TRUSTPOWER SUBMISSION: OUR CLIMATE YOUR SAY - CONSULTATION ON THE ZERO CARBON BILL - Ministry for the Environment
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
19 July 2018
Ministry for the Environment
PO Box 10362
WELLINGTON, 6143
By email: ZCB.Submissions@mfe.govt.nz
TRUSTPOWER SUBMISSION: OUR CLIMATE YOUR SAY – CONSULTATION ON THE ZERO
CARBON BILL
Introduction and overview
Trustpower Limited (Trustpower) welcomes the opportunity to provide a submission to the
Ministry for the Environment (MfE) on its Our Climate Your Say: Consultation on the Zero Carbon
Bill Discussion Document (the Discussion Document).
We understand that feedback on the Discussion Document will assist further policy development
and shape what will become the Zero Carbon Bill (the Bill).
The Bill will:
a) set out the long term commitment to transition New Zealand to a low emissions, carbon-
resilient economy through establishing a consistent approach to climate change that will
endure political cycles; and
b) respond to recent recommendations of both the Productivity Commission and Parliamentary
Commissioner for the Environment that the Government set out the laws and institutions for
a low emissions and resilient future, as other countries have.
The core building blocks that will likely be put in place by the Bill include:
a) setting a target to reduce our emissions – the net zero target for 2050;
b) introducing the stepping stones to reach this target – the emissions budgets;
c) setting up the institutions to provide independent expert advice and hold Governments to
account - the Climate Change Commission; and
d) putting in place arrangements so that New Zealand can better understand the risks associated
with climate change and make adaptation plans.
Trustpower’s views
We support the work being undertaken by the Government to set a long-term commitment to a
low emissions, carbon-resilient economy.
The building blocks to be put in place by the Bill will provide certainty around the approach that
will be adopted during the transition to carbon neutrality in New Zealand. This policy certainty is
crucial to investors in long life assets that relate to climate change.
Trustpower submission 1 19 July 2018The Bill will adopt features of the UK arrangements, including emissions budgets and an
independent Climate Change Commission, which we understand have been largely successful to
date1.
Trustpower’s feedback on the Bill draws on our experience as both an electricity generator and
multi-product retailer that has made significant investments in renewable generation and is
subject to many regulatory frameworks, colliding policy objectives, and significant national and
regional policy variances.
A number of entities have been undertaking vital work considering the transition to a low
emissions economy, including the Productivity Commission and Transpower. This work has
contributed significantly to the depth of understanding around what the transition to a low
emissions economy might look like in New Zealand and the supporting arrangements that will be
required.
We consider that the final recommendations of the Productivity Commission will be an important
input into the design of the arrangements to be put forward in the Bill.
Likewise, other work currently being undertaken by the interim Climate Change Commission to
plan a transition to 100% renewable electricity (in a normal hydrological year) by 2035 is also of
relevance when considering the arrangements to be implemented by the Bill.
As the discussion around transitioning to a low emissions economy has become richer, it has
become more apparent that there is an important role for the interim Climate Change
Commission in considering the costs and benefits of implementing a “target” of 100% renewable
generation in a normal hydrological year by 2035 prior to planning any transition. Further details
of our views around the adoption of this 100% renewable generation target are outlined in section
2.2.
Our review of the Discussion Document has also identified a number of important matters that
should be addressed prior to the Bill being formalised. These include:
a) considering how to take into account the energy trilemma when developing environmental
policy (section 2.3);
b) identifying if bi-partisan support on important foundational aspects of the Bill can be achieved
in order to provide greater investor certainty (section 2.4);
c) mandating the role of the Climate Change Commission in ensuring a cohesive policy response
to climate change (section 2.5);
d) determining the sequencing of events during the transition (section 2.6); and
e) recognising the trade-offs between investing to reduce emissions versus investing to mitigate
effects.
The remainder of our submission outlines our views on a number of broader but interrelated
matters including:
a) the role of the Emissions Trading Scheme (ETS) within the broader climate policy context and
the need for international connection (section 2.7);
b) the importance of international awareness when designing the new environmental policy
arrangements (section 2.8); and
c) the value of distributed generation during the transition (section 2.9).
1 In the course it its enquiry, the Productivity Commission engaged with a range of UK stakeholders about their experience with the UK
arrangements, “The consistent overall message was very positive about the UK Act and its achievements, with a general consensus that the United
Kingdom would not have made the same level of progress without the Act.” For further details refer to Productivity Commission (April 2018), Low
Emissions Economy – Draft Report, page 169.
Trustpower submission 2 19 July 2018Our responses to the specific questions posed in the Discussion Document are provided in
Appendix A.
Need to further consider transitioning to 100% renewable generation by 2035
Whether the Government’s aspirational goal of becoming net zero by 2050 is achievable will
depend on scientific advancement, technological developments, availability of capital, political
and regulatory certainty and cost-benefit assessment.
One mechanism for helping to achieve this goal is the specified target of 100% renewable
electricity by 2035 (including geothermal) in a normal hydrological year2. We note that the interim
Climate Change Commission is currently planning the transition to enable this to occur3.
We endorse the aspiration of significantly increasing both the aggregate renewable generation
and the percentage of total generation from renewable sources.
We consider, however, that a detailed cost-benefit assessment should be undertaken before
committing to this 100% renewable electricity target and making plans on how to achieve this
target. Whether the marginal investment in renewable generation is more effective in reducing
emissions than the marginal investment in reducing transport, agriculture or industrial emissions,
needs to be further considered by the interim Climate Change Commission. The efficacy of
initiatives will change over time as technology advances and costs come down.
Currently NZ’s electricity sector is largely renewable, and significant investment has been made
to date to achieve this. It will become increasing important that these investments can be used to
their fullest extent if New Zealand is to meet a target level of 100% renewable electricity
generation, or any target close to this. For example, water access and Resource Management Act
restrictions may hinder the ability of existing generation investments to provide assistance in
meeting the Government’s renewable generation target.
Being able to achieve the aspiration of significantly increasing both the aggregate renewable
generation and the percentage of total generation from renewable sources will require further
very substantial investment. Likewise, the anticipated electrification of the economy will further
enhance the important role of the electricity industry in achieving a low emissions, carbon-
resilient economy and require potentially even further investment (on top of that required simply
to meet the aspiration of a higher level of renewable electricity generation).
The recent Transpower Energy Futures White Paper identifies the future investment demand
pressures that the New Zealand economy will face as greater electrification occurs:
“Electrifying the NZ economy also represents a concentration of risk. With more and more of the
national economy dependent on electricity, as opposed to a wider range of energy sources (coal,
gas, oil), the resilience and reliability of the electricity system becomes all the more critical to the
country. Policy and regulatory settings must explicitly acknowledge the investment demand
pressures that New Zealand’s energy future represents and encourage direct investment across all
sectors of the industry.”4
The Transpower White Paper modelling estimates that, in the base case, daily peak electricity
demand will increase by ~66%, from ~6 GW in 2020 to ~7 GW in 2035, and ~10 GW in 20505. This
will require further very substantial investment in renewable generation that is able to meet the
2 As required under the Confidence and Supply Agreement between the New Zealand Labour Party and the Green Party of Aotearoa New Zealand
(52 Parliament).
3 We assume this role will transfer over to the Climate Change Commission to the extent that any work is still outstanding once the Zero Carbon
Act commences.
4 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 9.
5 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 22.
Trustpower submission 3 19 July 2018anticipated shortfalls in capacity during peak periods, or acceptance that gas fired generation
should remain at a greater proportion than implied by the current aspirational target.
The scale of the investment required to build the new generation to meet New Zealand’s future
renewable electricity needs is challenging. We don’t take a view at this time as to whether this
capital will be made available (that question is better asked of shareholders and the capital
markets who provide it) but we do note that capital is global and it will naturally flow to the global
markets with the best policy settings – in this case the markets that protect investor interests and
have settings that encourage the greatest level of emissions reductions per dollar (all else equal
– e.g. certainty of returns, stable political and regulatory settings etc.). To get our fair share of the
available capital, New Zealand must strive to have the best policy settings. To give a simple
example, investors will prefer to invest in a windfarm somewhere in the world where every turn
of the blade displaces coal rather than a windfarm that sometimes sits idle because of over-
capacity.
We note that there is a risk that adopting a 100% renewable electricity target will require an
overbuild of renewable generation in order to be able to meet peak energy requirements purely
using renewable generation in a normal hydrological year. In a “wet” year there will be idle
renewable generation. This would be a poor policy outcome, with an unintended effect of
discouraging investment. This would serve to undermine the overall aspirational goal of being
carbon neutral in New Zealand by 2050.
We consider that aspiring to achieve 100% renewable electricity in an normal hydrological year
by 2035:
a) needs to be balanced against other key initiatives to reduce emissions. If policy and capital
working together can achieve more emission reductions per dollar in the transport,
agriculture or forestry industries then those initiatives should be preferred;
b) requires keeping an open mind on the proportion of electricity generation sourced from
flexible fuels (including gas) until appropriate cost-benefit studies are done and the
capabilities of the renewable technologies are better understood (given that they are
developing all the time);
c) requires a detailed and sophisticated understanding of the costs, both with respect to capital
and in risks to the New Zealand economy identified in the supporting NZIER report, and a deep
understanding of the capital markets’ willingness to provide capital to New Zealand for this
purpose;
d) will require further consideration of the ETS and wholesale electricity market settings to
ensure that appropriate returns can be earned on new and existing investments. Otherwise
it is unlikely that the capital will be available to support the necessary investment in
renewable generation; and
e) requires other policy objectives to taken into account, such as affordability and security and
reliability of supply. This is explored further in section 2.3 below.
In summary, we support the interim Climate Change Commission considering:
a) the costs and benefits of having 100% renewable electricity (in a normal hydrological year) in
New Zealand by 2035, including the implications for security of supply and energy
affordability; and
b) the necessary regulatory and market settings that would be required to transition to 100%
renewable electricity.
The interim Climate Change Commission’s advice on these matters should then be considered by
Government prior to work being further continued to plan the transition to 100% renewable
electricity, in a normal hydrological year, by 2035.
Trustpower submission 4 19 July 2018Need to consider the energy trilemma when developing environmental policy
The World Energy Council’s definition of energy sustainability is based on three core dimensions
– energy security, energy equity and environmental sustainability. These three dimensions
constitute the “trilemma”6.
We consider that it is important during this environmental policy design phase that other policy
objectives relating to energy equity and security are taken into account. It is it vital that the overall
policy settings don’t unnecessarily increase energy poverty or reduce security of supply in New
Zealand.
The Business New Zealand Energy Council notes that “experience suggests that enduring
performance gains will be best achieved if policy interventions addressing a specific energy
trilemma dimension provide a clear path to better outcomes across all of the dimensions.”7
The current Electricity Price Review being undertaken by the Government focusses on the
“affordability” dimension of the trilemma. Specifically it will consider whether “the prices paid by
end-users for electricity are efficient, fair and equitable. Relevant perspectives on fairness and
equity include…. Whether all consumer have access to affordable electricity services, noting this
depends on many factors other than electricity prices (including housing quality and income
levels).” 8
The future challenges relating to the “security” aspects of the dilemma were highlighted in the
Transpower White Paper, which notes that under the base case modelling assumptions:
“… the significant growth in electricity demand, combined with an assumed greater resilience on
solar and wind, and continued dependence on hydro, leaves New Zealand more exposed than it
already is to supply shortages in winter or a dry year.”9
The Transpower White Paper also notes that:
“several potential technical solutions for managing New Zealand’s unique winter and dry-year
energy issue have been identified but none appears definitely feasible and economically
attractive.”10
Based on currently available technology, we consider that keeping flexible fuel generation in the
market is important during the transition in order to be able to meet these other important
objectives of security and reliability of supply and energy affordability. For example, the low
capital cost, high operating cost, and predictable availability of gas power generation makes it
well suited to match the objectives of energy affordability and security of supply, at a relatively
modest emission cost. This should be considered by the interim Climate Change Commission
when considering the aspiration of moving to a 100% renewable electricity target (refer to section
2.2 above).
Going forward, it will be important that the Climate Change Commission is cognisant of energy
affordability and security considerations when providing advice on environmental policy matters.
There should be a role for the Climate Change Commission in seeking input from Government
departments, including the Ministry of Business, Innovation and Employment (MBIE), and State
Owned Entities (SOEs) such as Transpower, whose work touches on the other dimensions of the
trilemma. For example, any recommendations that arise from the Electricity Price Review with
6 Refer to https://www.worldenergy.org/work-programme/strategic-insight/assessment-of-energy-climate-change-policy/
7 Business NZ Energy Council, 2017 Energy Briefing, page 3.
8 Ministry of Business, Innovation and Employment, Terms of Reference for the electricity price review, page 2.
9 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 29.
10 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 31.
Trustpower submission 5 19 July 2018respect to affordability will potentially need to be considered when developing environmental
policy.
Having the Climate Change Commission collate the advice from Government departments and
SOEs on the implications of a proposed environmental policy on affordability and reliability, would
be valuable for ensuring that Government can consciously make any decisions around trade-offs
between environmental sustainability, affordability and reliability. This aligns with our views
around the importance of a cohesive policy response outlined in section 2.5 below.
Need for bi-partisan support of core arrangements in the Bill
We note that the perception of regulatory or sovereign risk has significant implications for
investor confidence and will potentially undermine New Zealand’s ability to achieve 100%
renewable electricity and move towards greater electrification11.
The Transpower White Paper notes:
“Investors might also be deterred if they are not confident about the stability of policy or
regulatory settings. Investors do not like uncertainty. In the absence of reliable assurances about
long-term policy stability, investors could also be deterred by concerns about the possible
introduction or absence of introduction of policies, for example, closing peaking thermal plants,
incentivising distributed renewable generation, carbon charges, or changing market and pricing
regulations. Uncertainty, including regulatory uncertainty, is a fact of life for investors. However,
investors in energy capacity will make high-value long-term bets and the energy transformation
New Zealand needs will only be possible if the investment environment is sufficiently attractive.”12
The arrangements that are put in place during the transition need to provide certainty for
businesses going forward so they can make long-term decisions, including with respect to future
investment in renewable generation options.
A recent Vivid Economics report for GLOBE-NZ recommended:
“Political parties should actively seek to identify and articulate areas of common agreement on
climate policy in order to enhance policy coherence and predictability, while allowing room for
informed debate and party difference over policy design.”13
We consider it is important that key aspects of the climate policy approach receive bi-partisan
support, such as the mandate and remit of the Climate Change Commission and processes for
setting emission budgets. This will provide certainty of an enduring approach to climate policy.
We urge all sides of politics to work together in developing the arrangements so that a consistent
and enduring policy response to climate change can be put in place.
Important to have a cohesive policy response to climate change - the role of the Climate Change
Commission
In order to successfully transition to a low emissions, carbon-resilient economy, it is vital that
aggregated holistic thinking is a Government priority. The objective should be to provide greater
policy coherence and clarity of intention during the transition.
Our recent submission to the Productivity Commission as part of its low emissions economy
investigation, raised concerns around the lack of decision making alignment across the national
and local government agencies around New Zealand with respect to energy, water, and
11
The perception of regulatory risk will increase the cost of capital of all potential investors in the market. This will in turn increase hurdle rates,
delay investment and increase energy prices to consumers.
12 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 53.
13 Vivid Economics (March, 2017), Net Zero in New Zealand – Scenarios to achieve domestic emissions neutrality in the second half of the century,
page ix.
Trustpower submission 6 19 July 2018environmental concerns. Section 2.3 of this submission suggests that there is a need to consider
energy affordability and reliability and security of supply when designing environmental policy.
We are heartened by what we observe to be an increased focus of Government on ensuring a
cohesive policy response to climate change in recent times and support legislative arrangements
being put in place to ensure this is an ongoing focus.
We consider that a cohesive policy response to the challenges of climate change is particularly
valuable from an investor certainty perspective and support the Government putting in place
legislative arrangements that would ensure:
a) co-ordination of issues;
b) an economy-wide, strategic view on issues is considered; and
c) that a coherent and robust policy proposals are developed.
This would align with the advice of Vivid Economics:
“Independent institutions, backed by statute, can help assist both the Parliament and Government
in developing coherent national climate policy, and enhance citizen engagement. The analysis
conducted by such an institution might include, for instance, identifying expected trajectories for
emissions prices, so as to help private sector investors make informed decisions over long-lived
investments, or identifying whether there are tensions between government plans to reduce
emissions and other elements of its economic development strategy.”14
It would also align with the findings of the Transpower White Paper:
“Government has a critical leadership role to play in ensuring shared understanding, a clear
direction, established policies and alignment so that New Zealand can reap the significant
potential advantages and benefits from a successful energy transformation.”15
Greater clarity as to “who” should be responsible for ensuring broad policy coherence and
consistency with respect to climate change is an important consideration that should be
addressed by the Bill.
We note that the Productivity Commission’s draft report recommended that:
“Government is best placed to make detailed economy-wide policy design and prioritisation
choices that require cross-government coordination and allocation or funds…Even so, without
needing to be formally tasked with recommending a low-emissions strategy, the Climate
Commission will over time input into (and review) the Government’s strategy and policy choices.”
16
While we appreciate that through its proposed advisory role the new Climate Change Commission
would naturally provide advice on policy matters over time, in our view there needs to be an
express role for the Climate Change Commission in providing advice to Government on climate
related policy, with a focus on ensuring cohesive response is adopted and that there is awareness
of the implications of any climate related policy on other Government objectives, particularly with
respect to energy affordability and security.
This would ensure that:
a) the Government’s objectives around climate change can be more effectively achieved, while
being cognisant of the implications for achieving other objectives; and
14 Vivid Economics (March, 2017), Net Zero in New Zealand – Scenarios to achieve domestic emissions neutrality in the second half of the century,
page ix.
15 Transpower (June 2018), Te Mauri Hiko- Energy Futures – White Paper, page 56.
16 Productivity Commission (April 2018), Low Emissions Economy – Draft Report, page 188.
Trustpower submission 7 19 July 2018b) any inconsistencies or gaps that arise as a result of the climate change agenda being currently
spread across multiple Government departments, can be more easily identified and
addressed by the Government departments that are responsible for the relevant policy.
It would also further support the Commission’s role in establishing emissions budgets.
This was reflected in our submission to the Productivity Commission on the draft report where
we requested the Productivity Commission goes further with its findings:
“That is, the Climate Commission would be ideally placed to fulfil that overarching policy advisory
role, and ensure joined up thinking is prioritised throughout the transition, in addition to its specific
role in relation to the Emissions Trading Scheme. Trustpower encourages the Productivity
Commission to reiterate this need for a broad overarching policy document, importantly, by
reference to the need of a supervising body such as the Climate Commission, so these
recommendations are provided to the Government along with the “how””.17
Further details around the specific mandate of the Climate Change Commission are anticipated to
be provided by the Productivity Commission’s final report. We expect that these
recommendations will be considered as part of the development of the Bill.
As noted in the Productivity Commission’s draft report:
“It is critical that regulatory bodies have a clear mandate – that is, clarity about what they are
authorised or tasked to do. A clear mandate can help promote accountability, compliance, focus,
legitimacy and predictability.”18
Once the Productivity Commission’s final recommendations are made available on role of Climate
Change Commission, we consider further consultation with interested parties would be valuable
on the specific mandate of the Commission and its remit prior to finalising the relevant provisions
in the Bill.
We note that this further engagement will be important as there are a number of outstanding
questions which should be further explored with stakeholders around: how the Climate Change
Commission will be established; what the Climate Change Commission will be authorised to do,
including whether the Climate Change Commission can instigate its own work; and how the
Climate Change Commission will operate in practice.
Other important interrelated matters for further consideration include:
a) how the Climate Change Commission should work towards coordinating a consistent
approach between agencies when developing policy and identifying what the potential
impact on the climate change objectives might be. This is an important consideration for
ensuring that the Commission becomes “the hub” of an inter-agency and across government
approach, essentially ensuring a cohesive policy response to climate change can be achieved.
b) who the Climate Change Commission should report to. This is very important consideration
for ensuring a collaborative approach across Government is put in place. It is important that
this issue not be seen as just an environment policy matter. The issues are much broader and
involve consideration of other portfolios energy, housing, transport, agriculture and social
development etc. We doubt that making the Minister for Environment primarily responsible
would be the right choice.
In order for the Climate Change Commission to be successful it will need to be considered to be a
highly credible source of independent advice to the Government. The composition of the Climate
17 Trustpower submission on Productivity Commission’s Low Emissions Economy Draft Report (June 2018), page 4.
18 Productivity Commission (April 2018), Low Emissions Economy – Draft Report, page 185
Trustpower submission 8 19 July 2018Change Commission will be important for ensuring this, along with ensuring adequate funding is
provided so that it can produce well-reasonable analysis and undertake good quality processes.
In our view institutional form does not matter as much as quality. To this extent, putting in place
good checks and balances will also be an important consideration in ensuring the success of the
Climate Change Commission.
Sequencing of Action
The sequencing of events going forward, and in particular the order that policies are rolled-out, is
vital for the overall success of the transition.
We suggest that MfE considers whether there may be a role for the Climate Change Commission
in determining the sequencing of events during the transition.
Important to continue to develop the ETS so it is internationally linked
We consider that the ETS is an essential part of NZ’s climate policy approach and support its
ongoing development and linkage with international markets.
Incorporating international linkages where possible, when designing the New Zealand
arrangements will help ensure the most economically efficient response to climate change is
adopted from a global perspective. For example, New Zealand may be a lower emitter when
producing dairy than others and so it’s more appropriate that we supply these products so as to
minimise global emissions.
We are aware that this is an area still under consideration and that part of this focus is on
preventing “carbon leakage” to other countries with lower cost regimes.
We consider that going forward it is important that:
a) the ETS prices carbon at the right level so as to provide clear signals for further investment in
renewable generation;
b) investors have confidence that the ETS will endure so as to provide investment certainty; and
c) clear rules around eligibility of international credits are established so as to ensure the quality
of the units.
Better global outcomes (which in the final analysis is the most critical objective) will be enhanced
by maintaining strong links with international markets.
This is supported by the Vivid Economics report:
“Encouraging the private sector to make investments consistent with a low-emissions future
requires a robust and predictable emissions prices … Emissions pricing needs to be accompanied
by a range of changed market and regulatory arrangements, infrastructure deployment
mechanisms and specific support to address a range of additional barriers and market failures.”19
Important that a global view is adopted when designing policy arrangements
While the New Zealand Government can only legislate for New Zealand, appropriate cognisance
of the second order international effects is important when designing the new environmental
policy arrangements.
Climate change is a global issue and not advanced by exporting emissions abroad to less efficient
countries and companies.
19Vivid Economics (March, 2017), Net Zero in New Zealand – Scenarios to achieve domestic emissions neutrality in the second half of the century,
page ix.
Trustpower submission 9 19 July 2018We note that a target of 95% renewable electricity might be a better than a target of 100%
renewable electricity if New Zealand has avoided creating greater emissions in other countries,
most likely by indirectly encouraging the burning of coal.
Similarly, because New Zealand cannot legislate away other countries emissions but will be
affected by them none-the-less, appropriate weight must be given to remediation and resilience
efforts. We have not made extensive comment in this submission on how to get the right balance
between investing to reduce emissions versus investing to mitigate the effects of emissions. But
we note that this issue is already fully recognised and that it requires careful and objective
analysis.
Significant value of distributed generation going forward
In our view retroactive changes to the distributed generation pricing principles (DGPP) following
significant investments in distributed generation having been made, was a backwards step in
terms of encouraging smaller market participants to invest in small scale renewable generation in
New Zealand.
Having renewable generation available in the right location within New Zealand, and having them
be able to generate at the right times, will become increasingly important in ensuring that security
and reliability of the electricity system is maintained at least cost. This will help issues around peak
capacity availability identified in the Transpower White Paper, as referred to earlier in this
submission.
We also note that there are new technologies under development that will potentially impact on
the electricity system in the future. We don’t necessarily know the speed by which they might be
adopted (based on commercial viability) or the likely scale of penetration at this stage, but it is
imperative that New Zealand is open and receptive to future changes in order for a carbon neutral
future to be met.
In the interim distributed generation will provide an important role in ensuring power system
security and reliability can be maintained and that significant transmission investment can be
avoided. To enable this to occur it will be important that distribution networks become neutral
platform providers to facilitate two way power flows.20
Trustpower’s existing generation fleet is embedded in distribution networks in the regions around
New Zealand. This generation will be able to provide valuable assistance to meeting peak
requirements while avoiding the need for significant additional investment in the Transmission
network provided that an appropriate policy framework is in place to ensure that assets can
operate without undue constraints.
For any questions relating to the material in this submission, please contact me on .
Regards,
Peter Calderwood
GENERAL MANAGER, STRATEGY AND GROWTH
20 International Energy Agency, New Zealand 2017 Review, Chapter 7
Trustpower submission 10 19 July 2018Appendix A: Responses to questions in the Discussion Document
Question Response
We support the Government having an aspiration of carbon neutrality and the Climate
1 What process should the Government use to set a
Change Commission subsequently advising Government on the specific volumetric and date
new emissions reduction target in legislation?
targets. This will ensure that the volumetric and date targets can more appropriately account
Pick one: for economic considerations and technological developments, what is happening globally
the Government sets a 2050 target in legislation and the balance between reduction and mitigation.
now
the Government sets a goal to reach net zero
emissions by the second half of the century, and
the Climate Change Commission advises on the
specific target for the Government to set later
We don’t have any present views on which target would be best for New Zealand. The targets
2 If the Government sets a 2050 target now, which is
should be set, and even adjusted, as higher quality data becomes available.
the best target for New Zealand?
Pick one:
net zero carbon dioxide: Reducing net carbon
dioxide emissions to zero by 2050
net zero long-lived gases and stabilised short-
lived gases: Long-lived gases to net zero by 2050,
while also stabilising short-lived gases
net zero emissions: Net zero emissions across all
greenhouse gases by 2050.
We support the ETS being internationally linked. Refer to section 2.7 for our further views
3 How should New Zealand meet its targets?
around the continued development of the ETS and international linkages, including the
Pick one: importance of having strong environmental safeguards.
Trustpower submission 2 19 July 2018 domestic emissions reductions only (including
from new forest planting)
domestic emissions reductions (including from
new forest planting) and using some emissions
reductions from overseas (international carbon
units) that have strong environmental
safeguards.
We support changes to the target being possible. It is better to have targets that are widely
4 Should the Zero Carbon Bill allow the target to be
understood to be achievable as investors and other stakeholders will attribute greater
revised if circumstances change?
certainty to the associated policies. This will help create a virtuous circle of investment and
effort. A balance between providing certainty as to what the goal for carbon reduction is and
ensuring it remains appropriate needs to be struck.
We consider that three emissions budgets of five years each would provide a reasonable level
5 The Government proposes that three emissions of certainty as to the required emissions reductions over the medium term in order to meet
budgets of five years each (ie, covering the next 15 the target.
years) be in place at any given time. Do you agree
with this proposal? We however note it will be critical that the targets set are broadly seen as credible and
achievable and that there is clarity on supporting policies and tools that will be implemented
to help achieve these budgets. If budgets are viewed by key stakeholders as more aspirational
than practical then this may work against the overall objective. Equally important will be
disclosure of the basis on which the budgets are set so that stakeholders can understand the
assumptions made and form a view on the validity of those assumptions. Refer also to our
response on question 9.
Generally, budgets should be able to be adjusted, because data and circumstances change.
6 Should the Government be able to alter the last
We consider that it is important that, as these change, appropriate adjustments are made. If
emissions budget (i.e., furthest into the future)?
the targets cease to be understood as achievable, or the basis on which the targets have been
Pick one: set change, then the consensus around the investment and efforts required to achieve them
will be damaged and this may work against the broader goals. Whatever mechanism is
Trustpower submission 3 19 July 2018 yes, each incoming Government should have agreed for changes to specific targets, the need for providing investor certainty must not be
the option to review the third budget in the lost.
sequence
yes, the third emissions budget should be able
to be changed, but only when the subsequent
budget is set
no, emissions budgets should not be able to be
changed.
See above.
7 Should the Government have the ability to review
and adjust the second emissions budget within a
specific range under exceptional circumstances?
The proposed considerations to be taken into account by the Government and Climate
8 Do you agree with the considerations we propose Change Commission appear reasonable.
that the Government and the Climate Change
Commission take into account when advising on and
setting budgets?
Publishing a plan for how it will meet an emissions budget is an important step towards
9 Should the Zero Carbon Bill require Governments to achieving the overall goal of being carbon neutral. Putting clear timelines around when
set out plans within a certain timeframe to achieve Government must publish its plan in our view will promote good process and provide greater
the emissions budgets? certainty. But it is critical that the plans that are published are credible and achievable. If
stakeholders don’t believe the plans or the basis on which they have been formulated, then
the credibility of the Climate Change Commission and the Government of the day will be
compromised.
We consider that ensuring a coherent and consistent policy response to climate change is
10 What are the most important issues for the important. It will be vital that in setting plans to meet emissions budgets joined up thinking is
Government to consider in setting plans to meet promoted across Government departments and regional/district councils etc.
Trustpower submission 4 19 July 2018budgets? For example, who do we need to work
with, what else needs to be considered?
We agree that the Climate Change Commission should have an advisory and monitoring role.
11 The Government has proposed that the Climate As outlined in section 2.5 of our submission, we consider that there should also be an express
Change Commission advises on and monitors New role for the Commission in providing policy advice around climate change, and in particular
Zealand’s progress towards its goals. Do you agree ensuring a cohesive policy response is adopted.
with these proposed functions?
We support an approach which would ensure stability of the ETS, to the extent possible, being
12 What role do you think the Climate Change
put in place. We have not firm views on which option would better achieve this objective at
Commission could have in relation to the New
this time.
Zealand Emissions Trading Scheme (NZ ETS)?
Pick one:
advising the Government on policy settings in
the NZ ETS
makes decisions itself, in respect of the number
of units available in the NZ ETS.
We generally agree with the proposed range of essential and desirable expertise. We do
13 The Government has proposed that Climate Change however suggest that expertise with respect to business competitiveness and knowledge of
Commissioners need to have a range of essential and innovation and technology should be essential not just desirable. Maintaining New Zealand’s
desirable expertise. Do you agree with the proposed international business competitiveness and taking into consideration technological
expertise? developments will be important throughout the transition to a low emissions economy. Also,
having people that understand how capital allocation decisions are made is essential.
For the Climate Change Commission to have broad respect and support it much be seen to
be objective and represent the views of all stakeholders. We note that better outcomes come
from diversity of views.
Trustpower submission 5 19 July 2018We agree that adaptation and mitigation will be critical and should be covered by the Bill.
14 Do you think the Zero Carbon Bill should cover These trade-offs must be objectively assessed.
adapting to climate change?
We have no comment at this stage.
15 The Government has proposed a number of new
functions to help us adapt to climate change. Do you
agree with the proposed functions
We have no comment on this option at this stage.
16 Should we explore setting up a targeted adaptation
reporting power that could see some organisations
share information on their exposure to climate
change risks?
Trustpower submission 6 19 July 2018You can also read
