Jeanette Fitzsimons MP
Government Spokesperson on Energy Efficiency and Conservation
11 October 2007
Speech

Energy efficiency steps up for a sustainable NZ

Launch of the New Zealand Energy Efficiency and Conservation Strategy
11am, Grand Hall, Parliament Buildings
Wellington

See http://www.beehive.govt.nz/fitzsimons for powerpoint slides.

(Title slide)

Thank you David.

Energy efficiency and conservation uses smarter technology and behaviour change to meet our needs for services such as light, warmth, energy for business and transport. By being smarter about this, we can save energy, money and emissions. That’s good for families, business, the traveling public and our environment. In short it’s just good business nous.

This is the second version of the Strategy resulting from legislation I introduced during my first term in Parliament. It’s important in that it represents a step change in funding and delivery for energy efficiency, conservation and renewable energy. Since the first strategy, oil prices have tripled and climate change has accelerated and as other recent announcements show, this Strategy has never been more timely.

This version of the strategy has also been approached in a new way. Officials have worked hard on the cost benefit analysis that underpins it. We have also taken a programme driven approach to setting targets and forecasting outcomes. So targets are built up from the bottom, not imposed from the top. The strategy also makes clear, on a programme by programme basis, who is responsible for delivery. Progress will be tracked and reported on annually.

But this is not a static plan. We’ve also got programmes in place to track new opportunities to make savings as new technologies develop and as the cost effectiveness of actions change. I expect the strategy to be flexible in responding to new opportunities and I also expect that successful programmes will attract increased funding as time goes on.

This second strategy pulls together many programmes on which we have been working over the past couple of years and adds a number of new ones.

More funding has been allocated to home upgrades and programmes to improve the competitiveness of business, including a new training programme for workers and the uptake of woody biomass. In transport we’re taking a significant step to drive down the economic and environmental cost of motoring by setting a new fuel economy and carbon emissions target. We’ve also introduced two new sections within the business chapter to target the farms, horticulture and forestry; and the tourism sector.

Today I can say that we are making sound progress. But, as this strategy shows, there is more to be done.

(Slide 2, NEECS (2001))

The first version of the Strategy published in 2001 contained challenging targets for energy efficiency and renewable energy.

Energy efficiency improvements were responsible for constraining the growth in the demand for energy by around 19 PJ, limiting growth to around 59 PJ between 2001 and 2005. A significant proportion of this is a result of NEECS programmes as the following examples show.

Under it, 31,000 homes were retrofitted with insulation. EECA’s products programme, covering Minimum Energy Performance and Labelling Standards (MEPS and MEPL) delivered $60 million in savings to consumers for a programme cost of $3 million. EECA’s business programmes have delivered $88 million in saving.

We are also on track to meet the renewable energy target of 30 PJ by 2012.

But we did not do as well as we wanted to. Lessons learnt from the 2001 Strategy have been applied to this version of it and I must say it is better for it. We have much more experience of what works and doesn’t work; what the barriers to success are and how we can overcome them. As a result, the programmes in this strategy are better designed and the targets set are better informed.

(Slide 3, Potential electricity savings)

Before I go into the details I just want to show you the potential to make cost effective savings. This graph is derived from work into the potential to make savings that has influenced the design of the NZEECS. It was commissioned by the Electricity Commission to find out how much electricity could be saved at a cost lower than providing new generation.

This chart clearly shows that there is significant scope for savings right across the economy. The maroon bars quantify the savings that are cost effective. The blue bars show how much of that potential it is reasonable to expect we can realise. These potentials are based on the cost of energy efficiency programmes compared to building new generation infrastructure.

The results shows that people are not the fabled rational economic actors of the economics text books. But why aren’t we realising this potential? We know the answers to that question too as a result of work done to design programmes for the NZEECS.

(Slide 4, Barriers and market failure)

There are a number of common barriers to the uptake of energy efficiency and conservation measures that contribute to market failure. These include problems meeting the initial cost of improvements, lack of information, split incentives (for instance between a landlord and tenant) and weak price signals. You will see that many of the programmes are designed to specifically overcome these barriers and the market failure they result in.

Now to the highlights of the Strategy.

(Slide 5, Highlights – what’s new?)

Homes, business and industry

• Up to 180,000 insulation, clean heat or solar hot water upgrades for families

• Enhanced programmes to improve the competitiveness of business and enhance the ability to manage energy and emissions costs – in particular around industrial motors and compressed air

• A major boost for direct use renewables, particularly woody biomass. There is $5 million of new money under FIDA and new targets for the use of wood in the commercial and residential sectors and for the direct use of geothermal energy.

• A special focus on the farms, horticulture and forestry and tourism sector.

(Slide 6, Outcomes Homes, business and industry)

So what difference will this make?

By 2025, we expect energy efficiency programmes to be saving 30 PJ of energy and 5-6 Mt of carbon emissions per year compared to business as usual.

This is on top of savings already realised from the 2001 Strategy.

We expect the programmes to expand the use of wood fuel and geothermal heat to deliver an additional 9.5 PJ of renewable energy in industry and homes.

Let me translate petajoules for you. One PJ is the equivalent of all of the electricity used by a city the size of Nelson in 2006. So by 2025, each year we will be saving enough to meet the need of 30 cities the size of Nelson. (Based on 2006 consumption.) Another comparison is that 30 PJ is around one and a half times the amount of electricity generated using coal at Huntly in 2006.

(Slide 7, Highlights – what’s new)

Transport
The main transport target is to improve the fuel efficiency of vehicles entering the fleet by around 25 per cent by 2015. An average standard will be set for vehicles entering the light fleet of 170g/Km of CO2 which translates to 7.4l/100km for petrol vehicles and 6.5l/100km for diesels.

We also believe we can reduce the distance traveled by single occupancy vehicles in urban areas during peak hours by 10 per cent through a range of measures including better urban planning and cycling and walking facilities.

One of the best ways to promote this is through expanding public transport. Clearly local government has a key role to play here and I’m, pleased to see this leadership coming through. As part of the scheduled review of Regional Land Transport Strategies, regional public transport targets are to be set.

Focusing work in this area and setting targets will help make funding priorities clearer.

(Slide 8, Transport outcomes)

Let’s have a look at the savings we expect in the transport sector as a result of NZEECS programmes.

In transport, one petajoule is the equivalent of one coastal tanker load of oil - 25 million litres.

The programme will save 550 million litres of fuel, 20 PJ of energy and 1.36 million tonnes of emissions per year in 2015.

By 2025, we expect drivers to realise cumulative savings of 4.8 billion litres of fuel, 175 PJ of energy and 11.8 million tones of emissions by 2025.

We cannot rely on price signals alone to drive greater vehicle efficiency. Oil prices and the New Zealand dollar fluctuate to an extent that it is sensible to complement the introduction of emissions pricing with common sense measures to increase the supply of more efficient vehicles so drivers have more options to reduce their fuel bills and emissions.

(Slide 9, Energywise homes)

Now I want to look at some of the programmes in greater detail.

The focus of Energywise homes is warm, dry, healthy homes; improved air quality and reduced energy costs

We know that for every dollar we spend on insulation, energy efficiency and clean heating appliances, we can get up to $2.20 back in energy and health savings. We also know that from BRANZ’s Household Energy End-use Project that much of our housing stock is poorly insulated and too expensive to heat adequately. This was groundbreaking work and has made a real difference to how we have designed programmes.

We’re taking action on multiple fronts. We’re going to provide interest-free loans so families can do up their own homes with insulation and clean heating appliances. We’ve continuing with our retrofit programme for low income families and for families accommodated by Housing New Zealand. We’re lifting standards in the solar water heating industry to improve quality and provide assistance to those installing cost effective systems. We’ve revised the Building Code to improve the quality of our homes and to save people money - $760 per year in Auckland and $1,800 in Dunedin on average.

By Christmas we’ll have launched the Home Energy Ratings Scheme (HERS). This scheme will involve an audit that will measure the performance of a home and identify where further improvement can be made. Having a rating will allow homeowners to realise the value of a well performing home when they come to sell or rent it. We’re expanding EECA’s products programme which is on track to deliver cumulative savings to Kiwi consumers of around $2.7 billion by 2025.

I can also announce today funding of $800,000 over two years to kick start a scheme where people are incentivised to have their old, energy-guzzling fridges taken away. The majority of Kiwi homes have more than one fridge. The average second fridge is typically more than 16 years old and costs more $200 a year to run. The savings from a modern fridge can be enough, over time, to pay for a new one.

(Slide 10, Energywise business – industrial and commercial)

I have a particular interest in improving the competitiveness of New Zealand business of all sizes. Using energy efficiency to cut costs and improve competitiveness is just straightforward good business nous. To date, $88 million dollars worth of nous in energy savings from the Emprove and Energy Intensive Businesses programmes have been realised.

Just 300 firms account for around 90 per cent of energy used in the sector so it’s important that they are targeted. That’s why these programmes have recently had their funding expanded by $700,000 with further expansion under consideration for future budget rounds. This latest funding boost is to be targeted to improve the competitiveness of our export sector.

A significant amount of energy is used by large firms in the form of process heat. There’s a lot of scope for fuel switching from electricity and fossil fuels to renewable energy such as woody biomass. Efforts in this area have been given a $7 million dollar boost under the Forest Industry Development Agenda as detailed in the Sustainable Land Management and Climate Change Plan of Action.

The Electricity Commission is to expand its programmes to increase the uptake of energy efficient compressed air systems and electric motors. Ongoing annual benefits from the EC’s electricity efficiency programme are expected to be around 450 GWhrs and CO2 savings of 87,000 tonnes.

We also know that smart businesses involve their workers in realising efficiency savings. Today I’m pleased to announce a $850,000 programme to partner with the stakeholders such as the CTU and Business New Zealand to develop a worker training programme. Our intention is to expand this programme to cover relevant technical training programmes in the future so that they contain energy efficiency modules.

Action will also be taken to lift the energy performance of commercial buildings through the Building Code, support for the Green Star rating scheme and additional research into lifting standards further. We will be building on lessons learned in the household sector through programmes such as HEEP and HERS. The strategy contains plans for a commercial building energy end-use programme (BEEP) to research how energy is used and design more efficiency programmes to save it.

More new money, $1 million, is going to go into a pilot programme to convert old coal-fired school boilers to clean, wood chip or wood pellet fired systems during 2008.

When it comes to improving the competitiveness and profitability of New Zealand businesses and helping them manage emissions, energy efficiency means business.

(Slide 11, Energywise business – primary production and tourism)

Farms, horticulture and forestry, and the tourism sector are major export earners for New Zealand. They are singled out in this NZEECS due to their importance to our economy and the challenges they face in managing energy use and emissions.

These challenges are two-fold. First there is the need to increase the uptake of energy efficiency and conservation measures and renewable energy simply to improve competitiveness and better manage future energy cost and the introduction of emissions pricing. Second, there is the customer-driven need to actively take responsibility for emissions and turn the negatives of the food miles and carbon footprint debates into positives around enhancing the clean green New Zealand brand and business boosting initiatives such as CarboNZero.

New programmes will focus on partnering with the rural sector to identify and deliver cost effective energy efficiency improvements on farms and for horticulture. The focus here will be on opportunities in glasshouses, dairy sheds, irrigation and on-farm processing.

We also know from the leadership shown in the tourism sector, sustainability is a winner, both for the bottom line and in terms of attracting visitors. New programmes will promote this and better enable the sector to adopt energy efficiency and conservation measures and renewable energy.

Finally, there are many opportunities on farms to produce energy from wastes, whether it be biogas from animal and crop wastes, or electricity from small turbines on irrigation channels.

(Slide 12, Energywise transport)

If we are to cut emissions and attempt to make our economy less depended on oil imports we need to take action across our transport system.

The place to start is reducing the demand for travel. This is where better urban form and planning come in. Walking and cycling facilities are vital if we are to give people the option to switch from their cars for short trips.

Producing travel plans for businesses and schools can help identify options for mode shift and efficiency gains. Enhanced public transport, in terms of the quality (frequency and reliability) of the services, can open up more alternatives to the car in many situations but it has to be high quality otherwise it’s unreasonable to expect more people to use it.

Funding for public transport has increased 10 fold since 1999, with major investments in commuter rail and bus facilities now well underway. There is still a long way to go if we are to get the public transport service we want for New Zealand. This is why funding for public transport is regarded as a priority for the government and is a feature of programmes detailed in this Strategy. I also welcome last week’s introduction of the Public Transport Management Bill to promote the introduction of cleaner buses and integrated ticketing.

We also need to look at how we move freight to make that more efficient and to promote a level playing field across modes. Work in this area will include a study into options for improving the efficiency of the North Island main trunk line, including the possibility of completing electrification.

Our vehicle fleet also needs cleaning up – to make it more efficient and cheaper to run. Kiwi’s are paying with their health and at the pump. I’ve already mentioned the new import standards which will literally save lives as well as money and emissions.

This, and another target to cut the average kilometers traveled by single occupancy vehicles by 10 per cent by 2015, should deliver cumulative savings of 4.8 billion litres of fuel, 175 PJ of energy and getting on for 12 million tonnes of emissions by 2025.

Better driver behaviour can save money, fuel and emissions. The NZEECS includes a guide to cutting fuel use by around 20 per cent by simple, no cost and low cost actions. Training programmes to increase the uptake of such practices are being developed. Locally produced biofuels, principally from tallow and whey, can help displace mineral fuel.

We’re also backing research into second generation biofuels with the Low carbon Energy Technologies Fund. And we’re mindful of the potential negative impacts of some methods of producing biofuels so will be producing voluntary guidelines around these issues. There are also programmes to position New Zealand as a world leader in the adoption of electric vehicles and I am pleased to acknowledge the leadership of state-owned Meridian Energy in this area.

(Slide 13, The electricity system)

There is a lot we can do to make the most of our existing electricity infrastructure to make it more efficient and reduce the pressure on it. Over time, this should allow us to get smarter about how we spend money improving it and make it easier to accommodate more renewable energy of all scales from large wind farms, to distributed generation to micro generation systems for homes. These actions will help us to meet the target of 90 per cent of our electricity coming from renewable sources by 2025.

Key to this is improving customer participation in the market. Better information can help large users improve the way in which they bid into the market, including for load shedding. As improvements are made in the market and new technology comes on stream, we expect options for demand aggregation to improve.

This is where somebody pools the ability of many small consumers to reduce their load and offers that facility into the market when demand is high or when there are capacity constraints. We also know that when consumers have real time price information and related tariffs, they are better able to respond to price signals. So called smart meters can help with this. The really smart ones can be linked to appliances to automate demand response. The Electricity Commission is working on establishing standards for smart meters.

Another exciting area is distributed generation, in particular micro-generation, such as photovoltaic, mini wind and hydro systems. Lots of work is going on in these areas to bring costs down and make them more viable for widespread use. Central to this is sorting out grid connections and arrangements for putting surplus power on to the electricity network.

We are also keen to see energy companies do more to promote energy efficiency and renewable energy. We’re looking at what changes we can make to various rules to help this along. Network losses remain a problem. They grow as the load on the system increases and we question if the right incentives are in place for lines companies to manage them. Work will be done to identify the best way to minimise them. Looking to the future, the Marine Energy Fund is important in that it should help bring on this developing technology so we can see just what contribution it can make. We need to get more systems in the water so we can gain first hand experience of operating them and further develop the technology to improve efficiency and drive costs down. The fund will be open for applications shortly.

(Slide 14, Government leading the way)

Partnering with local government will be key to the success of this Strategy.

How we plan, build and operate our cities and towns has direct impact on our energy needs and emissions. Local government is responsible for much of the planning and delivery of local and regional transport infrastructure in partnership with central government. This ranges from the provision of walking and cycling facilities for short journeys, to providing public transport for commuters right up to integrating transport modes, such as road, rail and shipping. The programmes in this strategy share common objectives around reducing congestion and emissions, and improving the overall efficiency of our transport network.

It is a similar story when it comes to energy infrastructure. While generators and Transpower work with the Electricity Commission to plan at a national level, local lines companies, councils and communities are involved in in the delivery of new projects. Again, local government is at the centre of things and can make a real difference to how regional energy needs are best met. Leading councils such as Christchurch City and Environment Waikato have energy strategies in hand. Greater Wellington Council is working to make land available for energy developments such as wind farms. Local government also has direct contact with consumers and is very well placed to support the delivery of energy efficiency projects and to promote the uptake of renewable energy in the community.

Central government has a role to play in providing an example of just what can be achieved and the carbon neutral public service programme, and the supporting Govt3 initiatives, set out to do so. Two good examples of contributing targets are to cut energy use per employee by 10 per cent by 2012, and average emissions from public service vehicles fleets by 25 per cent by 2012.

But there is more to this that just setting an example. Government’s purchasing power helps to create demand, and that can build capacity within the private sector for the supply of energy efficient and low carbon goods and services to the wider economy. This leads to further innovation and economic activity as householders and firms invest in these goods and services and as demand grows, economies of scale can be realised.

(Slide 15, What’s next?)

The NZEECS represents a comprehensive action plan that will deliver significant gains for families, business and the environment. But there is still more we can do. A number of programmes have described as under consideration, are also included in the Strategy.

These include looking at further steps to improve the performance of our housing stock for families so they are warmer, drier, healthier to live in and cheaper to heat. We can take no pride in the poor quality of much of our housing, how many homes lack adequate insulation and have polluting heating systems. This is a particular problem with rental stock and we need to help landlords stop offering homes that cost families and the wider economy dearly in health, lost school and work days and unaffordable heating bills. Kiwi families deserve better and minimum standards can help.

It’s a similar story for our businesses. Why should businesses that lease property have to put up with sky high energy bills because many commercial buildings perform so badly. This is a real drain on profitability and has a cost to our economy.

Remaining in business, there is an adage that what gets measured, gets done. We know from overseas that shareholders want to see the potential for efficiency gains realised. That’s why we’re going to look into options for our largest firms to have to report on energy efficiency potentials to their shareholders.

In transport, a pilot programme in Auckland has been successful in getting many old cars off the road in exchange for free travel on public transport. We need to look at how we can best build on this success and get more of the oldest, dirtiest and most thirsty vehicles off our roads.

As I mentioned earlier, there is significant scope to further improve the efficiency of our rail network and we’ll be undertaking a study into that, including investigating whether there is merit in completing the electrification of the North Island main trunk line.

Finally, we also know that many of our existing programmes across housing and business are delivering exceptional value for money, significant energy and emissions savings and considerable co-benefits around health and air quality. We’ll be looking to build on this success through programme expansions.

(Slide 16, Conclusion)

This is a strategy for all New Zealanders. In order for it succeed, all sectors of the economy, families and businesses must take action, government alone cannot deliver the results for our economy and environment we are after.

And doing so makes such good sense. We know this can help families, business and travelers save energy, money and emissions. On top of that, its will deliver significant health and environmental benefits. It will also help our primary producers and tourism operators take responsibility for their emissions and demonstrate this to international consumers.

The time for writing strategies is over. Now its time for action.

ENDS

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