Globally, an energy revolution is occurring. Will Hawke’s Bay be an early adopter or a slow learner?
For most consumers, energy is a ‘take for granted’ aspect of our lives.
When the ‘system’ is working, we tend to think about energy when a light bulb burns out, we get our monthly utility bill, we’re searching for firewood, deciding to turn on the heat pump or portable heater, or we’re paying for petrol or diesel at the cash register.
Occasionally the system crashes on a major scale, and then we might think about where our electricity actually comes from and how resilient the delivery grid is.
Finally, if we have environmental concerns, we worry about the immediate and long-term impacts of energy use – the global warming effects of carbon fuels; the local air pollution caused by vehicles, burning orchard prunings or non-compliant woodburners; or whether we should invest in solar or double-glazing for our homes, buy an electric car, or take some other energy conservation action.
But normally, unless we’re opening our wallet for it, energy is not a top-of-mind issue.
In our consumer cocoon, we take little day-to-day notice of the monumental changes occurring in the global energy ‘ecosystem’ that will quickly transform much of what we now understand and take for granted.
Ultimately, these changes will find their way to New Zealand and Hawke’s Bay … although not as quickly as in more densely-populated regions, where scale, business and environmental imperatives, government policies (at all levels), and abundant venture capital all converge to accelerate the process.
The trends
So, what are the changes we will eventually need to address?
Two recent reports by major business and economic analysts – Bloomberg and McKinsey – paint a remarkable picture of the scale and implications of the energy transformation underway.
Perhaps the best news from a ‘planetary health’ perspective is the decoupling of economic growth from energy consumption. Electricity is the key. For example, while global power demand is projected to grow by 58% over the next 25 years (or 2% per year), the intensity of electricity use per unit of GDP is expected to fall by 27% over that period.
A projected US$10.2 trillion will be invested worldwide in new power generation ($4 trillion of that in China and India alone), but 72% of that will go to renewables. Investment in renewable energy will increase to around $400 billion per year by 2040; interestingly, more of that going to wind than solar.
As a result, renewable energy will reach 74% penetration in Germany, 38% in the US, 55% in China and 49% in India. One result is that global coalfired power generation will peak in 2026, less than ten years. Even though coal will still account for 30% of China’s power generation by 2040, the global shift from coal is a fantastic outcome for the planet.
Because New Zealand already generates 80% of its electricity from renewables (topped only by Norway’s whopping 98%), we tend to be a bit smug about our energy status in the global scheme. And given the relatively small contribution from electricity generation to New Zealand’s overall Greenhouse gas emissions, solar/wind’s potential to minimize New Zealand’s emissions is limited.
Yet the fact remains that we still have the 2nd highest rate of carbon emissions per GDP amongst OECD countries. And even this winter, up to one-third of NZ’s electricity was coal-generated.
The growth in renewables is propelled by technology-enabled steeply decreasing costs – solar PV dropping 66%, onshore wind by 47%, off shore wind by 71% – reinforced critically by major technology improvements in electricity storage … i.e., batteries.
Batteries will be a $20 billion per year business by 2040, up tenfold from today. Much of this expected growth is attributed to electric vehicles (EVs), consumer electronic devices, and small-scale batteries installed by households and businesses alongside PV (photovoltaic) systems.
Half of European electricity in 2040 will come from renewables; 45% of Australia’s power will be generated ‘behind the meter’ as wind, PV and batteries replace coal.
Meantime, in what the government terms a ‘disruptive’ energy scenario, if NZ reached 580,000 homes with solar PV and batteries, solar would make up only 20% of new generation and 3% of the total by 2040.
Climate implications
From a planetary health standpoint, the shift away from coal is vital.
As noted above, McKinsey projects that global power sector emissions will peak in 2026 – at 14Gt, and then decline by 1% a year (mainly due to improvements in China). Even in the US, economic drivers will account for a 30% decline in power sector emissions, regardless of government policy – it’s just smart business!
Although this is good news, is it good enough?
Says McKinsey: “Although the world’s power sector emissions reach a peak within a decade, the rate of decline in emissions is not nearly enough for the climate. A further $5.3 trillion investment in zero-carbon capacity will be needed to place the power sector on a 2C trajectory.” [Referring to the Paris Agreement 2C ‘tipping point’ target.]
Solar, wind, along with energy storage will be very important in achieving this global shift. Each country, region and consumer will need to find the right mix to sustainably meet their needs taking into account environmental, economic and social considerations. Meantime, transportation is in the bullseye.
Electrification
To date, the history and management of energy supply and use has been relatively simple – an Industrial Revolution built upon steam engines fueled by wood, water or coal; then 20th century introduction of oil, gas, and nuclear. Access to these supplies drove geopolitics, while behemoth corporations with global supply and distribution chains arose to manage their exploitation.
The future, as McKinsey sees it, is all about fragmentation – more players and more technologies. More than $200 billion of private equity capital has been invested in energy ventures over the past five years. As many as 20 new energy sources are on the horizon, many allowing for more distributed patterns of development and delivery … most yielding electricity.
Electricity will become the new energy king, with electricity demand rising to 25% of global energy demand by 2050.
To McKinsey, nowhere is this likely to be more evident than in the case of mobility – “center stage is the electric vehicle” – with EV sales by the mid2030s reaching 27-37% of new vehicle sales. A sign of the times … Volvo recently announced that from 2019 every new Volvo will have an electric motor.
Even Bill English and the Nats have jumped on the EV wave, pledging that one-third of the Government’s 15,500 auto fleet would be electric by 2021. Meantime, setting the pace, HBRC is the proud new owner of a Mitsubishi plug-in hybrid SUV.
McKinsey notes that “private EVs could become competitive with comparable internal combustion vehicles by the mid-2020s on a total cost of ownership basis.”
Going forward, McKinsey sees a convergence of EVs, autonomous driving technologies, and the ‘sharing economy’ leading to a “mobility revolution”, particularly in urban centres …
“What were once disparate, disconnected segments of the energy system – liquids-fueled transport, gas-heated buildings, electricitypowered lighting, diesel-based back-up generation – could converge around the electron. Electricity from power plants or rooftops will power homes and charge batteries, which will supply or slot into cars, which will act not only as modes of transport but as portable batteries themselves. Such a power system will change how individuals manage their energy and make transportation decisions, how governments regulate electricity, and how manufacturers design their products.”
A utility like Unison will need to understand a wider range of end uses (for example, transportation patterns that vary by time and season), deal with more technology providers, and learn how to manage flows and reliability in a distribution system where many energy users are also suppliers. And figure out how to charge for a distribution grid on which all customers are not equally dependent.
The effect of you and many others using EVs for transportation would be a decline in global demand for liquid fuel used in light vehicles of between two to six million barrels a day – a drop of 8-25%. The dominant use of liquid fuels would turn to chemicals rather than transportation.
No doubt the oil companies will cope and adapt, if for no other reason than they have vast amounts of capital with which to hedge their future energy bets.
Closer to home, the changes brought by electrification of transportation will be slower to advance. But any progress that drives down consumption of petrol and diesel will certainly be welcome. Not just for the environmental benefits, but also because our liquid fuels are imported, diverting our incomes to overseas pockets.
Still small in number – as of July NZ had 4,214 registered EVs – EV growth is strong and will be abetted as a wider range and more affordable models become available in the next few years. The graph above shows what NZ’s EV growth rate has looked like to date.
Here in NZ an analysis by Concept (consulting firm) estimates “each EV purchased in the near to medium-term to result in an average reduction in carbon emissions of approximately 1.4 tonnes per year, rising to 1.7 tonnes for EVs purchased further into the future.”
Concept says that for most households the $20,000 price tag of a solar and battery system would give a much better payback if it were invested in insulation, and a secondhand electric vehicle.
But wouldn’t it be nice to charge your EV with electricity you captured on your roof and stored in your high capacity home battery? Your investment in your home system would be paid to a local installer, and your petrol/diesel savings would be spent at a local restaurant or cycle shop or on your kids’ clothes, fueling our local economy.
All of this is becoming cheaper and more efficient. Tesla’s new glass tiles cost US$42 per square foot (material and installation), less than shingles with panels on top. The cost of solar panels has fallen by over 80% since 2005. Typical system costs in Germany and the US are shown at right.
And cheaper means mainstream. For example, IKEA has announced it will begin selling batteries for rooftop solar panels in the UK.
Google ‘solar equipment Hawkes Bay’ and you’ll find numerous specialist providers – like Hawke’s Bay Solar, Freenergy, Cellpower, and Harrison’s Energy Solutions – as well as traditional electricians expanding their services. Local providers Bruce Emerson (Harrison’s) and Aaron Duncan (Freenergy) estimate there are presently around 700 grid-connected solar systems in the Bay.
As the real cost of solar continues to decrease, it will become an economic option for more consumers to meet part of their electricity requirements, including charging their EV. EECA offer calculators to assist consumers with investment decisions for both solar PV and electric vehicles.
Biomass
The sun is not the only agent of change for energy in our region.
While solar-generated power can drive pumps for irrigation systems, cool packhouses and fuel cars, the utes and farm equipment of our rural sector still consume a hefty amount of diesel. Nationwide, diesel provides half of primary sector needs – about 630 million litres in YE March 2016 … and rising (26% more than five years prior).
And our main back-up power in Hawke’s Bay is diesel-powered (Whirinaki), providing 155 MW of our region’s 328 MW generation capacity.
Wouldn’t it be nice to have an alternative to diesel?
A diesel substitute is critical to a country where a fifth of greenhouse gas emissions come from the transport sector.
And, indeed, alternatives are on the horizon. Cummins, a 100-year giant in the business of farm machines, recently announced that in 2019 it will begin delivering electrified powertrains including both battery-electric and plug-in hybrids. And as noted above, auto and truck manufacturers are bringing forward gruntier EVs in the next few years.
But electric vehicles are not the only option. Biofuel is another alternative to diesel.
Z Energy has opened the country’s first commercial-scale biofuels plant in Wiri, South Auckland. The aim is to produce a diesel substitute – Z Bio D – that will cost about 2 cents a litre more than Z’s standard diesel. Fonterra, Fulton Hogan and NZ Post have signed up as early adopters. The $28 million plant will produce initially about 20 million litres a year, with the capacity to double that amount.
Z Energy says that compared to ordinary diesel, using Z Bio D can reduce carbon emissions by almost 4% with every fill. And domesticallyproduced, it keeps dollars onshore.
The material source for the Z Energy plant is tallow, a by-product of meat processing … a skill set of Hawke’s Bay!
But our region has another renewable supply source for bioenergy production – wood waste.
Wood waste at wood processing sites alone is estimated nationally at 4 million tonnes per year. Studies in Southland and Otago indicate about 20% of that volume becomes waste wood (a more conservative Forest Owners Assn estimate says 8%). Back in 2010, Scion, a Crown Research Institute, estimated that the wood waste from that year’s national forest harvest was capable of generating 12-23% of NZ’s liquid fuel demand, or 33-52% of our heat demand.
Pine harvesting will occur on a huge scale over the next decades in northern Hawke’s Bay – about 10 million tonnes coming from the Wairoa area in the coming decade – creating a possible source for bioenergy and power generation deserving of investigation.
Currently in Hawke’s Bay, our only experience with biomass-generated power is the Omarunui landfill, operated jointly by the Hastings and Napier Councils. There, partner Pioneer Energy produces landfill gas (55% methane) that generates 0.9MW feeding into the Unison grid and capable of powering 1,000 homes.
Local biomass consultant Christian Jirkowsky (Polytechnik) suggests that major heat users of biomass in the region could be the hospital, Heinz Wattie’s, Hawke’s Bay Protein, Canterbury Wool Scourers (there could be an industrial hub in Awatoto which could benefit from one common energy plant), schools, and the prison. But he laments that these prospects are hard to convince, as they resist considering social benefits or sustainability, insisting on short-term ROIs.
He observes: “As long as fossil fuels are cheap and as long as we don’t have a carbon tax and responsible emission standards, energy from wood waste will struggle, which is a pity given the amount of wood waste we’d have in the region.”
His final suggestion (and music to the ears of HBRC chairman Rex Graham): “I reckon that we’d run all schools in Hawke’s Bay just with the prunings from vineyards and orchards.”
Hawke’s Bay prospects
Will the global decline of carbon fuel use reach Hawke’s Bay?
Some would like to see Hawke’s Bay follow the oil and gas path of Taranaki, despite the trends noted in this piece.
However, the Regional Council is currently progressing a plan change that would prohibit oil and gas development where it might endanger our region’s aquifers … for which we’ve been admonished by Judith Collins, minister of energy and resources. And our Regional Planning Committee has called for limiting off shore exploration permits, to no avail at this point.
Meantime, rated in the top 10% of NZ sunshine hours (and with high intensity), and with a ‘wall of wood’ expected over coming years from our northern region, Hawke’s Bay would seem positioned to become an early adopter of the alternative energy ecosystem.
Perhaps EVs will be the thin edge into our cleaner energy future, followed by more ambitious development of bioenergy possibilities. In addition, like every other business adopting energy efficiency practices to lower costs, our councils will need to follow suit to be financially prudent.
All with the benefit of reducing our carbon footprint and creating a pathway to the ‘net zero’ carbon future for NZ and our region that Keith Newman wrote about in our last BayBuzz (‘A Less-Emissions Mission’).
All in all, doesn’t this path seem far preferable to hitching our energy saddle to the dinosaur of oil and gas development in Hawke’s Bay?