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Arab Spring reignites renewable energy debate

Grant Thornton (NZ)

Thursday 20th October 2011

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A majority of New Zealand's small to medium businesses would be prepared to pay higher energy costs in the short-term in order to reduce the economy's reliance on oil and have more stable energy prices in the long term, according to the latest research from Grant Thornton's International Business Report (IBR).

Of 39 countries surveyed, New Zealand was ranked 11th in its support of higher short-term energy prices, with 64% of businesses being in favour of this strategy. The global average was 41%.

Simon Carey, a Christchurch based partner of Grant Thornton New Zealand, said that New Zealand's support of higher short term prices was ahead of the United States (60%) and well in front of both the United Kingdom and Australia (44%). The BRIC economies had a low acceptance at just 36%.

"The survey also revealed a strong desire by New Zealand companies for the Government to be investing more into the development of renewable energy. New Zealand ranked 4th in the survey on this count with 76% of businesses calling on more investment from the Government compared with a global average of 44%," he said.

The survey indicated that since the start of the Libyan crisis earlier this year and the resultant lift in crude oil prices there was renewed interest in alternatives to oil.

In New Zealand there is definite attention being paid to alternates, especially geothermal and wind. Studies indicate that geothermal is currently the lowest cost technology for electricity production in New Zealand and this is backed by the fact that there are several geothermal projects of significance that are set for opening or under construction.

New Zealand is blessed with an abundance of wind but there are other factors that make the development of wind farms more difficult.

New Zealand started wind generation in the early 1990s, but the high set up costs compared with the wholesale electricity price has always made this a less than optimum option. However, the number of wind farms in New Zealand has more than doubled in the last four years.

A high New Zealand dollar and the establishment of more manufacturing sites in China, which has had the twin effects of forcing down overall manufacturing costs and also lowering transport costs because of the shorter distance from Europe, are helping to keep in check the high set up costs.

At a time when the New Zealand and global recovery remains fragile, it is encouraging to see that so many businesses would support extra investment in renewables even if this caused energy costs to rise in the short-term. These results should serve as a reminder to governments and international organisations that reliance of economies on oil needs to be addressed.

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