The E21 Initiative

Defining the Issues

New Zealand’s current situation regarding future electricity supplies is the result of a number of factors, including the core generation model, fuel constraints, industry structures and rules, and insufficient use of alternative strategies.

The New Zealand electricity infrastructure is essentially back-to-front. It has been designed around the idea of a few large-scale generators and distribution over a long transmission network. Hydro generation has been designed to provide base-loading, in spite of New Zealand having no water storage of any real significance, and thermal generation has been used for management of demand peaks. In other developed countries the use of hydro and fossil-fuel generation is reversed. New Zealand’s geography, together with the distances between energy resources and load centres, means that it is not possible to copy internationally recognised models. Our supply arrangements remain vulnerable to changes in the climate, weather and seasonal in-flow of water. Although the concept of peaking plants is gaining acceptance, these do not provide an optimal solution when compared to the use of firming generation.

With the depletion of the Maui gas field, and in the absence of sufficient gas reserves, the operators of the gas-fired generation plants are converting back to coal. An increased dependence on coal, including some imported coal, will have implications for New Zealand’s contribution to greenhouse gas emissions and its obligations under the Kyoto Protocol – unless this is balanced or offset by alternative strategies.

New Zealand is behind the rest of the developed world in terms of diversification and the mainstreaming of strategies such as Distributed Generation (DG). Distributed Generation can be defined as relatively small scale generation in comparison to the network, and connected without the need for deep network reinforcement. Although there has been considerable research internationally, there has been a lack of local research into the application and integration of DG and other strategies in the New Zealand context.

The structure of the industry has created a focus on short-term pricing signals and high risks for investors in new generation. Contractual arrangements within the industry are a barrier to modernisation, because investment in new generation plant may render existing plant less economic.
Energy conservation will provide some efficiency gain, but will not be sufficient to meet the continuing growth in electricity demand.

The acute risks and volatility in New Zealand’s electricity supply arrangements is the result of a lack of long-term strategic planning. In particular there has been a lack of co-ordination across the electricity supply chain and insufficient use of enabling technologies. Without the use of alternative strategies, the New Zealand economy is increasingly vulnerable to disruption and increasing prices.

A Catalyst for Change

Energy21 will promote and encourage cost-effective solutions, through strategies such as the “mainstreaming” of Distribution Generation, Demand Responses and System Optimisation.
Opportunities abound. New Zealand has an abundance of generation capacity and the basic infrastructure is in place. There are many niche opportunities which, when viewed together, can deliver energy solutions without the dramatic cost path which is inevitable at present. The key to making progress, and to underpin New Zealand’s economic strength, is diversity.

The New Zealand electricity system must be designed for diversity and it must take a whole-systems approach. The situation will not be resolved by companies pursuing their own agendas and new “build” solutions, regardless of the type of technology or individual merits of each project. We need innovation, diversity and a whole-systems approach.

New Zealand has no shortage of research capabilities, and there has never been a better time to act on wholesale modernization of an electricity industry that has become segmented and rigid. We can resolve the problems without huge costs.

Our knowledge of the industry tells us that there is an extremely high level of awareness of these concepts and support at many levels. What is less apparent, both within the industry and further afield, is that a period of major modernisation is possible now.

Energy 21 is intended to operate as an independent collaborative programme which is not aligned with any of the commercial motives in the current electricity supply chain. Contribution will be through the delivery of policy-level research that acts to encourage and lead broad-based, systems-level thinking around modernisation, reconfiguration and improvement in our national energy supply and security. Outputs will lead and inform public debate on strategies for improving electricity security including the “mainstreaming” of DG, Demand Responses, and System Optimisation.

CAE’s emphasis is to advance and promote a broad-based economic and technical perspective on electricity supply issues.

E21 is supported by:

In association with: EEA, IRL and NIWA