Labour has committed to 100% renewable energy in a decade. But is that the right goal?

The path to real sustainability and for New Zealand to live up to its clean, green brand has received renewed attention during the 2020 election campaign. There is a key divergence in the main political parties ideas for the role of renewable energy in the country’s greener future.

The Labour Party, most prominently, has proposed bringing forward the target of 100% renewable energy by five years, to 2030 – a policy first proposed by the Green Party.

National opposes the renewables target. The party believes the targets risk making electricity less affordable. Its sustainability policy has focused on getting more electric vehicles on the roads.

So, what should the goal be? Is 100% renewable energy the right aspiration or just the best looking one? While the parties are in the final throes of electioneering, it seems a good time to rethink how our energy industry actually operates, outside the sphere of politics.

Flick Electric CEO Steve O’Connor says momentum is building for a push to cleaner energy and some good ideas are coming to the fore, especially around boosting the use of renewable electricity in transport and by industrial companies. But he reckons political parties are missing a trick by failing to consider one powerful and obvious move that would get New Zealand to more renewable electricity generation faster. 

“If we’re really serious about getting more renewable energy generation the next government needs to have the confidence to totally shake up the electricity market, where a lack of competition is hampering investment in renewable generation,” he says.

O’Connor believes New Zealand is capable and ready to invest in new sustainable generation, but needs the market set-up to enable the right motivations and confidence for investment. Right now around 80% of New Zealand’s electricity comes from renewable sources – but O’Connor says the industry is ready to get up to around 90% renewable much quicker than 2030, with about 3,000 megawatts worth of wind farms consented but not yet built. That’s about a third more than our current total capacity. 

“The market should be best placed to solve the cost and environmental issues we face. And the government’s role should be to make sure the market is designed in a way to ensure fair and open competition that pushes the industry to transition,” he says.

Currently, there’s too much market power in a small number of hands, O’Connor says, and not enough competition in generation investment and dispatch of electricity. The solution, says O’Connor, is that the government and regulators need to either change the wholesale market to recognise the power of “gentailers” (electricity generators that are also retailers) or remove them from the retail market.

“The sad reality is that the incumbents have assets and interests sitting in the old world so lack the incentive to change sooner rather than later. Even though they have the tools, the gentailers that have the ability to make a difference aren’t incentivised to. 

“They have assets they want to sweat out as long as they can. Every generator should be competing to supply any and all retailers or larger industrial players seeking to transition – not just matching their generation volumes with their own retail load at an internally agreed price.”

O’Connor adds: “The ultimate would be to carve up gentailers like Meridian, Genesis and Mercury requiring virtual separation of their generation and retailing activities like we saw in the telecommunications industry.”

Flick backs all efforts to accelerate progression towards 100% renewable electricity, O’Connor says. But in order to avoid passing increased costs onto Kiwis, there needs to be a fundamental change in the industry that decouples generation from retail so there is effective competition across the board.

The goal of going 100% renewable by 2030 – as Labour and the Greens have pledged – could lead to either added costs for the consumer, or lead to problems with reliability. It’s the final few percent that could cause the problems, as the government’s Interim Climate Change Committee has advised.

“Such a solution is very costly, particularly in terms of achieving the last few percent of renewable electricity,” the ICCC wrote in its 2019 Accelerated Electrification report. “It is also likely to result in much higher electricity prices than in the business as usual future.”

Sweden is an example O’Connor looks to, where generators selling power pay a carbon price of close to NZ$200 a tonne, which acts as a major incentive to move to cleaner generation. Unlike here where the carbon price is closer to just $35. 

As well as sorting out the market. there’s a role for the government in increasing the infrastructure capacity of renewable energy generation. 

“The government should also step in when there’s a massive opportunity to make change, and this is where projects like pumped hydro come in,” O’Connor says. “We’ve seen the difference the big hydro dam building projects many decades ago made in increasing our access to water as a generation source.”

Currently, electricity makes up just 4.2% of our emissions. Any move to more renewable energy must be supported by changes in other sectors, says O’Connor. 

“New Zealand’s biggest drivers of carbon emissions are transport and farming. Some of the biggest differences that can be made is transitioning more transport to electric. And when it does transition we need to be sure that the electricity fueling it is renewable and at the right cost point.”

On October 18 the long election campaign will be over and the new government will have its mandate. Policy will start moving towards reality. And O’Connor has a challenge for the next government and its approach to how it imagines energy: 

“What legacy will you leave for future generations, so that we can be confident that when the clean energy transition comes it’s being powered by green electrons?”

This content was created in paid partnership with Flick Electric. Learn more about our partnerships here.