ASB’s latest Sustainable Economics report released today shows New Zealand’s energy usage will need to become heavily electrified if the country is to meet its net zero by 2050 emissions target.
With 70% of emissions in the target’s scope related to fossil fuel energy use, switching to renewable electricity presents a significant opportunity to make a substantial reduction.
“New Zealand is in a favourable position with an abundance of renewable electricity and many electric alternatives already in existence making it possible to reduce energy-related emissions now,” says ASB Senior Economist Kim Mundy.
Transport and industry will likely lead the transition
The greatest potential to decarbonise energy use lies in transport and industry as the largest users of fossil fuel energy.
Lowering transport emissions will require a twofold approach – reducing vehicle usage and transitioning the fleet towards emissions-free vehicles.
“With transport, the biggest bang for buck will come from reducing light vehicle emissions which currently make up 70% of all transport emissions. This will require investment however with an estimated 4.3 million EVs needed by 2050,” says Ms Mundy.
Heating and cooling processes make up most of the industrial sector’s energy demand with research highlighting a need to electrify low and medium temperature processes. This could be switching from gas or coal fired boilers to heat pumps or electric boilers which can save on operating energy costs.
“If we focus on these two electrification initiatives alone, we could eliminate roughly half of the emissions, relative to 2021 levels, captured in the net zero target,” says Ms Mundy.
Transforming New Zealand’s electricity system
Large scale electrification necessitates big changes to New Zealand’s electricity sector. Not only will much more renewable electricity generation be required but a high degree of flexibility needs to be built into the grid. Transpower data estimates that gross electricity demand could increase 68% by 2050. The cost of doing this is considerable with estimates of around $130bn needing to be spent on generation, transmission and distribution by 2050.
An opportunity for the private sector and Kiwi households
“While the benefits of going electric are clear, the cost of the transition and the fact there are many other pressing infrastructure needs presents an opportunity for a broader discussion around how the transformation is funded and what role businesses can play,” says Ms Mundy.
Banks have an important role in funding the transition to a low emissions economy. Earlier this year ASB announced a partnership with Rewiring Aotearoa, a New Zealand energy transition charity. The bank is financing a pilot study, due to get underway shortly, to help identify barriers and opportunities for consumers around energy transitions, focusing on a sample of Kiwi homes. The outcomes of the study will help to inform and enhance ASB’s pipeline of products and services to help more Kiwis move to power their lives with lower cost, New Zealand generated renewable electricity.
“Ultimately the way we use energy has to change and with less than 26 years left to achieve the 2050 target it’s critical that all New Zealanders understand the practical implications of transitioning to an electrified economy. We need everyone from government and businesses down to individual households to start thinking about what steps they can take towards the transition as meeting the target rests on our collective actions,” says Ms Mundy.
The Sustainable Economics: Towards Net Zero report looks at which energy-using sectors are most likely to decarbonise via electrification, the implications of decarbonising New Zealand’s energy use for the electricity sector, and other challenges that will need to be overcome to deliver a highly electrified economy.
The full report is available here. https://asb.co.nz/content/dam/asb/documents/reports/sustainable-economics/asb-towards-net-zero-report.pdf
