Keynote address at the Asia-Pacific Energy Leaders’ Summit
Good morning everyone.
It is a pleasure to be here at the Asia Pacific Energy Leaders’ Summit.
Again, can I please acknowledge:
- Hon Siosi Sovaleni Deputy Prime Minister of Tonga
- Zenaida Monsada, Philippine Secretary of Energy
- Christophe Frei (World Energy Council, Secretary General)
I'd also like to thank David Caygill and his team at Business NZ’s Energy Council for organising this Summit. Business NZ’s involvement is a clear recognition of the critical role energy plays in business competitiveness.
There is no doubt that this is an exciting time to be in the energy sector – both in New Zealand and globally.
Technological transformation, changing consumer preferences, volatile fossil fuel prices, and the need to transition to lower emissions economies have created a complex energy environment – one that brings opportunities as well as challenges.
One of our key challenges is around energy resilience. We must ensure our energy systems are adaptable and can withstand changing circumstance. As Energy Leaders, it is at the heart of what we do.
Energy resilience has become an important part of our work as we seek to understand the growing uncertainties presented by new technologies, cyber–security, and extreme weather events.
While there are obviously limits to what we can do to prevent events such as these, our ability to minimise the impacts and to ensure a rapid recovery are highly dependent on the resilience of our infrastructure, particularly our electricity networks.
Energy resilience in the New Zealand context
Globally, I believe New Zealand measures up well in terms of energy resilience using the metrics of security of supply, environmental sustainability and energy equity or competiveness - the World Energy Council’s criteria for judging a country’s energy system.
The Thirty Year Infrastructure Plan, developed by our National Infrastructure Unit highlights the hard work we have done over the past few years to ensure our energy infrastructure is modern and resilient. Transpower has spent more than $5 billion in the past six years upgrading our National Grid, increasing capacity, performance, and reliability.
On the other hand, the outlook for electricity distribution, long-term at least, is challenging. It is a dynamic market, with uncertain indicators on future demand, with aging assets, and emerging technologies which threaten, at a level, to disrupt the status quo.
To explore these challenges, the Government and the Electricity Networks Association established the New Zealand Smart Grid Forum. Over the past year, the Forum has explored how electricity network technologies are trending, and the potential benefits from adopting these new technologies in the New Zealand environment.
I have asked the Forum to look into how we can maximise the benefits to consumers, and to ensure we make the most of market-led innovation. This means better co-ordination while also managing any risks to resilience that might emerge from new technology applications.
The 2011 Canterbury Earthquake was a stark reminder of the devastating impact natural disasters can have on a city. Of interest, Orion’s electricity and gas infrastructure held up quite well, giving us quality data on our infrastructure. We are now seeing the network built back stronger and more resilient to all forms of natural hazards.
As part of the rebuild, we need to ensure that resilience remains paramount – not just in the sturdiness of pipes, poles, and wires but to ensure we successfully navigate the energy transition.
This transition is driven by the convergence of information technology and energy technology. It is changing the way we use energy and run the grid, and is resulting in the adoption and rollout of smart technologies. Rooftop solar photovoltaics, energy management systems, and battery storage have the potential to benefit New Zealand businesses and consumers through increased choice and control over their energy use.
Solar installations are increasing significantly, and retailers are now offering battery storage to complement solar. This provides energy to households in the evening and reduces peak demand, which offsets the need for further network upgrades and investment. I believe it is in the interest of electricity providers to adopt these innovative products to stay competitive or to complement existing product ranges.
It is clear that the nature of the business is changing rapidly, leading to some exciting opportunities for the incumbents and new entrants into the market. We are seeing that traditional business models and revenue streams may well over time become unsustainable.
The impact of these technologies will likely play out more slowly than the more immediate challenge of retirement and new investment in generation plant, but over time they are likely to have wide-reaching consequences for the entire electricity supply chain.
As a nation with an abundance of renewable resources, New Zealand has learnt to appreciate these advantages and we’ve developed our resources in a sustainable manner. However, I believe we have room for improvement by further developing our renewable resources, improving our energy intensity and improving energy efficiency
I also believe that, given the rapidly changing energy environment, it is time for the Government to set a clearer direction on what we want our energy future to look like.
As I announced earlier this month at the Downstream conference, we are in the process of developing new national energy targets – which will give a clear direction of the Government’s future direction for energy in New Zealand.
We will also be replacing the current New Zealand Energy and Efficiency Conservation Strategy (NZEECS), to complement the new targets.
In addition to improving New Zealand’s energy efficiency, we also need to improve our energy intensity - the measure of energy used per dollar of GDP.
Setting an ambitious energy intensity target is one option I’m considering. Improving our energy intensity will lead to decreased costs and improve our business competitiveness, which also aligns with the Government’s Business Growth Agenda objectives.
While renewables make up a significant proportion of electricity generation, electricity makes up only 25 per cent of our total energy demand. We need to look beyond electricity generation and increase the use of renewable energy in the transport and industrial heat sectors. This is another area where I’m considering setting a target.
The targets would send a strong signal of the Government’s intentions for the sector that will also help businesses with capital investment decisions and help align research and development investment with Government priorities – without compromising our ongoing need to ensure security of supply.
We all have a stake in ensuring the resilience of our energy system and your views on both the development of the targets and the new NZEECS strategy will be critical.
Once we’ve developed our thinking a little more, I look forward to engaging in further conversation with both the sector and the New Zealand public about how we take these next, very important, steps.
As some of you know, I have long been a proponent of electric vehicles (EVs). EVs are the perfect match for our renewable electricity mix. When driven in New Zealand EVs have 80 per cent less CO2 emissions than petrol-powered vehicles.
EVs are part of a response that looks to adopt new technologies as a means to transition to a low-carbon economy without compromising individual mobility or economic growth. EVs are a technology that is well suited to New Zealand. They represent an opportunity to leverage New Zealand’s abundance of renewable electricity to reduce transport emissions and further ensure energy system resilience by reducing our dependence on imported fuels.
Some businesses are taking a leadership position in this space. For example, Mighty River Power is already switching their fleet to be largely electric. This results in significant savings – the equivalent of buying petrol at 30 cents a litre, at current fuel costs.
The Government also has a role to play and there is work going on in this space.
New Zealand’s Renewable Advantage and Aid Programme
Increased international focus on climate change and pollution reduction means this is a really important time for the renewables industry.
The New Zealand Government has made a concerted and successful effort on the development of our energy resources, and we are proud of our renewable story.
In 2014, renewable energy made up 39.5 per cent of New Zealand’s total primary energy supply - a record high that places us third in the OECD, behind only Iceland and Norway – countries that have long been considered world leaders on this important measure. Nearly 80.7 per cent of our electricity was generated from renewables in 2015; this is the highest in 20 years.
We are a world leader in geothermal energy, have world-class wind resources, extensive hydro, and forestry resources as a source for bioenergy. These resources have a key role to play in helping us transition to lower carbon future.
New Zealand’s competitive advantage comes from the natural resources in our country and our geography. Our industry has developed by making the most of the rugged and challenging environment blessed upon us.
This has given us practical knowledge and experience about power generation and grid technology that doesn’t exist elsewhere.
Our experience in managing networks, integrating high levels of renewables, such as wind, into a long, thin transmission network is globally recognised.
We have been exporting this knowledge and capability worldwide for many years now.
Renewable energy, in particular geothermal, is a core focus of the New Zealand Aid Programme in countries where there is potential geothermal resource such as Indonesia, the Caribbean, Africa and some parts of the Pacific.
New Zealand support is focused on targeted technical assistance that helps determine the feasibility of geothermal resources development, laying groundwork to allow other donors and the private sector to invest in these countries.
Since 2013, through our NZ Aid programme, New Zealand has invested over
$100 million in renewable energy projects across six Pacific Island nations, as well as in the Caribbean and South East Asia.
The New Zealand Aid Programme scholarship programme has provided for students to undertake the Postgraduate Certificate in Geothermal Energy Technology at the University of Auckland since 2013.
The programme is run through the Geothermal Institute within the Faculty of Engineering at the University of Auckland and around 1450 students from more than 50 counties have graduated, and are now leaders in the geothermal industry worldwide, with scholars have coming from the Caribbean, Africa, Asia and the Pacific
Last year at the Paris CoP21, New Zealand officially became a member of the IRENA, Global Geothermal Alliance (the Alliance). The Alliance aims to increase the share of geothermal power generation and the direct use of geothermal heat globally.
The Alliance has a goal of five-fold growth of globally installed capacity for geothermal power generation by 2030. This is an ambitious goal, which can be achieved through knowledge sharing, strategic partnerships, strengthening investment.
I encourage the financial sector to collaborate with geothermal developers and navigate the hurdles to establishing this truly resilient form of energy.
Encouraging international clean energy collaboration
I understand and appreciate that New Zealand’s clean energy story is different to many other countries represented here today. The economies across the Asia-Pacific region are facing the triple energy challenge of sustainability, affordability, and security.
In the coming decades there will be unprecedented infrastructure investment across the region to meet the growing demand for energy. By 2035, energy demand in Southeast Asia alone is forecast to increase by 140 per cent. This will require almost a trillion dollars of investment. By 2040, Southeast Asia’s energy import bill is set to more than triple to $320 billion dollars per year.
In 2015, global clean energy investment hit a record $329 billion, $179 billion of which was in the Asia-Pacific region. The Asia Pacific Research Centre forecast the total energy investment between 2012 - 2040 to be between $24 - $73 trillion USD.
To meet this growing demand, policy makers will need to deploy all available assets at their disposal, whilst keeping a focus on clean, domestically generated energy. This will require significant financial resources and partnerships from the international community.
To deliver resilient energy systems and to deliver on our climate goals, I believe we need to enter an era of international clean energy collaboration and I am encouraged by the amount of collaboration taking place in the energy sector recently. At the Paris COP21, the International Renewable Energy Association (IRENA) launched the Global Geothermal Alliance to increase the share of geothermal energy in electricity generation and direct use of geothermal heat around the world. As a member nation, I believe New Zealand has a key role to play in the Alliance.
New Zealand is committed to playing its part to promoting this future globally. Our world-renowned expertise in this area has seen many New Zealand companies offer technologies and solutions to harness and realise renewable energy opportunities in both developed and developing countries.
I applaud the recent establishment of the APEC Energy Resiliency Taskforce, and look forward to hearing developments of its work programme. I am also encouraged by the World Energy Council’s ongoing work on resilience.
More collaboration and information sharing between key international organisations is vital to tackling the big issues of climate change, energy security and energy resilience. These are global challenges, which no single country or organisation can solve alone.
All in all, the energy sector, perhaps more than ever before, is facing significant challenges and opportunities.
Traditional business models are changing and regulatory mechanisms and policy settings may need to evolve – changes I think we’re well positioned to grapple with.
At the same time, the physical environment is important like never before.
To ensure the energy system of the future is sustainable and resilient will require us to work together – international organisations, Government and industry.
This Summit provides the ideal platform for us, as Energy Leaders to further develop that collaboration.