Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Electric cars, solar panels, and
                                                        batteries in New Zealand –
                                                        Are we best positioned to take
                                                        advantage of these technologies?

 Presentation to the Young Energy Professional Network
 Simon Coates, Concept Consulting
 8 June 2016
                                                                             www.concept.co.nz
20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm
Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Context to study

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
The same technologies have dominated electricity for decades

                        Centralised, economies of scale
                                                          Simple meters
                          generation and transport

                                                          ‘Dumb’ appliances

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Now, many new technologies are converging to disrupt this
 picture

                                                 Electric vehicles              Computing
Advanced
metering                                           Sensors                    Communications

                                                        Smart
Photovoltaics                                           appliances               Batteries
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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
These technologies represent a huge opportunity…

          Cheaper, cleaner                                                  Cheaper, more
          transport                                                         reliable networks

                                                                            Lower
                           Cheaper,                                         retail cost-
                           cleaner energy                                   to-serve
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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
… and are fundamentally challenging grid generation

          NEM grid demand

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Uptake of some new technology in New Zealand is starting to
 accelerate (e.g. solar PV)

                                                          But are things
                                                          heading in the
                                                        right direction for
                                                          New Zealand?

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
“Democratisation of energy”

 Decision making is moving
 from the boardroom…                                    … to the living room

 • Good outcomes will only emerge if the new decision-makers – i.e.
   consumers – have the right incentives and information

 • This currently doesn’t appear to be the case

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Study being undertaken to examine potential consequences of
  poor technology uptake
• Three separate reports
  1) Environmental outcomes given New Zealand’s renewables-dominated
  grid generation circumstances

   2) Economic consequences

   3) Social consequences
      – ‘Cost-shifting’ from technology uptake by
        some consumers, resulting in network &           Particular focus on
        retail cost-recovery being shifted onto others   whether low-
      – Consequences from altered tariff structures      income consumers
        to address the problem, resulting in winners     generally better or
        & losers                                         worse off

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Electric cars, solar panels, and batteries in New Zealand - Are we best positioned to take advantage of these technologies?
Concept study, but with support from 8 organisations

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Summary of emissions report

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Detailed market projections undertaken to examine emissions
 impact of technology uptake
• Concept’s market models work out least-cost generation build and
  operation, now and into future, based on key drivers, e.g.:
  – Demand growth and shape
  – Fuel & CO2 prices
  – Generating technology costs

• Run two scenarios
  – one with new technology uptake (e.g. solar PV, EVs, or batteries), and
  – one without

• Impact of technology on grid generation build and operation – and hence
  emissions

• Repeated over many different scenarios (e.g. fuel price, CO2 price, Tiwai
  in/out, etc.) to determine whether nature and scale of impact is consistent

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Projected NZ generation with / without EVs for sample
 scenario

               No EV uptake                             High EV uptake

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Majority of future EV demand is met by increased wind
 generation
                                                  Once system is more in
                                                  balance, increased EV demand
                                                  = new baseload (i.e.
                                                  renewable) generation

                  V. Early years, increased demand =
                  increased existing fossil gen.
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Projected NZ generation with / without solar PV for sample
 scenario

                     No Solar PV                        High Solar PV

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Three ‘phases’ of solar PV impact

                           2. System in balance.
                           Increased PV =
                           a) Reduced new baseload (i.e. renewable) build.
                           b) No avoided fossil.
                           c) Hydro progressively works harder to provide summer /
                                winter balancing

            1. Current system
            overcapacity.                               3. Hydro seasonal flex is exhausted
            Increased PV                               Increased PV is as per 2., except further seasonal
            reduced fossil                              balancing met by increased fossil and increased spill
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Considering all effects, EVs represent the biggest opportunity
  to de-carbonise our economy
• Analysis also considered avoided tailpipe emissions for EVs, and embodied
  emissions in manufacture of the technology
                                                         Flattening of demand
                                                         curve  more renewables
                                                         & less thermal

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Our situation is different to most overseas countries

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Coal-powered EVs overseas don’t save emissions compared to
 our wind-powered EVs

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And PVs avoiding overseas coal-fired generation is clearly
 better than New Zealand PVs displacing wind generation

                              Plus overseas summer-peaking markets
                              mean PV has a beneficial seasonal profile

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Economic impact of new technologies

            Report yet to be finalised, but provisional findings…

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EVs face pricing barriers to their uptake

                                                        • Night-time electricity charging
                                                          price being too high
                                                        • Little ability to be rewarded
                                                          from injecting at peak
                                                        • CO2 prices being lower than
                                                          ‘true’ social cost

                                                        • Currently largely offset by
                                                          avoiding paying for roading
                                                          charge,
                                                          – but this is due to be removed
                                                            in 2021

 • Scale of economic cost from delayed EV uptake could be $hundreds of
   millions

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Solar PV being over-rewarded for generation
                                                        • Principal benefit to
                                                          consumers from solar PV is
                                                          avoiding paying average
                                                          residential tariff

                                                        • However, value of solar PV
                                                          to New Zealand likely to be
                                                          a lot lower

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Solar PV is being paid for a service it is not providing
                                                        • Residential tariff
                                                          intended to be
                                                          broadly equitable,
                                                          and not too
                                                          inefficient, means of
                                                          recovering costs
                                                          given metering &
                                                          billing technology
                                                          constraints

• Not intended to be a means of paying for generation.
• Has effect of solar PV being paid as if it were reducing network and retail
  costs, whereas such costs are not reduced.
  – (Indeed, solar PV may increase both network & retail CTS costs)

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Although solar PV generally not economic for consumers at
  moment, it could be in future – but not for New Zealand
• NZIER estimate
  of economic
  cost from
  inefficient
  uptake of solar
  PV ≈ $2.7-$5bn
• Our estimate is
  $1.2bn - $2.6bn
• Renewable grid
  generation
  likely to be
  much cheaper
  for New
  Zealand
                                                         None of the technologies avoid the need
                                                         to build the grid
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Summary

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Wrong price signals  poor technology uptake
• Too much uptake of technologies which consume most, or generate least,
  during peak periods
  – Solar PV
  – Electric heating

• Too little uptake of technologies which
  – Contribute to avoiding peak demand, e.g.:
         •     Non-electric heating (wood or gas)
         •     Home insulation
         •     ‘Smart’ appliances
         •     Vehicle-to-grid electric vehicles (EVs)
   – Consume most at off-peak periods, e.g.
         • EVs

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Getting price signals right is critically important.
 But challenging!
                                                        • Wrong prices to consumers 
                                                          – Worse environmental
                                                            outcomes
                                                          – Higher energy & transport
                                                            costs
                                                          – Poor social outcomes
                                                        • Transitioning to the ‘right’
                                                          prices won’t be easy
                                                          – Inevitably winners & losers
                                                        • Need:
                                                          – Evidenced-based basis on
                                                            which to make decisions
                                                          – Appropriate incentives on
                                                            networks & retailers
                                                          – Broader political &
                                                            consumer buy-in
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The key lesson from Australia, Hawaii, Germany, UK, ….

                                                        Get things
                                                        right before it
                                                        is too late!

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Thank you

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About Concept
• Concept is a specialist energy and economics consultancy that provides services to clients in New
  Zealand, Australia and the wider Asia-Pacific region.
• Concept provides advice on energy sector policy, business analysis, restructuring, market design,
  regulatory issues, energy modelling, market analysis, and technical issues.
• Combining economic rigour, leading modelling & analytical skills, and practical backgrounds in the
  energy sector, Concept consultants are able to provide practical solutions to client problems based on
  robust analysis.
• For more information, visit www.concept.co.nz or email info@concept.co.nz .

Disclaimer
• The information and opinions expressed in this presentation are believed to be accurate and complete
   at the time of writing.
• However, Concept and its staff shall not, and do not, accept any liability for errors or omissions in this
   presentation or for any consequences of reliance on its content, conclusions or any material,
   correspondence of any form or discussions arising out of or associated with its preparation.

                                                                                       www.concept.co.nz
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