What to Look for in the Draft Energy Efficiency and Conservation Strategy

In Professor Barry Barton’s previous article, he stated that Energy efficiency will account for 51% of all cumulative emissions savings by 2040 if the world moves from business as usual to what the International Energy Agency calls the New Policies Scenario, while renewables will only account for 24%. When you think about it, that puts energy efficiency in an extraordinarily important place for policy purposes. However, New Zealand’s Energy Efficiency and Conservation Strategy available here offers little more than a business as usual approach. Professor Barton’s new commentary presents some compelling ideas ahead of the looming submission deadline of 7 February. – Ed

What should we look for in the Draft New Zealand Energy Efficiency and Conservation Strategy 2017-2022 that was released just before Christmas? My previous blog “What to Look for in Energy Efficiency Policy” covered the issues in general terms and talked about how enormously profitable energy efficiency measures can be, for reducing carbon dioxide emissions, increasing energy security, and increasing productivity. The Draft Strategy points out that New Zealand has high energy intensity and low energy productivity; we don’t squeeze as much wealth out of every unit of energy as many other countries do. This affects our greenhouse emissions.

The statutory Energy Efficiency and Conservation Strategy is a key opportunity to map out policy in the field, identifying targets and the means by which they will be achieved. Here are a few thoughts about what to make of the Draft Strategy.

The areas selected for action

The Draft Strategy concentrates on two areas; industrial process heat, and transport. It doesn’t propose any economy-wide endeavours and it doesn’t put anything forward for appliances, houses, or other buildings. The two areas chosen seem to make sense for a specific focus. But it would have been good to have some data and analysis done to back up the choices made. The Draft is not based on any evaluation of what did and didn’t succeed in the three previous Strategy efforts.

Let’s look at the two areas where the Draft sets specific targets.

Target 1: “Decrease in industrial emissions intensity of one per cent per annum on average between 2017 and 2022”

The key fact about this is that 1% is actually the business-as-usual forecast. The “Technical fact sheet on the proposed industrial emissions intensity target” that accompanies the Draft Strategy says, “This method estimates that emissions intensity fell by 1.0 per cent per annum on average between 1990 and 2014, and forecasts this to continue out to 2022.” There’s a graph to prove it. So the target in the Draft Strategy is to do what we are probably going to do anyway. When you think about it, this is an extraordinary lack of ambition for a national policy document.

There are several other issues to be careful with in understanding this industrial process heat target, although none of them is as startling as the business-as-usual figure.

• The target is for carbon dioxide equivalent (CO₂-e) greenhouse gas emissions, not energy efficiency or energy intensity. It is desirable to focus on GHGs, but there could be some odd consequences in putting a GHG target into a statutory energy efficiency instrument. For example, a conversion to electricity or wood pellets would look good even if it was horribly wasteful.
• The target is for an intensity reduction, not an absolute reduction. It is to be measured in emissions per unit of GDP. Emissions could go up if the sector expands. Intensity measures are good for helping companies adjust and increase productivity, but what the planet cares about, ultimately, is total tonnes emitted.
• The 1% target, quite apart from being business as usual, is not especially arduous by international standards. Many OECD or IEA countries are obtaining similar reductions in related measures.
• The target is for industry, but it excludes some large industrial sectors: chemical manufacturing, base metals, petroleum refining, and electricity generation.
• The measures or policy actions that are put forward as supporting the target deserve to be considered closely. Most of them are actions that the government has long had under way. The one new one is to produce a Process Heat Action Plan (p 13), but even that is only a strategy to have a plan. It’s all rather sketchy.

Target 2: “Electric vehicles make up two per cent of the vehicle fleet by the end of 2021”

The key question to ask here is, what about the other 98%? (Or the other 95%, if one thinks of it in terms of the new vehicle registrations over the next five years.) If we are serious about low-emissions transport we need to include the internal combustion engine vehicles that will dominate transport for a long time to come. As the Draft Strategy says, the fuel economy of vehicles entering our fleet is poor compared with other countries. Virtually every other developed country gains big benefits from fuel economy or fuel efficiency standards. Australia is now moving towards introducing standards, and that will leave New Zealand in company with Russia in believing that they are unnecessary. Work on fuel efficiency standards in 2016 was promised but it hasn’t surfaced.

Other issues about electric vehicles:

• The EV policies that the New Zealand government has adopted thus far are not the ones that the research shows are the important ones – dealing in a meaningful way with the barrier of the extra cost of EVs, and bringing fuel efficiency standards to bear.
• The main policy instrument addressing price – the road user charges exemption – probably does little except bring about a regressive transfer of wealth; it is a tidy bonus for people who are well enough off not to worry about the EV price barrier, without seriously influencing purchaser decision-making.
• Again, the measures or policy actions that are put forward as supporting the target need close scrutiny. Just as with process heat, some of them are pretty sketchy. An example is the measure to “explore options for the accelerated uptake of more energy efficient and intelligent land transport technology”. That’s hardly a policy at all.
• Focussing on EVs leaves commercial transport and heavy vehicles unaddressed. While there is interest in buses, the technology for the electrification of heavy vehicles is well behind that for light vehicles. For heavy transport and freight we need other policy measures.

Non-target: where did the 90% renewable electricity generation target go?

The Draft Strategy discusses the existing target of 90% renewable electricity generation by 2025 subject to security of supply. That target has broad support and we are making good progress in reaching it. It can be put forward as a New Zealand success story. But oddly enough the Draft Strategy does not re-state the target at all. The previous NZEECS stated it, and one would think that it should be carried forward. Its presence in the New Zealand Energy Strategy is no substitute, that is not a statutory document with legal effect.

While while other areas of energy supply and demand may be better for new efforts to decarbonize our economy, we still need this target in the main statutory renewable energy strategy document. Where else does it belong?

Making Submissions

Submissions are due very soon, 7 February 2017. The Draft Strategy was only released on 13 December 2016.

Perhaps it is a time to hope that under new political leadership the government can break away from a pattern of minimal incremental adjustment, and galvanize some real change, by improving or replacing this Draft Strategy. Energy productivity is a new focus in many countries to reap major gains in how we use energy. We could do the same.

Prof. Barry Barton