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
Context to study 20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 2
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 13Majority 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 14Projected NZ generation with / without solar PV for sample
scenario
No Solar PV High Solar PV
20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 15Three ‘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 16Considering 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 17Our 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 20Economic impact of new technologies
Report yet to be finalised, but provisional findings…
20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 21EVs 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 22Solar 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 23Solar 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 24Although 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 25Summary 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 27Getting 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 28The key lesson from Australia, Hawaii, Germany, UK, ….
Get things
right before it
is too late!
20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm 29Thank 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
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