How to fix: Electricity emissions

Solving one of the country’s biggest climate challenges would also give us healthier homes and cheaper power—and fortify communities against natural disasters.

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In January 2019, the future turned up in Tasman. New Zealand’s fourth-warmest year kicked off with a drought, and just a month later, firefighters were battling the biggest wildfire in the country’s history at Pigeon Valley. The air in Hawke’s Bay and the Bay of Plenty was 1.2ºC warmer than usual, and Tauranga went 39 days without rain.

As drought dragged on into winter, farmers switched on their irrigators, and electricity demand from the agricultural sector jumped 11 per cent. At the same time, deluges in the south filled hydro lakes to “dangerous” levels, according to the energy generator Meridian. Rather than add that extra generation to the grid, Meridian spilled water from the lakes, leaving hydro output for the year down by three per cent. Genesis Energy ignited its coal-fired power station at Huntly to make up the shortfall, and New Zealand went on to burn 62 per cent more coal than in the previous year—just to keep the lights on.

Hydro power doesn’t come without significant greenhouse-gas emissions of its own—173 kilograms of carbon dioxide and 2.95 kilograms of methane per megawatt-hour, according to one Swiss study—but at least it’s renewable. (Coal emits twice as much greenhouse gas.) Our hydro power helps to put New Zealand on the right side of the energy ledger: we have the third-highest proportion—84 per cent—of renewable electricity generation in the OECD, after Norway and Iceland.

But transport and industry still rely heavily on fossil fuels, so that across all energy sectors, that renewables supply drops to just 40 per cent. So if we’re going to meet our Paris Climate Accord commitments, says the Climate Change Commission, we must power more of our cars, our industry, our lives, with electricity rather than oil. The commission wants a target of 50 per cent of all energy consumed to come from renewable sources by 2035, while the government actually has a target of generating 100 per cent of electricity from renewable sources by 2030. (The commission says it’s dreaming: those last few percentage points are estimated to cost a bomb.)

In any case, as things stand, the electricity market isn’t up to it. More than half of our electricity comes from a handful of lakes, mostly at the very bottom of the country, which generate power that must then be sent to the top of it, where demand is greatest, losing about five per cent along the way.

Our hydro lakes hold enough water for only a few weeks of winter energy demand—so in dry spells, we’re forced to burn gas, coal and diesel to make up the shortfall. (That sends wholesale electricity prices soaring—Meridian’s decision to spill that lake water in 2019 cost electricity consumers an estimated extra $80 million.)

While more than 80 per cent of New Zealand’s electricity is generated from renewable sources, two-thirds of the overall energy demands for transport, heating, industrial and residential purposes still come from fossil fuels. Just over a third is used for transport, and a third for industry. Reducing carbon emissions will require a total transformation of how we meet the energy demands of these sectors.

If there’s to be a “just transition” to cleaner energy—a policy that doesn’t disadvantage low-income earners—we need to find a way to smooth out the price shocks that come with the vagaries of electricity supply. But that won’t be easy, because that supply is subject to sun, wind and rain. We need a solution to dry years and peak loads. The government is considering a Think Big fix—the Lake Onslow pumped hydro proposal.

It sounds simple enough: water is pumped from Otago’s Lake Roxburgh uphill to a reservoir, where it sits until we get a dry year. When levels in the hydro lakes get low, that water in the reservoir is released back downhill, spinning turbines and producing some 1100 megawatts of electricity as it goes. The idea is to deliver dry-year energy security while ending our reliance on coal and gas for back-up generation. The scheme could store between five and eight terawatt-hours of electricity (for comparison, New Zealand’s total annual electricity demand is about 40 terawatt-hours).

There are a few problems with the scheme: for one thing, it would use more energy to pump the water uphill than it would make on the way back down, though that’s not an issue if its sole purpose were to fill a temporary gap in supply and demand. But with a projected bill of $4 billion, pumped hydro is an eye-wateringly expensive way to reduce greenhouse-gas emissions.

In play too, is Rio Tinto, New Zealand’s single-biggest consumer of electricity. The Australian multinational says it may wind up its aluminium smelting operation at Tiwai Point in 2024. If it does, that would free up fully 13 per cent of the country’s renewable electricity supply, making the case for pumped hydro still weaker.

Instead, says the Climate Change Commission, we could spend some of Lake Onslow’s $4 billion price tag reducing the need for more electricity in the first place. New Zealand has some of the most poorly insulated housing stock in the developed world—and our housing statistics reflect that. Researchers say that cold homes are implicated in our high rate of excess winter mortality (around 1600 deaths a year) and needless winter hospitalisations. Warm, dry, well-insulated homes would improve both public health and energy affordability, and reduce the energy we use, delivering big emissions reductions at a fraction of the cost of more generation.

There are other changes we could make at home, too. In 2008, the government was widely lampooned for trying to mandate low-energy light bulbs. Last year, a University of Otago study showed that lighting draws 12 per cent of peak winter electricity generation. LED and compact fluorescent lights, the study found, “could reduce evening peak demand in winter by at least 500 megawatts, or nine per cent, by 2029, and reduce total annual demand by one terawatt-hour”.

Huntly Power Station’s two Rankine units (which are coal and gas fired) have a combined capacity of 500 megawatts. We could turn them off for good—just by changing light bulbs.

Around a third of electricity demand in New Zealand comes from households, but that share is rising as more people turn to heat pumps and electric vehicles. To keep up, says the commission, New Zealand will need to produce more electricity.

Wind contributes just 690 megawatts of generation. Wind farms have struggled against Resource Management Act provisions that make consents cripplingly expensive, especially for smaller projects—only 35 turbines have been erected in the past eight years, and at time of writing, just one large wind farm, Turitea, near Palmerston North, is being built. Yet the commission says that if electric-vehicle sales go as projected, we’ll need another wind farm like it every year to keep up with demand.

Some say the solution already exists, and it’s right above your head. The atmosphere receives enough sunlight in a single hour to meet the electricity demand of everyone on Earth for a year. Next time you fly into Auckland, notice those hundreds of thousands of grey roofs, baking in the sun. According to the Electricity Authority, only 7000 of them have photovoltaic panels on them—there are barely 30,000 rooftop arrays across the entire country.

At present, New Zealand has no large-scale solar-power plants—but perhaps that’s not necessary. Other cities have opted for “distributed generation”, a network of small electricity generators or storage devices dotted about the grid. Those generators might be batteries, hydrogen fuel cells, or small community wind farms or solar panel arrays. They could also be your house. In Western Australia, photovoltaic rooftop solar is the largest energy source in the state’s south-west, providing 1100 megawatts of installed capacity—three times as much as the region’s biggest power station. In March 2021, the state’s South West Interconnected System (SWIS) set a record for the share of wind and solar in its grid—79 per cent.

Generous federal and state incentives have seen one in three Western Australian homes subscribe to a distributed generation scheme. (It’ll be one in two by 2030, according to projections.) The scheme encourages households to store solar energy generated in the sunniest middle of the day, and to install west-facing panels that will catch the sun later in the day, when electricity demand normally surges as people get home from work.

Dozens of countries offer subsidies to homeowners to go solar. Some, like Germany, which started its scheme back in 2010, are now ending subsidies, having achieved what they set out to do—the cloudy country has 555,000 megawatts of solar capacity. Compare that with sunny Aotearoa: as of June 2021, says the Electricity Authority, photovoltaics made up just 159 megawatts of capacity. That’s almost entirely down to the fact that successive New Zealand governments have rejected solar subsidies. With an average photovoltaic system costing between $10,000 and $20,000, a homeowner couldn’t expect a payback on that investment for a decade. The result? We still burn coal to top up our electricity supply. John Kidd, an analyst with Wellington-based energy-sector research company Enerlytica, estimates Genesis burned about 250,000 tonnes of coal a month at Huntly over the first quarter of 2021.

But photovoltaic has its foibles: just days after Western Australians set that record, a bank of cloud rolled in, slashing around 300 megawatts of rooftop photovoltaic output in 30 minutes. To fully utilise the sun’s energy, we need a way to store it for those cloudy days, and battery technology is coming to the rescue. The Western Australia state government says it will build a 100-megawatt battery to store SWIS output, which will be backed up by community batteries across the local network. In addition, as more and more people buy electric cars, those vehicles will become a part of the household energy infrastructure, acting as a storage battery while they’re parked. For instance, you could programme your electric car’s battery to charge late at night, when power is cheap. Then, come morning, when the hot water’s running and the jug’s on, it could be feeding power into your home.

Household energy management is getting easier all the time: multinationals such as Amazon and Google are already investing in automation systems that manage heating, light and security set-ups. Already, there are home appliances that communicate with energy markets, monitoring electricity spot prices and deciding whether to switch themselves on. In the future, smart systems will analyse your household energy use and juggle the flow of power in and out of your home, integrating with electricity tariffs, storage batteries and weather-forecasting software. They’ll buy your electricity when spot rates are favourable, maybe to charge up your household batteries or your car on a cloudy day.

But when your photovoltaic panels are making power, they’ll also make you money. Feed-in tariffs (FITs) are the earnings you make from selling the excess generation from your home to the national grid. FITs have been enacted by dozens of countries, mostly for photovoltaic solar, and they were a big reason for Western Australia’s renewables uptake. Together with subsidies for the photovoltaic systems themselves, favourable FITs shorten the payback period on renewable investment dramatically, making renewables a no-brainer.

Typically, governments trying to coax people into distributed generation have offered very attractive tariffs—at one point, South Australian electricity retailers were paying homeowners a mandated $0.54 AUD a kilowatt-hour for their excess generation, when the cost of buying electricity back into their homes was just $0.19 AUD a kilowatt-hour. As solar uptake swings into gear, those FITs usually reduce: nowadays, South Australians can sell their electricity for $0.19 AUD, tops. But that’s still better than the going rate here, which in May averaged just $0.08 NZD.

Our electrical demands fluctuate over a 24-hour period, surging as business starts the day and again in the evenings. Like most days, on August 9 this year, geothermal generation remained static, wind power oscillated with available breeze, but hydroelectric power stations could control the water to the turbines, generating power as it was needed, up to a point. Huntly’s coal plant also accommodated the changing load. But once at capacity at 11am and from 7pm-9pm, the grid had to accept power from diesel generators for the peak load.

So why is our electricity market practically hostile towards solar? It’s a long answer, but in a nutshell, market reforms by the government in 1998 practically guaranteed that generators can sell electricity at lucrative wholesale prices north of $0.30 NZD per kilowatt-hour (no wonder they’re not interested in buying your excess solar). How? Because they can generate that electricity practically for free. The dams that make it were built and paid for 40 years ago—by taxpayers. Ironically, the inertia built into Aotearoa’s plentiful hydro is holding back investment in distributed generation.

Secondly, as we saw Meridian do last year in spilling all that hydro-dam water, companies that generate and sell energy—“gentailers”—are incentivised to keep supply “on the precipice of shortage” so spot prices stay high, as Major Electricity Users’ Group chair John Harbord put it recently. It doesn’t suit their purposes to have you generating excess power on your roof.

Thirdly, the market sets power prices to match the most expensive generation needed to meet that last fraction of demand. If that last one per cent is supplied by Huntly coal, then that high price is locked in across all other electricity sources. That means hydro generators are laughing all the way to the bank, because they can sell their much cheaper hydro power at much higher coal prices. (It also favours wind farms.)

The massive infrastructure projects of Think Big hold some other lessons for us, too. They were supposed to make us more resilient, insulating our economy from international shocks. But ironically, big hydro and coal plants leave us vulnerable: on August 9, 2021, some 20,000 homes across the North Island lost power smack in the middle of a well-forecasted cold snap that was already straining supply. Despite sufficient warning, Genesis didn’t fire up its Huntly plant, because it figured it had enough supply for its own customers (just). In Taranaki, Contact’s gas plant lay idle. Electricity spot prices hit $200,000 a megawatt-hour—600 times the going rate—while people sat swaddled in blankets.

If they’d had solar panels, or an electric vehicle and a battery, they could have looked after themselves, and that’s a critical but overlooked strength of distributed generation. It builds genuine resilience. It also puts power—the pun is justified here—back in the hands of those who depend on it.

When Germany offered money to its citizens to adopt renewable energy, many communities built Bürgerwindparks—“community wind farms”—that supplied surrounding villages. They were given the chance to build a decentralised, more democratic energy network. Research found that when people could see the source of their electricity from their window, they thought harder about how much they used. They became energy-conscious.

New Zealand won’t meet its climate targets without the engagement of New Zealanders. Top-down, one-way power monopolies must be replaced with active, equitable power-sharing local networks, with energy conservation as their central remit, not profit from production.

The sector must be fairer, supporting people to be a part of an energy revolution, and make sure they can afford the electricity they need to stay healthy.

That would be a “just transition” if ever there was one.

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