Estimates Debate — Energy and Resources

Meitaki maata. We will now move on to the Estimates debate on energy and resources.

Madam Chair, thank you for the opportunity to take a call in this debate as the chair of the Economic Development, Science and Innovation Committee. For the benefit of the committee, I’ll give a little bit of an outline in terms of what we heard from the Minister, Megan Woods, at Estimates, and then I’ve got a couple of questions that I will pose to the Minister before, no doubt, others will want to pose their questions.

The main appropriations sought for energy and resources—we heard that there’s money in the Budget to fund energy storage, energy efficiency, and fuel switching projects that reduce carbon emissions from industrial processes. We heard about the work to fund the work of the Electricity Authority, which is a Crown entity responsible for regulating the energy market. We also heard from the Minister around the finance to expand the Warmer Kiwi Homes programme, and I’ll have a question about that soon. We also heard from the Minister about funding for the work of the Energy Efficiency and Conservation Authority. And, finally, we heard about support policy advice in terms of the management of the Crown mineral estate. We also had a discussion about the Commerce Commission’s study into the fuel markets, which aims to ensure New Zealanders get a fairer deal at the petrol pump.

I’d just like to pick up on a couple of those aspects. The first one I’d like to touch on—and I’ll have a question leading out of it—is the funding in Budget 2021 for the extension of the Warmer Kiwi Homes project. Now, as the Minister told us, there are a number of health benefits that are associated with a warm, dry home, and this appropriation in the Budget will allow for 47,000 homes to receive insulation and heating retrofits. Now, just to put a personal lens on this, in 2008 my wife and I—I was actually working in retail at the time—we had two young children and were in a fairly cold house, and we were fortunate enough to receive a grant through a community services card for insulation underneath our house, which was on piles, and also insulation in the roof, which was a scheme similar to this scheme. It certainly made a significant difference to our house, and certainly to our children and our family.

There’s quite often a discussion around health, housing, and education, how the three of those work together, and which is most important. Some would say that education is the most important aspect for our children, to create opportunity in terms of opportunities for them later on in their life; some would say, “No, no, it’s health that’s most important.”; some would say housing. Obviously, the three of them work together, but I have a view that, actually, out of those three, housing is vital to get right, because if you have young people, children, living in warm, dry, healthy homes, you can then work to wrap around those services around the education and the health. So I am very interested to hear a little bit more about this programme, and in particular what sort of health benefits the Minister expects that this will have, particularly for our tamariki. So my question on the housing aspect is: what will this funding be used for specifically, and how will it impact on low-income households, particularly children? So what sort of benefits does the Minister see this investment having for our tamariki?

The second aspect I’d like to touch on before I finish my contribution is the investment in the Energy Efficiency and Conservation Authority’s programme with businesses. I’m curious around what sort of programmes and policies have been successful in encouraging businesses to reduce their carbon emissions. Now, I know the Minister is particularly passionate about ensuring that we meet our Paris targets in terms of decarbonisation, and so the investment obviously links in with that, as we’ve heard from the Minister in the Estimates. I’d be interested to hear from the Minister in terms of, given the success of the first round of funding in the Government investment in Decarbonising Industry fund—and I know there was a lot of interest in that from businesses—what sorts of things does she expect the next round of that funding to support? How does she believe that this funding will support us, as a country, reaching our targets in terms of the decarbonisation and supporting businesses to decarbonise their work? Thank you.

In December last year, Cabinet signed off on $100 million for the New Zealand Battery project under the shovel-ready initiatives programme. This money is provided in Budget 2021 under the multi-year appropriation, energy and resources investment in infrastructure projects. This money included $30 million for an evaluation of different options, and $70 million for a more detailed feasibility study. The criteria that Cabinet signed off for this $100 million spend included providing a “pathway to 100 percent renewable electricity”. Since this decision, we have had the Climate Change Commission report, where the commission said that the 100 percent target should be “aspirational” and that the Government should consider replacing the 100 percent target with an aim of achieving 95 to 98 percent renewables. So my question to the Minister is: is the Government going to reconsider the objective of 100 percent renewable electricity for the New Zealand Battery project in light of the Climate Change Commission advice to shift away from this?

In her paper to Cabinet, the Minister said that to ensure the evaluation process was fair and robust and unbiased, she had adopted several mitigation strategies, including setting up a technical reference group. The Ministry of Business, Innovation and Employment now have set up the technical reference group, and while a number of the members have extremely strong CVs, we were surprised to see the appointment of a Greenpeace climate and emergency campaigner and one of the founders of School Strike 4 Climate put on the technical reference group. Is the Minister satisfied that these appointments fulfil her expectations of this group that it provide robust, unbiased, technical advice? The second question on that is: were the appointments to the technical reference group sent to her for approval before they were announced?

Thank you, Mr Chair. I’ll go through the four questions that I’ve had put to me so far.

The first was around the Warmer Kiwi Homes. I mean, very good to hear very personal stories about how this programme, which is where we bring together our energy and our housing policy, and our health policy as well—how they intersect. So this is a scheme that we brought in in our first Budget when we were in Government. It has been a scheme that has been very successful. In fact, we’ve had to top up Budgets all the way through because we have met or exceeded targets.

One of the things about this scheme that makes it different and marks it out from previous insulation schemes is that it focuses not only on insulating the home but also providing efficient and affordable heat source options for families as well. I very much believe that you can have the best insulated home in the world but if you can’t afford to heat it, it’s still going to be a cold home. So that is why I’m delighted that we have been able to achieve our targets around this, and, in fact, last year, had to bump it up again. The $120 million that was provided in this year’s Budget will see us add another 47,700 homes eligible for both that insulation and heat source scheme.

It’s something that we are looking to combat some of the health challenges that we have in New Zealand that, frankly, we should not be seeing in a First World country. We see it very much connected to some of the programmes that we have operating under Vote Health, in terms of rheumatic fever. And we know that warm, dry homes are absolutely critical if we are going to combat the scourges in our communities, such as rheumatic fever.

In terms of the GIDI programme—the Government Investment in Decarbonising Industry—this is a scheme that is achieving very well for the Government. We’ve allocated $279 million in the first round and that will actually achieve close to 10 percent of all the carbon savings that will be required under our first carbon Budget. In the 16 projects that have been funded to date: five high-temperature heat pumps, two boiler conversion to biomass fuel, two new biomass boilers, two new electrode boilers, four energy-efficiency projects, one biogas boiler, and four other technologies. It is achieving beyond what we thought it could. I mean, in terms of the 16 projects that we funded in the first round, it’s the equivalent of taking 62,500 cars off the road.

So, I think, we can see that for $22 million we are looking forward to round two of that programme being announced soon, and being able to point to some equally good programmes. I probably note that some of the exceptional results that we saw in round one, I’m not sure that we’ll be able to replicate those in every round, but certainly there.

I’ll also address the question that was put to me around the New Zealand Battery project and whether we’ll be revising the target in light of the independent climate commission’s report. Of course, Cabinet has yet to consider the recommendations of the independent climate commission, and so that is something that we are yet to do. But what I also point the member to is: as well as making that recommendation around the 95 to 98 percent, the independent climate commission said that we also had to look at a broader energy target. So, while New Zealand may score very well on the renewable component of its electricity sector, our broader energy system still has a lot of work to do in terms of decarbonisation.

I very much take the view that there’s a dichotomy—that we cannot do either unless we address the issue of the decarbonisation of dry-year storage. At the moment, as we all know—and we are seeing far too much of it this winter—New Zealand stores energy for a dry year in the form of fossil fuel, whether that be gas or whether that be coal. What we are seeing is that gas isn’t performing as the system would expect it to this year, so we are burning increased rates of coal. That is not something that our Government is content with. It is not something that we are willing to leave a system in place where the only option is to burn fossil fuel to counter a dry year. So that is why we have invested in that $100 million battery project.

I’m going to turn to the last question that the member raised—and that was that the singling out of two members of the technical reference group, look, I find somewhat disappointing. Two young women being appointed to a reference group in an industry that is so male dominated, I am disappointed that this is a line of questioning that that member has been pursuing for a period of time. I am going to defend the CVs of those two young women.

So the young woman that the Opposition member writes off as a Greenpeace activist actually has a Master’s in ecological economics. So I could say that is actually someone that is more than capable of sitting on a technical reference group that is appraising whether or not this makes sense both from an environmental and a business point of view. The other young woman that the member has chosen to target with her questioning is Isla Day, who was part of the School Strike 4 Climate. Isla is actually studying physical geography and biomedical science. She is a member of the Wellington City Council Environmental Reference Group.

Actually, I think that member needs to move herself a little bit more into the present and realise that, actually, when we are considering projects that do impact on our future, that are about climate change, it is absolutely imperative that we include the next generation in this. I’m not content to have the usual industry players, which are largely not as diverse as the technical reference group that we have appointed to this. This is too big of a question for New Zealand’s future, and one that I will make sure represents what the future of New Zealand looks like.

Tēnā koe, Madam Chair. Tēnā koutou e te Whare. I thank the Minister Megan Woods for her answers so far, which have been very clear. Obviously, climate change is the single biggest issue facing all of us and there’s going to be a need across all sectors for a considerable transition to a decarbonised economy, a decarbonised electricity system, and energy more broadly. Obviously, our largest area of energy—fossil fuels is the energy we use for transport fuels, which is mainly used in our privately owned light fleet, the cars, utes, and vans that we drive every day. I bring this up because there has been a lot of misinformation out there, I believe—and I wanted to ask the Minister some questions about this—misinformation about the coal imports this year. I’ve seen reports that coal is responsible for the majority of our electricity generation, that the increased coal imports are due to increased demand from electric vehicles. Obviously, all of this is not true, and so I just wondered if the Minister would care to expand a little bit on the reasons why we have increased coal imports this year.

What percentage of our electricity generation this year is from renewable and the increased demand on the grid from electric vehicles? My understanding is there is enough renewable electricity consented to more than cater for increased demand, even if we had a 100 percent electric vehicle fleet, which we are very far from because previous Governments didn’t do anything to actually incentivise electric vehicles.

Then I have a second question, which is around the role that smaller-scale solar generation might play in the transition to a decarbonised electricity system. My understanding is that the Government has actually invested in some pilot projects recently. Community housing schemes and marae might be receiving funding for solar generation. And I was just wondering if the Minister would like to speak to the benefits of that and how much the Government is investing in that area?

Thank you, Madam Chair. It’s good to get an opportunity, while the Minister Megan Woods was in her disappointed mode, to ask a question. When she told me in written question No. 26184 that, and I quote, “I find it very disappointing to continue receiving questions around the wide range of perspectives that make up the New Zealand Battery Project Technical Reference Group.”—can she elaborate further on why she as a Minister is disappointed to be receiving written questions?

Thank you, Madam Chair. So we understand the Government is carrying out a $30 million feasibility study into the Onslow pumped hydro project. That is a project intended to provide for dry-year storage to replace what the Minister referred to as “the failure of natural gas to actually support New Zealand’s baseload energy requirements at this time”. Although, the industry would counter that by suggesting it’s not so much a failure of gas—because we have the gas—it’s a failure of Government policy which makes it so hard to get the gas. But coming back to Onslow, that project would be New Zealand’s largest hydro dam, would flood a Unesco-level wetland, and would cost billions and billions of dollars and take decades to consent and construct. It doesn’t sound feasible at first glance.

Now, storing water for a dry-year risk in a hydro dam has merit, but that stored energy needs to be close to where people and businesses need it, and it’s been suggested by many in the energy industry that that is not the right place to store energy, because it’s so far away from the main centres. That water must also be held as reserves for years and years sometimes, between dry years, without producing any electricity or revenue for the dam owner. So the private sector energy generators are now asking the Government and they’re asking their customers why they would invest in new renewables and baseload energy generation when the Government might build an enormous hydro dam, take control of the electricity markets, and tank all of their brand new investments.

What New Zealand families and businesses need right now is affordable and secure electricity and energy. So, Minister, my question is: what plan does the Government have for affordable and secure electricity if the business case for the Onslow dam project shows that it is simply not feasible?

I will address some of the questions that have been asked. There were questions around our coal usage this year—what’s driving increased demand and to put that into context. The member asked for the proportion: I don’t have that proportion on me, in terms of the electricity sector, but I’m happy to get that to the member at a later time. What we do know is that the provisional data for coal use and electricity generation for the second quarter of 2021 is estimated at 585,000 tonnes, for a total of over 1 million tonnes in the first half of 2021. This suggests that New Zealand is on track to use similar amounts of coal for electricity generation as the dry period 2005-08.

So I think that we can see that, when we have low levels in the hydro system and we don’t have gas contributing to that, this is the way the system is set up to provide energy in New Zealand. As I’ve outlined, this is not something that we as a Government are content to see continue—that we simply must find ways in which we can store energy for a dry year, in a renewable form, which leads me on to some of the questions that have just been asked by the member that’s just taken his seat, Simon Court. He’s been asking why it is that there’s been continued investment in generation when the Government is looking at providing a storage dam. There is a bit of conflation in the contribution that the member just made around generation and storage. Of course, the pumped hydro that we’re looking at is not a hydro dam in terms of it being a generator; it is a place in which we will store energy to use in a dry year. So it’s not in a similar vein to a Manapōuri or a Clyde dam; it is quite different.

I don’t accept the assertion in the member’s question that we’re not seeing investment in new renewable generation. In fact, we’re seeing quite an uptick of investment in new renewable generation. We’ve seen a billion dollars invested by private generators this year alone. They can see that there is a huge growing demand for electricity. As we move away from fossil fuels, we decarbonise our economy and there is that growth pathway for electricity. I think over $1 billion of investment puts pay to that assertion.

What we also know is that—and moving on to another question that was asked around solar—it’s actually dry-year storage that will unlock the real potential of some of our more intermittent renewable sources, such as wind and solar, in New Zealand. The fact that we can have that ability to release from a pumped hydro system will mean that we can see more of an uptake in wind and solar. Wind is a very proven technology in New Zealand. I don’t think we have enough data on solar and the potential in a number of permutations, and that is exactly why we have invested the $28 million into getting data through trials on our Māori housing and our public housing stock. Some of it will be stored in batteries, some of it will go direct to hot water, some of it will be a solar array that generates for a community rather than individual houses, but I do note that we’re still learning a lot about different capacities for solar at different latitudes in New Zealand.

So, for example, I opened the Halfmoon Bay School solar array recently, and that’s performing at 20 percent ahead of the projections for the solar activity you’d get at those latitudes. So we’ve got more data that we need to learn and that we do need to make sure that we’re understanding the full potential, because intermittent renewable sources will definitely be a large part of our decarbonised pathway. But we need to make sure that we have good renewable storage solutions set up there as well.

I thank the Minister Megan Woods for that contribution again and those answers. Another debate that keeps coming up in this House is around gas and whether the Government’s decision last term to stop issuing new permits for exploration offshore for oil and gas has contributed to the issues with gas production this year. It’s my view that there’s no way these things are related. The Government has, of course, issued new exploration permits for oil and gas onshore. So that really does beg the question of whether the industry and the Opposition members in National and the ACT Party are just going around, you know, trying to draw some relationship where there is no relationship.

From the Greens’ point of view, given that the International Energy Agency—I’m not sure if the members in the National and the ACT parties have ever heard of this agency, but it is the world’s premier energy agency—came out in May 2021 saying point blank that Governments have to stop exploration for new gas, coal, and oil and new developments or extensions to gas, coal, and oil if we are to have any chance of meeting the commitments that all countries made to keep global warming under 1.5 degrees Celsius above pre-industrial levels. In other words, the International Energy Agency is saying that from 2021 Governments should stop development and exploration for not just coal but also oil and gas, because it is not mathematically possible to have a stable climate and increase the supply of fossil fuel production.

Would the Minister care to comment on that and whether or not it is possible to respond to climate change and ensure a healthy, stable climate for our future and to continue oil and gas exploration, not to mention the fact that, indeed, there is no relationship between a decision to discontinue exploration for oil and gas offshore and the current issues with production and gas that are affecting fields here in New Zealand right now?

Thank you, Madam Chair. To the Minister: given it is likely to be at least a decade before a pump hydro project is built, if it is built at all, and that New Zealand has experienced in the last 12 months an electricity system that’s lost resilience from reduced gas production, has she received any advice on potential imports of liquefied natural gas (LNG) to New Zealand over the next decade? Following on from that question: has she set aside funding or requested officials to do any work on the potential to import LNG into New Zealand? A third part to that is: has the Minister received any advice on the economic cost and greenhouse gas emissions of importing that, and how would this compare to utilisation of potential gas reserves right off the coast of our own country?

Thank you, Madam Chair. I do actually now have that data about the percentage of coal in our electricity system: 10 percent of that is there.

In terms of the role of gas going forward, I think the assertions that decisions that we made—the Government under the previous term—to end the issuing of new offshore exploration permits has had any impact on what we’re seeing with production problems off a couple of gasfields, I would remind members that, actually, to bring a field to production takes far more than 24 months. They still would be exploration permits, so they’d be a long way from being production permits. In fact, the Advertising Standards Authority found that to be a false assertion during the election campaign and ruled against some political parties using that as a line.

The assertion that often accompanies that is that there hasn’t been any investment in our current fields and that that’s part of the problem. Well, actually, we’ve had over $1 billion worth of investment since we made that decision, and there is quite a sprightly spring season in terms of bringing rigs planned for this year.

So I think we’ve got an important debate ahead of us as a country, and I just ask all members of this House to base that debate in fact. I think we’ll be far more served as a nation.

Then, we had a series of questions from the National Party energy spokesperson which were talking about the lost resilience of the electricity sector because of the failure of fossil gas to deliver that security of supply that we need in a dry year. What I would point out to the member is that, actually, we’re back now, in terms of our hydro lakes, to 99 percent in the southern system; 99 percent of historical average across—no, actually, 103 percent in the southern system; 99 percent across the whole country.

But we will keep experiencing dry years, and this is just why we’re investing in that feasibility study around pumped hydro. I would have liked to have seen us start that work a decade ago. We would be in a much better position as a country if previous Governments had taken decisions that it was obvious were going to be required under agreements that they’d signed up to around climate change commitments—that we would have had to have looked at ways to decarbonise the storage of energy in this country—but we have done that.

There was a very specific question from the member, too, about whether or not I’m receiving advice on importing liquefied natural gas. No, I’m not. I’m aware that the Gas Industry Co. is currently looking at that, but that’s not something that we’re considering.

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