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Thank you Grenville for the introduction and thanks to the organisers, the New Zealand Wind Energy Association, for inviting me to speak this morning.
I’m delighted that you have been able to hold an in-person conference this year. It was regrettable that last year’s event had to be cancelled due to the nationwide Level Four restrictions.
The New Zealand Wind Energy Conference provides an important forum for government, industry and academia to celebrate success, debate priorities and plan for the future transformation of our energy sector, so that we can reach net-zero carbon emissions by 2050.
Wind energy is a critical piece of that transformation and the collective expertise represented in the room today has a key role to play.
You will all be aware of the Climate Change Commission’s draft advice on the first three emissions budgets. It confirms the reality of the climate change response we must all make. The proposed emissions reductions pathways, are ambitious, but they also recognise what is technologically and economically realistic, and they consider the impact the pathways will have on people. Encouragingly, the draft report shows we have the tools and technologies available today to make big strides towards an affordable and sustainable economy that provides future focused jobs in a low emissions world.
Already we can see how industry is reacting positively to our policy direction, with a number of businesses demonstrating leadership by making renewable energy investment decisions.
Much of this investment is in wind thanks to its cost-effectiveness, reliability and abundance.
Meridian Energy will build a new windfarm near Napier – a 41-turbine, 176 megawatt project – at a cost of $395 million.
Tilt Renewables – with Genesis Energy contracting in as an off-taker – has delivered the $277 million Waipipi wind farm in South Taranaki, which is now supplying energy to the national grid.
Mercury Energy has committed to building the massive two-stage Turitea wind farm. Stage One is still under construction. Together the two stages represent over half a billion dollars of investment.
Mainpower’s Mt Cass 22-turbine wind farm for $200 million, the largest planned yet in the South Island, is also under way.
Contact Energy has planned a new 152 megawatt, $580 million geothermal power station at Tauhara near Taupō
I am also being briefed about several exciting developments in the solar sector which forms another important piece of the energy jigsaw.
Labour’s 2020 election pledge brought forward our target of 100 per cent renewable electricity from 2035 to 2030 to decarbonise our electricity system faster. And while I am mindful of the big challenges we face, I believe a fully renewable electricity system is achievable and will help us to decarbonise other parts of our economy. We have already made massive strides in our transition process, even in the face of recovery from Covid-19.
The New Zealand Battery project has been set up to address the lack of dry year storage in our electricity system. Dry years, like the one we are experiencing now, with stressed wholesale electricity pricing driven by low hydro-lake storage and tight gas supplies, are costly. And while we are still far from the need for a conservation campaign the situation shows why we must think seriously about ‘dry year’ energy storage, particularly in a future with 100% renewable electricity.
The $30 million initial study will investigate pumped hydro against other technological possibilities to eliminate the need for fossil fuels in our electricity system. It will provide comprehensive advice on the technical, environmental and commercial feasibility of a grid-level, renewable energy storage solution.
Pumped hydro at Lake Onslow, as well as other smaller scale pumped hydro options, are the focus of the study, with other technologies being assessed as comparators. The first phase of this project is on track to report back in late 2021. The second phase involves business case development and is expected to be completed in late 2023 or early 2024.
In parallel to this work I have been clear that I am concerned about at the prospect of rising power prices, something that households and businesses can ill-afford, especially those still recovering from the impact of Covid-19. This is why I have asked officials for advice on current wholesale price levels and trends.
Regarding the outlook for this winter and the current lake storage levels, I am closely monitoring the situation to ensure that demand continues to be met and that the market is responding in an efficient and appropriate way. Additionally, my officials at the Ministry of Business, Innovation and Employment are working with Transpower, the Electricity Authority, and the Gas Industry Company to establish systems and processes to enable a coordinated whole-of-sector response.
I also note that New Zealand hosted its first Offshore Wind Forum in Taranaki late last year, which explored the potential for offshore installations to deliver significant volumes of emissions-free electricity to the national grid in the future. This option may fit well with other emerging technology solutions, such as hydrogen production – and a local hydrogen network coupled with export opportunities. Both, or either, of these technologies may also work well alongside a New Zealand ‘Battery’. I welcome this conversation on offshore wind, as no single technology can help us deliver on our emissions reduction and renewable electricity goals alone.
Government is also reviewing Resource Management Act national direction instruments to support renewable electricity generation. This includes making changes to the national policy statement on renewable electricity generation as a priority, as well as looking at changes to transmission-related national direction instruments. I recognise the importance of these changes for the wind energy sector want to take a moment here to thank many of you here today that have contributed to this process – through submissions, and providing information to officials.
This work has been aligned closely with the RMA review currently underway at the Ministry for the Environment. The RMA review will be important to unlock fast development of new renewable electricity generation, to displace thermal generation and meet increased demand for process heat and electrification of transport. New legislation and national direction is likely be in place in 2023. Funding of $3 million has been allocated to the Ministry of Business, Innovation and Employment to work closely with their colleagues at the Ministry for the Environment on the RMA review work.
There is also the development of Resource Management Act national direction on industrial greenhouse gas emissions. Proposals for national direction are currently being consulted on, with a focus on coal boilers as well as encouraging energy efficiency and best available technology across all sources of fossil fuels used by industry. The intention is for national direction to be in force by December 2021.
We recently announced the first successful applicants for our $70 million Government Investment in Decarbonising Industry Fund, which will see companies across New Zealand optimising their energy use and switching to cleaner fuels. The decarbonisation fund provides crucial financial support to business and industry to help them switch from boilers run on coal and gas to cleaner electricity and biomass options. This helps create jobs in the clean energy sector, and future-proofs our economy.In total, in this first round, fourteen companies will receive $22.88 million in co-funding to help their businesses transition away from fossil fuels. This will achieve up to ten percent of the gross long-lived emission reductions required from the Climate Change Commission’s first draft carbon budget for the period 2022 to 2025 – or equivalent to taking 49,000 cars off the road.
A number of you in the room work in the community energy space and will be aware of the Government’s $28 million Māori and Public Housing Renewable Energy Fund. It will trial and evaluate renewable energy solutions to improve the wellbeing of people in Māori and public housing through lower household energy costs. Investment in public housing will also assist with decarbonisation of public sector infrastructure. Kāinga Ora is well advanced with its first project for public housing – procurement is currently underway for installation on solar panels on approximately 100 houses in the Wellington region.
Of course, we cannot ask New Zealand businesses and households to decarbonise without playing our own role. That’s why the $200 million State Sector Decarbonisation Fund was announced in January 2020. The SSD Fund provides co-funding to schools, tertiary institutions, hospitals, and other government agencies for projects to replace fossil fuel boilers with cleaner alternatives, replace vehicle fleets with electric vehicles, and install energy-efficient chillers and LED lighting. The SSD Fund is now a key part of the Carbon Neutral Government Programme that was established in December 2020 with the aim of making a number of government organisations carbon neutral from 2025.
The phase-out of natural gas from our energy system is another important but complex task. As we transition, our natural gas market will need to continue to provide secure and affordable energy for our electricity system, and keep some of our major manufacturing companies operating. The question for the Government is how we can best support this phase-out, while ensuring that consumers can still access the energy they need. I have asked the Gas Industry Company to investigate the current settings in the natural gas market around contractual arrangements and how these affect the overall availability and flexibility of natural gas. Meanwhile, we are amending the Gas Act to provide clear regulatory powers for information disclosure issues that may have significant downstream impacts, such as on electricity markets, or create risks for security of supply.
Fortunately, as a result of the deal between Meridian Energy and the New Zealand Aluminium Smelter we now have a greater understanding and knowledge of the short term national electricity supply and demand picture until the beginning of 2024. The extended timeline for the smelter’s operations provides a valuable opportunity to work with stakeholders to put in place the plans we need to support the transition of the Southland economy. This includes potential new uses of the smelter site, and for Transpower to make the necessary transmission investments to open up new options for the use of electricity from the Manapouri hydro station.
I am sure many of you worked hard recently to deliver a submission on the Climate Change Commission’s draft emissions budgets and policy direction for our emissions reduction plans. Following release of the Commission’s final advice on 31 May 2021, the Government will set emissions budgets and develop an emissions reduction plan, as a statutory requirement, to outline policies for emissions reductions in response to this advice. The heat, industry and power component will be set in the context of the New Zealand Emissions Trading Scheme and will consider a broad scope of complementary measures for emissions reductions in the sector for the short and longer term.
I know many of you want to ask me whether Government will develop an energy strategy and set a renewable energy target. The Climate Change Commission recommended that an energy strategy be in place by 30 June 2023. The Government welcomes this recommendation and we will be considering it carefully, with a view to indicating a response to the recommendation in our emissions reduction plan. Government also welcomes, and will be carefully considering, the Commission’s recommendation for a broader renewable energy target, together with the Commission’s other recommendations. As previously noted, we have an aspirational target for the renewable electricity sector already – 100 per cent renewable by 2030 – which remains a priority for the Government. We await the Commission’s final advice on an energy strategy and targets, incorporating public feedback, before making any final decisions. This final advice is due at the end of May.
So to finish up, this is an exciting time to be part of the New Zealand wind energy sector, which plays such an important role in helping us achieve our shared climate goals, unlocking electrification, providing modern jobs, and transforming our economy. But there is still more to do.
Thank you for the opportunity to speak with you about the Government’s actions to date and the shared plans we have underway to enable the transition.