New Zealand has achieved record levels of renewable energy generation and consumption in recent years, with 80-85% of electricity being generated from renewable energy sources according to the Energy Efficiency and Conservation Authority. While certainly cause for celebration, statistics like this are only sustainable in favourable weather conditions for our existing infrastructure ie ample rainfall and wind. This highlights a key vulnerability of New Zealand's renewable energy system – that success in generating renewable energy is dictated by the South Pacific's erratic weather conditions. This is what experts have termed the dry year problem.
In this update we explore the current state of New Zealand's renewable energy infrastructure and why it is critical to invest in both renewable energy production and storage capacity if we are to find a viable solution to the dry year problem.
Oh no, the power's out... again
Recent events have demonstrated the fragility of our energy system, particularly in times where a peak in energy demand coincides with unfavourable weather conditions, or a shortage of fossil-fuel reserves. Already this year we have seen the Energy Minister, Simeon Brown, declare New Zealand to be in an "electricity crisis" and warned of an immediate risk of power cuts and blackouts if the public did not urgently reduce their energy consumption, and earlier this winter, Transpower issued a grid emergency notice for Northland residents to conserve power following a pylon failure.
But these are not expected to be one-off occurrences as the Government has been regularly briefed by energy industry officials leading into this winter on the potential energy supply and demand risks for 2024.
A little bit of context…
While New Zealand consistently produces among the highest percentages of renewable energy in the world, its' success is currently dependent on favourable weather conditions, leaving our nation's 'clean' energy system vulnerable to the increasingly unpredictable elements.
With a growing population making full use of energy intensive technologies (eg the rise of artificial intelligence), a push to electrify our transportation system (our largest current emissions sector), and an increase in energy intensive enterprises such as data centres, our appetite for energy continues to grow rapidly and place additional pressure on our energy grid.
We are therefore faced with the challenge of ensuring there is enough supply to meet increasing demand, while at the same time meeting the legislative commitment to be "Net Zero" by 2050, requiring a major transition away from fossil fuels. Another challenge is ensuring that energy infrastructure is fit-for-purpose to meet this continuing rise in demand. This is where we see two key priority areas for investment and diversification emerge that will help our nation continue to grow while maintaining energy independence (that is concerningly on the decline):
- Renewable energy production
- Renewable energy storage capacity.
The need for more renewal energy production
Recent experience has shown that even in a record year for renewable energy generation, energy demand exceeds existing renewable capacity. Then there is the inevitable increase in electricity demand on the horizon and the ever-looming dry year problem. It is clear that New Zealand needs to produce more renewable energy, and it needs to do so quickly if we are to achieve legislative "Net Zero" commitment.
A number of alternative energy technologies have been investigated - including biomass energy, flexible geothermal and hydrogen electrolysis - however, none of these are capable of solving our renewable energy deficit and the dry year problem alone. There can be no denying that we need to diversify and adopt a portfolio approach in order to meet the projected two thirds increase in energy demand by 2050. This has been picked up on by the current Government who have committed to making it easier to consent a wide range of renewable energy projects.
The need for more renewable energy storage
To avoid the dry year problem, New Zealand also needs to be able to effectively store the energy it generates so that it can avoid burning fossil fuels when wind and hydro production is down and instead 'turn on' the renewables tap. To achieve this, we need to invest in energy storage systems.
For several years, pumped hydro was championed as the solution to reaching 100% renewable energy production and storage by acting as a buffer in dry years due to the vast potential to store energy and ability to utilise spikes in energy production during favourable conditions. This was the idea behind the Lake Onslow project in Central Otago however this project never got off the ground due to technical and financial challenges that came to light during feasibility studies.
Battery storage projects are on the rise overseas however New Zealand continues to lag behind internationally in terms of investment in such projects. It is promising to see some investment being made in small scale battery projects such as Meridian's 100MW energy park in Ruakākā (currently in construction), Contact Energy and New Zealand Steel's 100MW energy storage facility in Glenbrook and WEL Networks' 35MW battery storage system in Huntly. However, more infrastructure like this is clearly needed as energy production alone can only take us so far if we are to solve the dry year problem.
So what is being done?
Several committed energy projects are expected to be built by 2026, and we are experiencing a spike in new projects being actively pursued off the back of the Government's promises to streamline the consenting process to help get projects underway as quickly as possible. As covered in our previous update, we anticipate that a number of renewable projects will be able to take advantage of this new streamlined process under the Fast Track Approvals Bill.
Notable projects already in the pipeline include:
- The Southern Green Hydrogen Project, a hydrogen-ammonia facility in Southland, led by a partnership of Meridian Energy, Woodside Energy, Mitsui & Co and Ngāi Tahu
- The Pukenui Solar farm, a 17 hectare, 22MW solar farm near Houhora in the Far North District capable of powering up to 2000 homes, being constructed by Far North Solar
- Kōwhai Park, a 150MW solar farm at Christchurch Airport, a joint venture between Contact Energy and Lightsource bp
- An additional 2,200 MW of on shore wind generation (across a number of projects) in various planning, consenting and construction stages.
We can also look to National's pre-election 'Electrify NZ' Policy for an indication of what may be around the corner (although we recognise that the Government's policy position for renewable energy is yet to be fully realised). The Electrify NZ Policy proposed the following changes to speed up the development of renewable energy projects:
|
Commitment |
Status |
|
Introducing a new National Policy Statement for renewable energy generation (NPS-REG). |
The Government has begun (as part of its 100-day plan) developing a new NPS-REG. We are awaiting further clarification as to expected timeframes for delivery. However, we expect the new NPS-REG will be released for consultation by the end of this year. |
|
Restore 'remedy and mitigation' options to manage (rather than simply avoid) adverse effects from renewable energy production and transmission. |
Status unknown, awaiting further clarification from the Government. |
|
Requiring decisions on resource consents for non-hydro renewable generation within one year of application. |
Status unknown, awaiting further clarification from the Government. |
|
Increasing the minimum duration of consents for all renewable energy projects to 35 years. |
Status unknown, awaiting further clarification from the Government. |
Conclusion
We expect the Government will continue to make further announcements regarding renewable energy policy over the coming months. If you have any questions about what this could mean for you, please get in contact with one of our team. For more information on our energy sector expertise, please visit our energy and renewables, infrastructure and climate change and sustainability webpages.
This article was co-authored by Lisa Bazalo (senior associate) and Alastair Cameron (solicitor).
