Nationwide uptake of energy efficient technology, such as LED lighting and heat pumps, could significantly reduce the
cost of meeting New Zealand’s ambitious renewable electricity goals, according to new modelling.
The Energy Efficiency and Conservation Authority (EECA) has investigated the role energy efficiency can play in
supporting the government’s ambition towards 100% renewable electricity by 2035*.
This ‘Energy Efficiency First: The Electricity Story’ modelling supports work led by the Interim Climate Change
Commission (ICCC) on that scenario.
EECA’s modelling finds widespread uptake of energy efficient technology in factories, businesses and homes would mean a
lot less new renewable generation would need to be built, to supply New Zealand with very high levels of renewable
electricity. This would require less capital investment and reduce national electricity costs.
EECA’s Chief Executive Andrew Caseley says the usual mind set is to build more renewable generation, but investment in
energy efficient technology is often overlooked.
‘Energy efficient technology is a key solution hiding in plain sight. Mass uptake of these technologies would lead to
significant electricity demand reduction and savings in factories, buildings and houses, so they would effectively play
the same role as new renewable capacity.’
The study shows the savings from system wide uptake of modern technologies like LEDs, heat pumps, energy efficient water
heating and electric motors could provide the system with the equivalent of 4,000 GWh of extra capacity, before any new
renewable generation would be required.
Mr Caseley says while there are costs to large-scale introduction of energy efficient technology, it is still cheaper **
than building new geothermal, wind or other renewable generation.
‘The other benefit of course is that consumers will need to spend less on electricity as a result of that investment.’
Mr 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
‘It’s time electricity efficiency receives the priority that it deserves’.
‘There’s no doubt that energy efficient technology can reduce electricity emissions, along with consumer and system
costs. It is absolutely critical that everyone involved in planning and investing in any part of the electricity system
understands the potential role of energy efficient technologies in our electricity system.’
* In a normal hydrological year
** For the first 4,000 GWh (See Page 3 graphic, or Figure 6, Page 16 of the Overview Report).
Q and A
How much of our electricity is currently renewable?
***Electricity Authority figures for 2013-17 (Electricity in NZ 2018) show New Zealand’s fuel sources are 81% renewable:
Hydro 59%, Geothermal 17% and Wind 5%.
What scenarios did the study model?
Six scenarios were modelled (see ‘scenario development’ in the technical report). These covered:
• a base case scenario
• two scenarios in which only additional generation is used
• one ‘hybrid’ scenario in which an optimum combination of additional generation and energy efficiency is used.
In short, the modelling found that the most optimal and cost-effective highly renewable electricity system will require
a combination of additional renewable build and investment in energy efficient technologies (i.e. the ‘hybrid’
How could electricity efficiency make achieving high levels of renewable electricity, cheaper?
EECA’s modelling estimates that the cost of deploying widespread efficient electricity technologies to meet existing
electricity demands are much lower than the cheapest new renewable generation, on an equivalent basis. For example,
4,000 GWh of electricity efficiency could be delivered for an average cost of $25 /MWh, compared to $60-$70 /MWh for new
wind or geothermal. See Page 3 graphic, or Figure 6, Page 16 of the Overview Report.
What kinds of energy efficiency measures are required to meet the scenario set out here?
More efficient technology including; LEDs for lighting, heat pumps for water heating, cooling, refrigeration.
For example if all homes and commercial properties used only LEDs there would be a 30-35% reduction in electricity use
If all current electrical space heating and water heating was delivered via heat pumps, we could expect savings of
around 40% for these end uses. See Appendix A of the technical report.
Not all available energy efficiency is used in the hybrid scenario, only those which are cheaper than new generation on
a like-for-like basis (cost per MWh).
What is required to do that?
System wide investment and uptake of energy efficient technology. This could be achieved through a range of mechanisms.
Regulation to phase out inefficient technology is the strongest and most effective lever to deliver the scale of energy
efficiency required to meet renewable energy targets, however subsidies and other forms of incentives such as third
party investment or alternative business models could also deliver large-scale, rapid change. Many existing products
available on NZ’s shelves and online are already regulated to ensure the worst performing technologies are not for sale.
How much would it cost per household to convert appliances to energy efficient ones?
For the average home, installing LED lights is expected to cost around $200 to $400, leading to consumer savings of $100
to $300 per year.
Converting the main living areas of an average home to heat pump space heating is likely to cost $2500 to $4000. This is
likely to lead to consumer savings of $300 to $600 per year.
How much would it cost business to convert to appliances to energy efficient ones?
For commercial premises such as an average size school, a lighting upgrade could cost around $60,000, leading to energy
savings of around 45,000 kWh per year and cost savings of around $15,000 per year.
High temperature heat pumps cost around $1M per MW of heat output. For a business running 5000 hours per year this would
represent a saving of $60,000-80,000 per year if replacing electrical heating.
How does this fit with new demand for electricity- like electric vehicles?
All of the efficient technologies proposed here provide the same or better functionality as the old inefficient
technologies they replace, meaning we can meet our electricity needs using less electricity. This was modelled as a
reduction in demand, but it could also be looked at as freeing up demand for other uses, like electric vehicles or
industrial heat pumps. If demand saved through energy efficiency is replaced by other uses, then the need for new
generation is higher, but the GHG emissions savings will be even higher if we replace inefficient uses of high carbon
fuels with efficient low emissions electricity.
When does peak electricity demand occur?
Peak electricity demand occurs mainly on winter evenings, requiring extra generation. This is often when hydro storage
and inflows are at low levels. As a result, it is more likely that thermal generation from fossil fuels, such as gas and
coal will be required at peak times than at other times. Many of the energy efficient technologies modelled also reduce
peak demand which contributes to some of the savings observed.
Why did the study not include future electricity demand growth?
We utilised a present day base case model of the current New Zealand electricity system, including actual demand from
2017. This was chosen to remove a key uncertainty, which is demand growth between now and any future modelled date.
Estimates of future demand growth may include or exclude energy efficient technology uptake, so it can be hard to
separate out from business as usual. This carries a risk of double counting or other mis-estimation.