Energy Efficiency in New Zealand

Demand to hear the other side of the electricity debate

An article by Heather Staley, Chief Executive, Energy Efficiency and Conservation Authority (EECA)

The electricity debate, which has been re-energised since Meridian’s decision not to proceed with Aqua, has been almost entirely focused on what the industry calls ‘the supply side”. Various serious people have scored headlines over what fuel we should be looking to and when and where our next power plants must be. The electricity sector is complex and challenging, so it is sad that this debate has - so far - been largely one sided.

It is a fact that demand is increasing every year. Energy demand tends to track with economic growth, and this has been happening. Further, there are large new demands for irrigation in the South Island that have called for more electricity, there are 30,000 more houses each year, tourism is growing, and sales of domestic accessories such as PCs, home theatres and dehumidifiers continue to climb. Demand is increasing, but Aqua was never going to start coming on stream until 2009 anyway. Amazingly, the demise of this project seems to have led to a consensus that our energy future lies inevitably in coal. We have it, so we should burn it to feed our insatiable hunger for electrons.

The fact is that coal could well be part of the answer. But no matter how ‘clean’ the electricity generators try to make the plant, there will always be carbon dioxide (CO2) emissions from coal and that is bad for the environment. There is also the cost of coal – at around 8 cents per kilowatt hour (wholesale price) it is expensive. It is there as a back up if we need it, but this need is far from proven. Some lobbyists are even using the ‘n’ word (nuclear) and one wonders if this is another part of the strategy to make coal look like an attractive option. Coal should be a last resort for New Zealand, not a first resort. Last resorts are what we do when better options don’t deliver.

And there are certainly better options before us. The first part of solving a problem is to scope it. There’s a widely declared assumption that New Zealand needs 150 megawatts (MW) of new power generation each year for all foreseeable years. That’s around 3% extra per annum. Hence the supply side case for more power stations. The 150MW figure seems carved into stone, but in fact it is highly debatable when you flip your thinking from the supply side to the demand side of the business.

There are some who say energy efficiency has little role to play. Dr Don Elder, Chief Executive of Solid Energy (the main coal supplier), recently wrote that New Zealand industry is already very energy efficient. This assertion suits his position, but it is wrong. Almost every large electricity user can find ways to save 5, 10 or 15% of the electricity it uses each year at less than the cost of new supply. Energy efficiency is already having a significant impact on demand growth and some companies are already finding those savings. This is routine. Since these companies use 60% of our power, even a small improvement in efficiency across the board makes a difference and, as some companies have already shown, energy efficiency isn’t a one-off thing – there is still scope for fine tuning systems from time to time and gaining additional savings.

A short history lesson. New Zealand’s development in the 20th century was fuelled as much by cheap power as it was by grass and wool and meat. Lakes and rivers, once dammed, gave cheap and apparently endless electricity. This enabled our industries to develop, and it enabled us – the most remote nation on earth – to enjoy first world lifestyles in our homes. However, anything which is cheap and inexhaustible will often be wasted.

Naturally we became gluttons for power, but it couldn’t last. The next phase of our national growth will be fuelled by smart thinking about how to get the most out of electricity, as well as how best to produce it. Most developed companies started ‘decoupling’ energy use from economic growth more than a decade ago but in New Zealand there is still the belief that economic growth and increased energy demand must go hand in hand. It doesn’t have to.

The beauty of energy efficiency is that it doesn’t affect our standard of living (we save money as we reduce energy use) or productivity, and it is the cleanest, greenest and fastest solution to meeting our future needs. Indeed, it is often the cheapest as well. A good energy efficiency solution may cost a company 1 or 2 cents per kilowatt hour (remember that new coal generation would cost 8 cents, and that’s before the cost of transporting the power and other mark ups) and it will also save the company money on their power bill.

Energy efficiency doesn’t mean going without – our rooms are still lit, our heaters are still on and our food is still refrigerated. Production lines still roll. But we use more efficient lighting, more efficient heaters and our food is kept cold in more efficient refrigerators (the higher the number of stars on an energy rating label, the more efficient). Efficient motors drive the production lines.

Many of our leading businesses are embracing energy efficiency as a way to reduce costs and gain an advantage. Energy efficiency doesn’t mean lower quality or fewer products – Sealord reduced energy costs by 6.5% and at the same time increased production by 7.5% by assembling an energy management team and enhancing two heat recovery systems. Fonterra are aiming for a 10% reduction in energy use across its dairy processing plants by monitoring and analysing energy use and improving systems. Over a five year period, Carter Holt Harvey’s Kinleith plant reduced electricity use by 17% and gas use by 34% per tonne of product by improving plant, involving staff and doing things such as reusing waste heat.

One of Auckland’s most prestigious commercial buildings, the Vero Centre, has electricity consumption 10% less than the Property Council’s benchmark. The Vero Centre was designed and constructed with energy efficiency in mind and the building’s managers have continued to fine tune the building’s controls and adjusted lighting and air conditioning. As a result, in two years energy consumption has fallen by an additional 7% at the same time as occupancy has increased by 10%.

The problem for many in the electricity sector is that when we don’t even understand how to interpret changes in use, how do we measure absence?

We know demand is increasing. We know that supply is increasing. We are uncertain about the lead times for some major investments and the consequent effect on prices. We want easy, fast and cheap solutions. Investments in known energy efficiency technologies are potentially capable of all three and you don’t need a RMA consent to install an efficient motor or a heat recovery system.

In 2001 California were facing blackouts but one third of all households saved more than 20% of their electricity, 27% of all businesses saved more than 20% of their electricity. California is now looking to energy efficiency, energy conservation, demand response and renewable energy to meet all future electricity demand needs. The world’s third largest economy is taking energy efficiency and conservation seriously, why are some in New Zealand’s electricity sector not?

In California they talk about the ‘secret surplus’ – the amount of electricity being used that can potentially be saved. There are a plethora of ways to cut consumption without cutting comfort or productivity, and that’s exactly what smart households and smart businesses are doing today. And if these are options are coupled with building more renewable power sources, then New Zealand will have found a way to compete with the world while reducing greenhouse gas emissions.

But if these measures are not enough, perhaps then - and only then - will we need to go to the last resort – coal. It’ll still be there.

So the next time you read a headline urging that we burn coal to generate electricity, ask yourself which side you’re on – the supply side or the demand side.

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