrastructure can be.
As we work to ensure we are more resilient, we cannot take our eye off the critical job of tackling climate change.
As you know, a massive part of the solution to climate change is making the transition to low-emissions energy.
So, this sector has a unique challenge to:
- make the most of the renewable resources we have in Aotearoa, New Zealand.
- improve and deploy more energy efficient, clean technology and to
- Innovate to find new solutions to the vexing problem that is the use of energy that is warming our planet….
….. all the while keeping the lights on and ensuring energy is affordable, as New Zealand makes this transition to a low emissions economy.
That’s why this government is so focused on the long-term strategic work of system change.
Because a more resilient, affordable, secure and decarbonised energy system will deliver a more prosperous New Zealand and create the jobs of tomorrow for our childrens’ future.
All the major parties in the New Zealand Parliament have signed up to the emissions reduction targets through legislation. This cross-party support is for the good of New Zealand; we only need to look at how other parts of the world are still locked in partisan debate on this issue, to know that carbon budgets lift our political debate in my opinion and provide the discipline we must all adhere to. It requires us to demonstrate if not ‘x’ than ‘y’ as to how to meet the carbon budgets.
A key part of the system change that is required, that the Interim Climate Change Committee (ICCC) identified, is to resolve New Zealand’s dry hydro year problem.
As you know, this is when our hydro-electricity lakes run low for long periods of time, requiring more fossil fuels be used to generate enough electricity.
A dry year solution would be a huge step towards our climate change goals and set us up for a secure and sustainably powered future for generations to come. But it’s by no means an easy problem to solve. We’d need an extra 3 to 5 terawatt-hours of renewable energy that can be turned on as needed. That’s about 10 per cent of our current annual consumption.
The New Zealand Battery Project was set up to explore the feasibility of pumped hydro and other possible renewable energy solutions to the dry year problem. To date, initial feasibility studies have been completed and an indicative business case has been developed.
I recently announced that Cabinet has agreed to proceed to the next stage of detailed business cases for the pumped hydro option or a suite of alternatives to that – the portfolio approach of biomass, hydrogen and flexible geothermal.
Solving New Zealand’s dry year problem won’t be cheap; the options are estimated to cost between $13 and close to $16 billion dollars.
But neither is the status quo using coal and gas to plug the energy gap every time we have a dry hydrological year.
High-level, conservative estimates based on the Climate Change Commission’s emissions pricing, show that in 2035, the cost of keeping the lights on in a dry hydro year will cost approximately a billion dollars for gas and factoring in emissions pricing. For coal it would be $1.6 billion – just for one year.
By 2050, it would be $1.3 billion for gas, and $2.2 billion for coal –for just one dry hydrological year.
It is simply not sustainable – in any sense of the word – to rely on expensive fossil fuels to store our energy into the future. We have to find alternatives. Other alternatives come with costs too. The I CCC concluded in its report that overbuilding renewables would be costly and would lead to significant energy wastage during normal times.. and would be reliant on high electricity prices and will require significant levels of shortage and demand response. These are exactly the trade-offs and the questions that the NZ Battery project must weigh up. And that we must do it in a systematic and evidenced based way. These are the answers that as a sector and a country we must answer.
We can develop low-emissions, long-term alternatives that will deliver secure electricity supply, allow us to decarbonise other parts of the economy, AND put downward pressure on electricity prices by pegging them to renewables.
That’s the type of system change the NZ Battery Project is exploring, and we are committed to finding the best way forward for our country, New Zealanders – and the planet.
In our election year, I look forward to each party putting their penny down on the form of specific policies on how to address the fundamental problem of dry hydro years and how we store energy in a renewable form for the future.
The other significant work stream that has been delivering for us is the Government Investment in Decarbonising Industry.
As we work toward decarbonising our economy, one of our key initiatives has been to partner with industry to make change happen when it otherwise would not have…
…and sometimes to make it happen faster than it otherwise would have happened.
This is exactly what the Government Investment in Decarbonising Industry or the GIDI fund does
Making things happen faster is significant. This is about the carbon budgets that parties all around our Parliament have signed up to. We need to be working with industry to pull those initiatives into earlier carbon budgets because we have all signed up to those targets. So again, that comes back down to if not ‘x’ then what is ‘y’ kind of debate we need to have in an election year.
What will we do to work with industry to make sure we are decarbonising in a way that means New Zealand doesn’t have to go out and buy expensive carbon credits in international markets rather than investing in New Zealand industry to actually get some of the cheapest abatement we could possibly deliver.
Projects approved across the country range from switching fossil fuel boilers to electrode or biomass boilers for process heat, the use of industrial heat pumps as well as heat recovery and efficiency improvements.
Over the first three rounds, $63m of GIDI funding has been allocated – across 51 major industrial decarbonisation projects, that has catalysed over $100 million in private funding.
These projects are expected to deliver a lifetime carbon abatement of 7.18 million tonnes of CO2.This is the equivalent of taking around 130,500 cars off the road. Round four of the GIDI fund closed recently, and I will make announcements on this in due course.
Last year we announced a boost to GIDI of $650 million over four years aimed at expanding the number and type of projects that can receive money, to expand what can be achieved in decarbonising out energy system, without de-industrialising it.
As we decarbonise, the Gas Transition Plan will play a key role. It’s clear that the phase-out of gas from the energy sector will be an important consideration. The plan will establish realistic, but ambitious, transition pathways for the fossil gas sector to decarbonise in line with the first three emissions budgets out to 2035, while signaling the longer-term direction out to 2050.
Fossil fuels will be phased out in a way that ensures energy remains secure, reliable, accessible, and affordable to all New Zealanders. The transition to a low emissions future will be paced in a way that balances the urgency to act with the impacts on our people, homes, and livelihoods.
Since the decision to develop the Gas Transition Plan was announced at the end of 2021, the Ministry of Business, Innovation and Employment has been working with the Gas Industry Company to carry out extensive research, including targeted engagement with many of you here today.
This is helping us understand the challenges and opportunities facing the gas sector to help inform potential scenarios for testing in a public consultation later this year.
But there are other exciting opportunities for us here. The potential for offshore renewable energy is a key opportunity for New Zealand. There is considerable renewable energy potential within the Territorial Sea and Exclusive Economic Zone, which have higher average wind speeds than most other places. This means that offshore wind farms in our seas could produce more energy per unit than the global average.
We are actively encouraging the development of an offshore renewable energy sector. Establishing a regime to pave the way for investment is a key priority of mine as Minister, so it’s great that we are making such good progress. And I know how hard people have been working on this. We’re now consulting in two stages on a dedicated regulatory regime.
A first discussion document, released in December 2022, focused on proposals for enabling the feasibility phase of offshore renewable energy projects.
The second discussion document, covering further matters such as an allocation regime, and environmental assessments, will be released mid-year.
Hydrogen also offers a complementary tool alongside electrification for decarbonising hard-to-abate sectors and supporting economic transitions away from fossil fuels.
We’re developing a Hydrogen Roadmap to clarify the role hydrogen could play in the wider energy transition and to outline how the government can enable this sector. I look forward to sharing an interim Roadmap mid-year, and a final Roadmap alongside the Energy Strategy by the end of 2024.
The Energy Strategy will address strategic challenges in the energy sector and signal pathways away from fossil fuels and towards net zero carbon emissions by 2050. These pathways need to ensure that energy is accessible and affordable, secure and reliable, and supports New Zealanders’ wellbeing.
As I have been covering, we’ll progressively meet our needs using renewable energy through increased investment in geothermal, wind and solar, but also by increasing the use of potential technologies such as bioenergy, offshore wind, hydrogen, pumped hydro, and large-scale batteries.
Also as mentioned, fossil fuels will need be phased out in a way that ensures energy remains secure, reliable, accessible, and affordable to all New Zealanders.
The strategy will ensure that the actions and initiatives we implement are coordinated across the whole energy system.
By the time the strategy is delivered at the end of next year, we will have held an extensive, collaborative process of public engagement. Bringing New Zealanders along the journey will ensure the changes we need to make are well-planned, co-designed and lasting. I want to encourage you all to engage in this process and be part of designing that.
Alongside the development of the Gas Transition Plan, this Government is working to review our Electricity Market Measures to support the transition to a highly renewable electricity system. I’m conscious of the linkages between these two projects. Officials are working to ensure they align and complement each other.
The current cost of living crisis further highlights the need for us to have affordable and accessible energy. We are continuing to implement recommendations following the Electricity Price Review, and the Energy Hardship Expert Panel is currently running targeted consultation on options to address energy hardship.
Finally, I’d like to recognise the important role upstream producers continue to play in New Zealand’s energy systems. Petroleum infrastructure has served our energy needs for decades. As these assets reach the end of their life, however, we need to ensure they are decommissioned in an environmentally responsible manner and that the costs of decommissioning do not fall on the public.
Having a sufficient supply of onshore fuel stocks will help shield us from major disruptions to international oil and fuel markets, natural disasters, and infrastructure failures.
And while the risk of a major disruption to our fuel supply is very low, the impacts would be significant and felt across the economy.
Last year I announced a Fuel Resilience policy package that consists of a domestic fuel stockholding obligation for fuel importers and wholesalers of 21, 24 and 28 days’ cover of diesel, jet, and petrol respectively. This will be coupled with Government procurement of an additional 70 million litres of diesel.
I’ve already touched on many of the opportunities and challenges that are facing us in our energy sector. I want to acknowledge that right now is a challenging time for the sector. You are working to deliver energy and electricity systems for the future of o ur country.
The move towards a decarbonised economy, and the increased electrification that involves, will be a challenging transition. In order to do this, we need to listen to, and work with, industry and small businesses and continue to focus on the issues that matter.
At the same time however, these challenges also present enormous opportunities for industry, and for the future of the country. Events like this one provide an important forum to discuss the way forward and the way for us to realise the potential of those opportunities.
As a Government, we recognise that are simply cannot achieve our goals without a partnership with industry and the wider sector, and we look forward to the opportunity to partner further with you all.
Thank you.
