Innovation in Global Power - Parsons Brinckerhoff

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Planning and the Role of Regulators http://www.pbworld.com/news_events/publications/network/ New Zealand Energy Strategy – A Plan for a Sustainable Nation By Nick Barneveld, Wellington, New Zealand. 64 4 916 6558, barneveldN@pbworld.com New Zealand promises to be one of the world’s leaders in taking proactive measures toward sustainability in the electricity sector. The author tells of its goals and strategies, and in so doing, illustrates the promise of the Kyoto Protocol. Acronyms/Abbreviations CER: ETS: GHG: NZETS: NZU: Certified Emission Reduction Emission Trading Scheme Greenhouse gas New Zealand Emission Trading Scheme New Zealand Unit Figure 1: Fuel supply – Hydro storage trajectories. The New Zealand government is determined that the country become a truly sustainable nation, and even a carbon neutral nation. Its recently introduced New Zealand Energy Strategy to 2050 (referred to in this article as The Strategy) maps out an ambitious pathway for the reduction of energy-related greenhouse gas emissions. Operating within a framework of competitive energy markets,The Strategy was designed to: • Set conditions for capital investment • Provide leadership on energy security and climate change issues • Respond to the challenges of meeting demand in a growing economy, maintaining security of supply and reducing greenhouse gas emissions. The Strategy and the associated New Zealand Energy Efficiency and Conservation Strategy introduce initiatives that champion: • Renewable energy across the electricity generation market • Energy efficiency among transport, domestic and commercial users • Development and deployment of sustainable energy technologies. The current electricity sector of New Zealand is characterised by: • A long stringy transmission system spanning two islands, which are linked by a high voltage direct current (HVDC) transmission line with both over-land and sub-sea components • Significant indigenous fossil fuel • Tightening supply and demand • Rising investment costs and wholesale and retail prices • Vertically integrated generator retailers • Renewable generation resources that are notable for significant seasonal and year-on-year variability (Figure 1). New Targets for Low Emissions A secure energy system with low emissions will require changes in the way electricity, heat and motive power are produced and delivered. For example, the electricity sector, currently sourcing 65-70 percent of its “fuel” from renewable sources (Table 1), has a target of achieving 90 percent renewables generation by 2025. This very challenging target requires servicing all new demand with renewable generation and reducing existing fossil fuelled thermal generation by more than 50 percent, replacing it with energy generated using renewable technologies. This renewable generation policy position is a major change from the prior neutral policy position. The new policy has been given impetus by a legislated ban 1 for the next ten years on new base-load thermal electricity generation, plus New Zealand is a signatory to the Kyoto Protocol. 1 At the time of writing the legislation is in the process of being enacted. Tidal power is one technology that the government is supporting, as New Zealand has significant potential available along its extensive coastline. In fact, Crest Energy Limited has applied for environmental consent to construct a marine turbine power generation project in the Kaipara Harbour in Northland, northern New Zealand. The project comprises up to 200 PB Network #68 / August 2008 86
Planning and the Role of Regulators Table 1: Electricity generation by fuel type (2006 calendar year). completely submerged marine tidal turbines with a maximum generating capacity of about 200 MW. They would be located near the entrance of Kaipara Harbour, one of New Zealand’s natural harbours that is not used as a major port. 2 Emission Trading Scheme The introduction of the New Zealand Emission Trading Scheme (NZETS) was announced in September 2007. NZETS is the first mandatory greenhouse gas emissions control measure in the world that proposes to cover all six Kyoto Protocol greenhouse gases: •CO2 Carbon dioxide •CH4 Methane •N2O Nitrous oxide • PFCs Perfluorocarbons • HFCs Hydrofluorocarbons •SF6 Sulphur hexafluoride. Figure 2: Electricity generation weekly CO2 emissions March 2007-May 2008. Source: Energy Link Limited http://www.pbworld.com/news_events/publications/network/ Figure 2 shows the CO2 emissions from March 2007 through May 2008 from the various generation facilities currently within New Zealand’s thermal electricity generation portfolio. These levels are based on the current operating regime of the asset portfolio shown in Table 1. They illustrate two factors: • The magnitude of the target CO2 emissions from electricity generation. (On a global scale, the emission quantities are very small.) • The extreme sensitivity of the existing generation mix with its high proportion of renewable plant to uncontrollable weather influences. The 30 percent year-on-year increase in CO2 emissions for the month of May is a result of a lack rainfall in the hydro generation catchments. The contribution attributed to Whirinaki during April/May 2008 (see Figure 2) is from a 150 MW diesel fuelled open cycle gas turbine power station built by the government to provide back-up to the hydro generators in the event of water shortages. Under NZETS: • There will be no free allocation of greenhouse gas emissions for electricity generators and fossil fuels. • Larger industrial firms will get a partial free allocation of emission units to cover their direct emissions and the indirect emissions of their electricity use. They will have to buy NZ Units (NZU) to cover their remaining greenhouse gas emissions • The international reductions purchased will be primarily Clean Development Mechanism Certified Emission Reductions (CERs) from developing countries. The price of NZU will be set by international CER prices. Higher Energy Prices on the Horizon Meeting New Zealand’s new targets means that everyone in the country will be affected by higher prices for nearly all forms of energy. Businesses and individuals will be able to manage their exposure to these higher energy prices by: • Improving their energy efficiency • Developing their own renewable energy sources • Investing in their own Clean Development Mechanism projects in developing countries. With NZU prices expected to converge eventually with European Union Emission Trading Scheme (ETS) prices, petrol and 2 For more information about tidal power, see “Project Brief: Tidal Power” by Peter Kydd on page 53. 87 PB Network #68 / August 2008
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Innovation in Global Power - Parsons Brinckerhoff

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