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? 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
The same technologies have dominated electricity for decades Centralised, economies of scale Simple meters generation and transport ‘Dumb’ appliances 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 3
Now, many new technologies are converging to disrupt this picture Electric vehicles Computing Advanced metering Sensors Communications Smart Photovoltaics appliances Batteries 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm www.concept.co.nz 4
These technologies represent a huge opportunity… Cheaper, cleaner Cheaper, more transport reliable networks Lower Cheaper, retail cost- cleaner energy to-serve 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm www.concept.co.nz 5
… and are fundamentally challenging grid generation NEM grid demand 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 6
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? 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 7
“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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 8
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 9
Concept study, but with support from 8 organisations 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 10
Summary of emissions report 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 11
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 12
Projected NZ generation with / without EVs for sample scenario No EV uptake High EV uptake 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 13
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. 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 14
Projected NZ generation with / without solar PV for sample scenario No Solar PV High Solar PV 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 15
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 16
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 17
Our situation is different to most overseas countries 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 18
Coal-powered EVs overseas don’t save emissions compared to our wind-powered EVs 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 19
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 20
Economic impact of new technologies Report yet to be finalised, but provisional findings… 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 21
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 22
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 23
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) 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 24
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 25
Summary 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 26
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 27
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 28
The key lesson from Australia, Hawaii, Germany, UK, …. Get things right before it is too late! 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 29
Thank you 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 30
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 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 31
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