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Energy efficiency key to lowering cost of renewables push - EECA

Thursday 18th July 2019

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A focus on energy efficiency will lower the cost of the country’s drive toward greater renewable energy use and may increase the scale of emission reductions achieved, the Energy Efficiency and Conservation Authority says.

Installing LED lighting, high-temperature heat pumps and electric motors with variable-speed drives could save the equivalent of 4,000 gigawatt-hours of electricity – about 10 percent of current annual demand.

EECA says that would not only free up other renewable generation for other uses, but it would also reduce the spend expected on additional transmission and distribution and deliver a bigger emission reduction than going to 99 percent renewable generation.

“There’s no doubt that energy efficient technology can reduce electricity emissions, along with consumer and system costs,” EECA chief executive Andrew Caseley says.

“Overlooking the impact of energy efficiency creates a risk that we might build more generation than needed. This could result in higher than necessary costs, along with other impacts.”

The Interim Climate Change Committee has advised the government against pursuing its 100 percent renewable generation by 2035 goal. It says a focus on electrification of transport and industry – coupled with a rising contribution from renewables – will deliver three-times the emission reduction at relatively little extra cost.

EECA has taken the ICCC’s work a step further to test what could be achieved through wide-spread application of more energy efficient technologies – almost all of which are cheaper than installing new wind generation. In a business setting, reducing lighting, heating and mechanical power use costs less than half the cost of new generation.

The authority cited three scenarios, all of which retained gas-fired generation for peaking and dry-year cover.

One scenario limited the average role for thermal generation to less than 50 GWh of generation, the next modelled a 99 percent renewable system, while the third “hybrid” model tested the impact of using energy efficiency to reduce demand by 4,100 GWh.

All reduced emissions by more than 2.7 million tonnes a year, compared with a base year of 2017. But the hybrid model achieved a 3 million-tonne reduction as it required less thermal back-up than the 99 percent renewable scheme and also resulted in less investment in new geothermal generation – which also produces emissions.

EECA estimates the hybrid scenario would require a total capital investment of $4.1 billion – including $1 billion on energy efficiency – versus $6.1 billion for the 99 percent renewable scenario and $8 billion for the peak thermal model.

Total system cost, including transmission and distribution, is also lowest for the hybrid scenario at $148/MWh. That contrasts with $156/MWh for the base case and in the 99 percent renewable model, and $158/MWh in the peak thermal model.

Over 10 years, EECA says that $8/MWh reduction delivers a total benefit of about $2.3 billion.

When that system cost is combined with the emission reduction achieved, the hybrid scenario delivers a $92 benefit for every tonne of CO2 avoided. Peak thermal has an abatement cost of $94/tonne – almost four-times the assumed carbon cost of $25/tonne - while 99 percent renewable avoided emissions at a cost of $42 a tonne.

EECA observed that the biggest emissions benefits are available within businesses, yet energy efficiency efforts are not being taken up as quickly as expected, given the financial returns already available.

It noted that capital is usually constrained within businesses, which also tend to focus on a smaller number of large opportunities at any one time. Small projects have to compete for capital and often face a short payback requirement of up to 18 months. Efficiency efforts also have to work around operational requirements.

EECA said it was not within scope to recommend policy options for advancing efficiency efforts.

But it observed that mechanisms used in New Zealand and overseas in the past have included ramped-up energy performance regulations, buy-back schemes, subsidies and low-interest loans to accelerate uptake of new technologies, and regulations to require landlords to improve the performance of their buildings, such as with the Healthy Homes Guarantee Act.


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