Leveraging our energy resources to reduce global emissions and increase our living standards

Our first 30-year Infrastructure Strategy aspires to enable a net-zero carbon emissions Aotearoa through rapid development of clean energy and by reducing the carbon emissions from infrastructure.

New Zealand has an abundance of low-emission energy potential. We can grow our low-emissions energy generation beyond what we need to meet our climate change commitments, to create high-wage jobs for New Zealanders and reduce carbon emissions globally. This report provides technical analysis in support of this ambition.

The report is based on our own research, drawing on publicly available information.

Read the report

Key findings of the report

New Zealand has abundant natural resources for low-emission electricity generation

  • We have untapped wind, solar, hydro and geothermal resources that, in aggregate, are treble the amount identified by the Climate Change Commission for achieving net-zero carbon emissions by 2050.

Our electricity system could become more internationally competitive as preferences for low-emission electricity increase

  • Our electricity system can become more internationally competitive if we adopt lower cost decarbonisation policies than other countries.
  • As we already have a relatively low-emission electricity system, we could also become more competitive if preferences for low-emission electricity increase over time. This could lead more energy-intensive firms to locate their production in New Zealand.
  • This trend may have already started, as there have been six announcements recently of investments in large-scale international data centres for Aotearoa, including a hyperscale data centre near Invercargill to take advantage of the cooler weather and proximity to low emission electricity.

We could become cost-competitive in wind generation

  • Relative to the global average, we have high wind speeds across much of Aotearoa, which means electricity from our windfarms should be lower cost than the global average. However, that does not appear to be the case due to relatively high installation costs. If we can reduce those costs, then our abundant wind resources could be competitive internationally.
  • To reduce installation costs, we need to allow larger-scale windfarms (to benefit from economies of scale in their installation and operation) and adopt smarter approaches to resource regulations.
  • Currently offshore windfarms are about double the cost of onshore ones. However, offshore wind costs have been reducing faster than for onshore wind. If recent trends continue, offshore wind will be cheaper than onshore in 20 years. It is important we have a sound regulatory approach for making decisions about offshore windfarm applications. 
  • Solar generation is currently more expensive than wind generation, but like offshore wind, it is likely to become cheaper than onshore wind in the next decade or two.
  • However, we are unlikely to ever have a competitive advantage in solar generation, as other countries have stronger fundamentals, such as more sun and a better correlation of solar output and demand.

Our backup generation needs to be cost-competitive for our wind resources to be internationally competitive

  • Backup generation is needed to cover periods when demand is high, hydro storage is low and the wind is not blowing. For our wind resources to be competitive, our backup generation needs to be low-cost, or at least no more costly than in other countries.
  • At this stage we do not know the costs of the proposed Lake Onslow pumped hydro storage scheme. However, regardless of cost, our calculation is that it will not be available until 2037 at the earliest. By that time, inter-seasonal battery storage could be feasible and cheaper, and a more flexible option. Other approaches may also offer better value, such as biomass peakers and demand response from electricity users.
  • Similar points apply to backup generation from hydrogen and ammonia, and as they are emergent technologies investing in them now would be a longshot. They are currently very expensive, in part because of very low conversion efficiencies.

Developing our low-emission resources could improve wages and reduce global emissions

  • Developing our low-emission energy resources could improve wages and living standards in Aotearoa. The empirical evidence suggests that low energy prices, presumably due to an abundance of low-cost energy, drives economic prosperity in the short run, which can permanently lift income per capita. 
  • While a case can be made for removing unnecessary obstacles to developing our low emission energy resources, the evidence is not strong enough to justify subsidising their development.
  • Provided our low-emission energy is also low-cost, then a switch of electricity demand from the rest of the world to Aotearoa is likely to reduce global emissions. This is because demand reductions in other countries is likely to lead them to retire high-cost and high-emission thermal generation earlier than otherwise.      

Let us know what you think 

Our strategy work has the potential to shape New Zealand for decades to come, and it's important to us that everyone has the chance to have their say. Tell us know what you think about our analysis of the prospects for Leveraging our energy resources to reduce global emissions and increase New Zealander’s living standards. 
 
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