REVIEW – NZ ENERGY STRATEGY TO 2050

The New Zealand Energy Strategy to 2050, (NZES), published October, 2007 is part one of two government papers to provide guidance about New Zealand’s energy future. The first part “Powering Our Future” covers the over-arching issues and the policy direction with government initiatives set forth to drive the policy. The second part (not covered in this review) is an action plan aimed at those responsible for running households, businesses and industries.

Part One – Powering Our Future is a comprehensive assessment of the NZ energy landscape. From the outset it is abundantly clear that the NZ Govt is aware of the criticality of the energy flows necessary to maintain the economy and the social cohesion it provides. It is also aware of the affects that society has on the natural environment. It paints a picture of a diverse and interconnected set of energy industries in a world that is rapidly changing and a world that is pushing the limits of the underlying resources. Any strategy looking 40+ years into the future is ambitious particularly in the flux of our time in history. When that strategy attempts to pilot a path through the conflicts of economy and the environment that ambition is enormous.

A great deal of effort has gone into planning the strategy and the document has a consistency at macro and micro-levels. The policies are backed with plenty of diagrams, illustrations and textual information. The diagram of NZ’s energy flows on page 107 (inset) is a masterpiece of graphical representation. The tone is positive and with the evidence of the research on the page it creates a feeling of reassurance. For a lay-person such as myself, (Architect), the NZES required an investment of concentration and mental space in order to fully digest the complex subject of a nation’s energy future. The glossary of acronyms and definitions at the rear of the document was essential.

The agenda presented in the strategy is the paramount importance of living sustainably. As such there were no surprises and the directions advocated appear to be in the nation’s best interest. Some effort was devoted to prepare the public for the roll-out of potentially unpopular policies such as the (carbon) Emissions Trading Scheme and NZ’s energy obligations to off-shore entities such as OECD that contribute to NZ’s energy equation are mentioned. The difficulties that energy providers have had getting projects off the ground because of the Resource Management Act were also addressed.

NZES clearly and lucidly separates vision from action. Action is teased out under main headings of :

- Resilient low carbon transport

- Security of electricity supply

- Low emissions power and heat

- Using energy more efficiently

- Sustainable energy technologies and innovation

- Affordability and wellbeing

The strategy however, has an “Achilles Heel” in its benign evaluation of future oil supply. Whilst acknowledging the advent of “Peak Oil”, the NZES adopts a so-called “mainstream” view on the matter. The International Energy Agengy (IEA) projects that world demand for oil will rise to circa 117 million barrels per day by 2030. This projection has wide support, however the IEA’s projections of future supply have been highly contested by those studying the peak oil issue. Those critical of the EIA are senior analysts and geologists who have come from within the oil industry and have formed the Association for the Study of Peak Oil and Gas (ASPO)[1]. The NZ Energy Strategy quotes IEA’s - World Energy Outlook 2006;

“the world’s proven reserves (including non-conventional oil) should be sufficient to meet demand to 2030” [2].

EIA’s own records of actual oil production in the period from 2005 to date shows the IEA supply projection to be greatly and increasingly wide of the mark. Not only is the wedge between demand and supply ever widening but it looks like a full blown delamination is happening, the consequences of which cannot be under-estimated.

One presumes that this critically important matter was carefully thrashed out in the offices of the MED prior to publication and that the final spin was adjusted for political reasons. In the currently optimistic economic environment it would be extremely difficult to come up with a publicly acceptable energy strategy based on the oil production peak that occurred May 2005, at 74.3 million barrels per day[3]. With every month that has passed since that date, it is becoming clearer that the actual supply trend is already downward. It is obvious that even without the political instability of OPEC countries in the Middle-East, real production is unlikely to ever exceed 90 million barrels per day let alone push through the 100 million barrels/day mark.[4]

An energy strategy based on the true trend-lines would be very different from the one published, and it would not create a feel-good factor. The Governors of New Zealand have therefore elected to post-pone the inevitable until circumstances make it obvious to the electorate that Draconian measures are what is actually needed. This will only result in reducing the time to prepare mitigation measures and make the affects more acute. In this the NZ government is no different to most Western governments which all founder on the shoals of a short term election cycle. The meta-problem of ever-increasing needs in an ever-depleting world, as illustrated by oil energy, will severely test the resilience of the Democratic process.

Meanwhile, the MED Discussion Paper: Options for Government Response to an Oil Supply Disruption has been quietly circulating since Sept 2006. This is a much more targeted document and does not try to set up a grand plan of managed actions to transition to a new sustainable economy. In my view a combination of both documents will form the strategy that will be adopted in the not too distant future.

Despite the crucial flaw discussed above the New Zealand Energy Strategy to 2050 is still an important document for New Zealander’s to read. There is much to learn about the issues that are unfolding and there is plenty of valuable information that is not wrong. All New Zealanders need to see how their personal choices fit into a nation’s attempt to chart a course into a very uncertain future.

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[1] Matthew Simmons (oil investment banker) is just one of many who have written extensively on the subject. A copy of a detailed analysis titled Another Nail in the Coffin (Nov 2007 ) leaves no doubt about the true state of world oil production.

[2] NZES - Box 7.1, p47

[3] This figure is for Crude Oil + Condensates.

[4] To put this into perspective, the most oil NZ has ever pumped is about one million barrels in one year (2006).