Speech to Carbon and Energy Professionals NZ
The theme of this conference is Regenerating New Zealand and it couldn’t be more appropriate.
Around this time two years ago I had returned from Germany where I attended and spoke on a panel at the Berlin Energy Transition Dialogue.
Everyone attending was of the view that the world was on the precipice of a major economic transformation; that the way the world economy worked was putting the survival of our planet at risk - and that things needed to change.
The surprise factor has been how dramatically it would change, and that the catalyst was a global pandemic.
New Zealand’s collective response to COVID-19 means that on so many levels we are in one of the best positions in the world in terms of COVID’s impact and our recovery from the fall out.
Our primary response, to keep people safe from COVID has proven to be – as we always knew it would – the best thing we could have done for our economy too.
The 2021 Budget figures show just how important that has been.
Last year we were expecting unemployment to peak at 10 percent, whereas now we expect it to fall to 4.2% in the next three years.
GDP growth is expected to rise from 2.9 percent this year to 4.4 percent in 2023. Exports are forecast to grow, on average, by 5.8 percent over the next four years.
So we are very much in recovery.
But if COVID has taught us anything, it has shown us how crucial it is to build resilience into our systems.
It did not take long as COVID took hold around the world for the climate and energy sectors to call for stimulus packages to be aligned with decarbonisation aims.
This Government has long had the view that this is the right approach.
Our ban on new offshore oil and gas exploration was controversial at the time, but in recent days the International Energy Agency has backed up this approach, calling for more action to replace fossil fuels with clean energy.
I am proud to say that this Government has made significant moves toward exactly this, which I will further outline today.
But first, you will all be very familiar with the Climate Change Commission’s draft advice on the first three emissions budgets.
Encouragingly, it shows we have the tools and technologies available today to make big strides towards an affordable and sustainable economy that provides future focused jobs in a low emissions world.
Most of the Commission’s recommendations align well with actions the Government is already taking, or is getting underway, which assures us that we are on the right track.
In the next week we will have the Commission’s final report and the Government will make decisions on emissions budgets by the end of the year.
Our policy to bring forward decarbonisation of our electricity system faster - to 2030 instead of 2035 – is ambitious, but is exactly the kind of purpose we need to urgently address the drivers of climate change.
The New Zealand Battery project has been set up to address the lack of dry year storage in our electricity system. Dry years, like the one we are experiencing now, with stressed wholesale electricity pricing driven by low hydro-lake storage and tight gas supplies, are costly. And while we are still far from the need for a conservation campaign the situation shows why we must think seriously about ‘dry year’ energy storage, particularly in a future with 100% renewable electricity.
The $30 million initial study will investigate pumped hydro against other technological possibilities to eliminate the need for fossil fuels in our electricity system. It will provide comprehensive advice on the technical, environmental and commercial feasibility of a grid-level, renewable energy storage solution.
Pumped hydro at Lake Onslow, as well as other smaller scale pumped hydro options, are the focus of the study, with other technologies being assessed as comparators. The first phase of this project is on track to report back in late 2021.
The second phase involves business case development and is expected to be completed in late 2023 or early 2024.
Investment in our economic recovery needs to be bold and it needs to put people and sustainability at its heart.
Industry has reacted positively to our clean energy policy direction, with a number of businesses demonstrating leadership by making renewable energy investment decisions.
Since 2018 there has been over $2 billion committed to renewable energy projects.
Our renewable energy strategy work programme has guided a significant programme of work including renewable electricity generation, process heat, backing emerging technologies, pathways for hydrogen and just transition work.
Transitioning to a net-zero economy will require significant system change and the energy sector will have to do some heavy lifting.
In my view we need a planned and orderly transition for the energy sector.
Part of this planning needs to be workforce planning; capacity needs to be built - from economists to engineers.
One particular area of focus is the use of process heat in industry. This audience well knows how the industrial sector contributes to the New Zealand economy, employing around 11 per cent of the labour for its output and accounting for about 10 per cent of GDP.
You will also know that process heat in industry makes up around a third of New Zealand’s overall energy use, and 60 per cent of it is fossil fuelled.
The Government recognises that changing how industry uses energy will be crucial in New Zealand’s transition to a productive, low emissions economy.
That’s why we launched the $70 million Government Investment in Decarbonising Industry (GIDI) Fund to help businesses switch from fossil fuels to clean energy.
In April I announced the successful applicants for the first round.
The 14 projects will share nearly $23 million $22.79 of government co-funding, with successful applicants putting up nearly $26 million $25.64 of their own money into projects that will make a significant dent in emissions.
It’s projected they will achieve about 10 per cent of the gross emissions reductions required from the Commission’s first Carbon Budget for period 2022-2025.
Round Two of the GIDI Fund has now closed, and officials are busy assessing applications for funding many of which I am sure have had your input.
I look forward to announcing successful projects in the coming months.
While we are helping businesses transition, the Government is also leading by example , with the Carbon Neutral Government Programme to achieve carbon neutrality by the end of 2025.
Agencies will measure and publicly report on their emissions from next year, put in place and execute a transition plan, and offset any remaining emissions by 2025.
This initiative is backed by State Sector Decarbonisation Fund. The $200 million Fund was topped up in Budget 2021 by $19.5 million to finance the replacement of fossil fuelled boilers and vehicles in the public sector.
Climate Change Minister James Shaw recently announced support $13.1 million in funding to help with the buy or lease of 422 electric vehicles and charging infrastructure for the sector.
The conversion of Government fleets will increase demand for electric vehicles, which will start flowing through into the second-hand market.
I’m also pleased to note that from this year NABERSNZ became compulsory for all Government agencies who occupy single-tenant, co-tenanted or co-located government offices. This is an important message to the rest of the sector that this is the direction the country needs to take.
But this is just one part of our efforts to make our homes and buildings more energy efficient.
Our Warmer Kiwi Homes programme has delivered over 60,000 insulation and heating retrofits.
Last year’s COVID-19 Response and Recovery Fund ensured 9,000 additional New Zealand houses could be retrofitted and in Budget 2021 we are extending support $120 million, so about another 48,000 homes can be made warmer and drier through retrofits.
Warmer Kiwi Homes is good for people’s health, the environment and support jobs in the energy service sector.
I am particularly interested in energy efficiency because it is critically important to managing the energy trilemma. Clever use of energy reduces energy costs, supports decarbonisation of the economy, and helps maintain security of supply.
That is why we continue to invest in EECA’s work encouraging organisations to optimise energy efficiency and use; the less load on the grid, particularly at peak times, the lower the cost to consumers.
EECA’s business team - with input from many of you - works with the country’s largest energy users which consume more than half the country’s business energy. The energy savings to date are large. I’m told they are equal to the annual energy use of all households in a city the size of Rotorua.
I am delighted that Budget 2021 is doubling investment in this programme.
A big part of decarbonising our economy means understanding what options there are to transition, developing plans to get there and support for bringing on new technology. This all makes it easier for businesses to move toward clean and clever energy use,” Megan Woods said
EECA steers these large energy users towards energy savings, but you’re the people who make it happen.
You are the experts who have the detailed knowledge and skills to allow companies to cut their energy use, often by as much as 20 per cent.
And it’s you who extends our reach to the small and medium enterprises that we could never reach alone.
As the Minister for Research, Science and Innovation, I see a huge crossover between the technology and energy sectors. Technology and innovation are critical to achieving our energy and carbon reduction goals.
I envision the future of New Zealand as a global innovation hub, a world class generator of new ideas for a productive, sustainable and inclusive future.
The opportunity to optimise the efficiency of energy-using technologies is enormous.
EECA’s Equipment Energy Efficiency (E3) Programme has delivered 59.55 petajoules in cumulative energy savings in New Zealand since 2002 by lifting the efficiency of our products and vehicles.
This is equivalent to the annual electricity generation of roughly 20 new wind farms.
Enabling new technologies has the potential to greatly lower the cost of electrification.
But we also need to think broader. There are also significant energy efficiency gains from targeting technology replacement programmes at industrial applications.
Those of you who have heard me speak before will know I am a passionate believer in a just, well-managed transition.
The industry will be challenged by rapid and exciting change. In the next decade, almost everything in the energy sector could be disrupted. For example:
Low carbon fuels such as biofuel and green hydrogen could play a role in decarbonising hard-to-electrify transport applications.
The growth of emerging technologies is creating new markets and giving consumers greater choice and control in meeting their energy needs.
The rate of technological change can be frightening when people’s jobs and livelihoods are at risk.
Placing people at the centre will ensure the challenge we face is turned into an opportunity that contributes to improved economic and social wellbeing, and drives more sustainable and efficient energy use.
Our recovery from the impacts of COVID-19 have looked through this lens too and how best to:
look after people
look for opportunities to enhance our economic resilience and create jobs,
and look toward the future we want to create.
The $50 billion Covid-19 Response and Recovery Fund set up last year was aimed at revitalisation of the economy by supporting regional and local projects that create jobs.
Budget 2021 is building further on this – to secure New Zealand’s recovery from COVID-19, and address some of the long-term challenges we have been facing so we can all have a better future.
We have a lot of good work to build on, but there is more to do.
While we have laid the groundwork for the changes required, the biggest impacts and results will emerge in the medium to longer term.
Once we have the Climate Change Commission’s final report we will be pulling all the strands together into a National Energy Strategy.
I’ve been getting a lot of interest in this.
Regeneration will involve disruption. The structure of the energy sector will almost certainly be quite different in 2030 and may be unrecognisable in 2050.
The companies and people in this room will have much to do with implementing these changes. You are at the front line of energy management and energy transition.
As Energy and Resources Minister I am very excited about what might come to pass in the sector. I look forward to continuing our good work with you all through 2021 and beyond.