Energy Sustainability Plan - Creating Competitive Advantage for the Waitaki Community - CORE
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new zealand centre for advanced engineering
Energy Sustainability Plan
Creating Competitive Advantage for
the Waitaki Community
Funded by
December 2008
Mail: Private Bag 4800, University of Canterbury Campus, Christchurch 8140, New Zealand
Street Address: 39 Creyke Road, Ilam, Christchurch, New Zealand
Phone: 03 364 2478 Fax: 03 364 2069 e-mail: info@caenz.com www.caenz.com
Energy Sustainability Plan
Creating Competetive Advantage for
the Waitaki Community
December 2008
Report Synopsis:
Providing a platform for the community to engage with local government, in developing more
sustainable Economic Development Plans, Infrastructure Development Plans, and their supporting
Regional and District Plans, to establish a business environment that maximises the community’s
ability to create wealth from its local energy resources without compromising environmental
sustainability or lifestyle, with specific regard to reducing the impact of global energy issues such as
fossil fuel dependence and climate change.
Report Authors:
Don Mackenzie; Ken Mitchell, Whitston Consulting
Acknowledgements:
CAENZ would like to acknowledge the support of Network Waitaki Ltd and the Waitaki Development
Board in preparing this report.
Approved by:
RJ (George) Hooper
Issued: December 2008
CAENZ is an independent-think tank and research facilitator funded by grants and sponsorships. CAENZ’s
mission is to advance social progress and economic growth for New Zealand through broadening national
understanding of emerging technologies and facilitating early adoption of advanced technology solutions.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, transmitted,
or otherwise disseminated, in any form or by any means, except for the purposes of research or private study,
criticism or review, without the prior permission of the New Zealand Centre for Advanced Engineering.
Copyright
©2008 New Zealand Centre for Advanced Engineering
Address for Correspondence
New Zealand Centre for Advanced Engineering, University of Canterbury Campus
Private Bag 4800, Christchurch 8140, New Zealand
Phone: +64 3 364 2478 Fax: +63 3 364 2069 E-mail: info@caenz.com www.caenz.com
CONTENTS
1 Introduction ............................................................................................................................................. 1
1.1 Background ........................................................................................................................................ 1
1.2 Waitaki District’s Role ........................................................................................................................ 1
1.3 New Zealand’s Position from a Global Perspective .......................................................................... 3
2 Energy in the Waitaki ............................................................................................................................. 7
2.1 Waitaki District Statistics .................................................................................................................. 7
2.2 Economic Performance 1997 - 2007 ................................................................................................ 7
2.3 Local Economic Commentary ........................................................................................................... 8
2.4 District Economic Powerhouses ...................................................................................................... 10
2.5 Local Resources .............................................................................................................................. 12
2.6 Energy Use ...................................................................................................................................... 13
3 Near Future & Future Trends ............................................................................................................... 27
3.1 General Observations ..................................................................................................................... 27
3.2 Waitaki District Population and Dwellings Projections .................................................................. 27
3.3 Electricity Energy Demand Forecasts ............................................................................................. 28
3.4 Alternative Electricity Generation ................................................................................................... 33
3.5 Wood .............................................................................................................................................. 35
3.6 Coal ................................................................................................................................................ 35
3.7 Towards Sustainable Transport: the 2008 NZ Transport Strategy ................................................. 38
4 Constraints & Vulnerability .................................................................................................................. 47
4.1 National Level Policies and Strategies ........................................................................................... 47
4.2 Electricity – Policy and Planning Principles ................................................................................... 49
4.3 Electricity Constraints – District and Regional Plans ...................................................................... 51
4.4 Infrastructure Vulnerability ............................................................................................................. 53
4.5 Regional Level Policies and Strategies .......................................................................................... 55
5 Opportunities & Competitive Advantage ............................................................................................. 59
5.1 Transition Community ..................................................................................................................... 59
5.2 Climate Change needs Housing Change ........................................................................................ 59
5.3 Potential Distributed Generation (DG) Resources .......................................................................... 60
5.4 Development of Resources ............................................................................................................ 63
Contents Page iii
6 What can Local Government do? ......................................................................................................... 65
6.1 National Policy Statement for Renewable Electricity Generation ................................................... 65
6.2 Support Community Energy Initiatives through Economic Development Strategies ..................... 65
6.3 Provide Leadership ........................................................................................................................ 65
6.4 Address Planning Shortfalls ........................................................................................................... 66
7 Conclusions .......................................................................................................................................... 67
8 Appendix .............................................................................................................................................. 69
8.1 Waitaki District Council Energy Objectives and Policies ................................................................. 69
8.2 Waitaki Development Board Draft Strategic Plan 2008-2011 ......................................................... 72
Page iv Energy Sustainability Plan: Waitaki District
1 INTRODUCTION
…There is nothing more difficult to energy supply would be placed at risk. We
arrange, more doubtful of success, assumed that economic development was
more dangerous to carry through than reliant on increasing energy supplies, and put
initiating change…The innovator makes little effort into using energy more efficiently.
enemies of all those who prosper under
the old order, and only lukewarm The sense of outrage and lack of confidence
support is forthcoming from those who that now pervades consumer attitudes toward
would prosper under the new. the energy industry, as a result of oil price rises
and the dry year risk to our electricity system,
Nicolas Machiavelli, The Prince, 15131
could simply be described as the manifestation
of a socially constructed problem. On top of
1.1 Background2 this there is also public interest and concern in
respect of the ongoing use of fossil fuels and
The developed world currently faces a problem
the resultant enhanced greenhouse gas
of its own creation. The cause of this problem
emissions to the atmosphere. The issues go
is best summarised by the following quote:
further than just energy. Peet and others4
..we are not only ignorant of what have argued that we will not address the heart
energy is, and the critical role it has of the energy problem unless due recognition
played and continues [to play] in is placed on the resource and ecological
economics and politics, but most of us constraints of the systems in which we live.
simply don’t care about energy. 3
The scale and seriousness of the problem is
This was Paul Roberts’ description of the now evident. Major changes are needed in
American population’s attitude to energy, but is both the demand and supply side of New
equally relevant to all developed economies. Zealand’s energy system. The issue is one of
transformation, a need for a new approach. To
Energy is fundamental to our economy and our be effective, these new directions will need to
everyday lives, yet the extent of our depend- be implemented at regional and district levels.
ence has been largely overlooked until very The government has introduced a number of
recently. In New Zealand, we have benefited policy documents that signal a very different
from decades of cheap oil, exceedingly cheap approach to energy in New Zealand at a
natural gas, and an ‘apparent’ unfettered national level, but many energy-related
supply of all consumer energy types (e.g. activities are strongly influenced by the
electricity and transport fuels). For many years politics, plans and initiatives administered at a
as a nation we ignored the inevitability of local government level.
depletion of current energy stocks without new
investment in either exploration or generation.
We lost sight of the simple fact that as our 1.2 Waitaki District’s Role
demand for energy increased, we would reach This report was commissioned by Network
a point in terms of the service life of our aging Waitaki Ltd, the local electricity distribution
transmission and distribution networks that our line company, which is 100% owned by the
community’s electricity consumers. It is a
1 www.agassessment.org/docs/
ESAP_SDM_220408_Final.pdf. response to community-driven initiatives with
2 This section draws heavily from a presentation given by regard to energy sustainability and the need
Mike O’Connell (ECAN) and George Hooper (CAENZ) given
at the EEA Annual Conference 2006, entitled Energy into
for infrastructure investment being driven by
the Future: Creating a long-term balance between energy economic growth and change in land use.
planning and desired community outcomes. [From the
ECAN publication Identifying the Linkages between Energy
Policy and other ECAN Policy Portfolios - June 2008].
It is intended to provide a platform for the
3 Roberts, P, 2004. The end of Oil: on the edge of a
perilous new world, Houghton Mifflin Company, Boston, 4 Peet, J, 2005. “Sustainable Energy: is sustainable
MA. attainable?”, Future Times, Vol.2, 6-9.
Introduction Page 1
Figure 1: Map of the Waitaki District Page 2 Energy Sustainability Plan: Waitaki District
community to engage with local government, in indication that issues like global warming and
developing more sustainable Economic peak oil have now become mainstreamed into
Development Plans, Infrastructure Development Government and institutional thinking. Four
Plans, and their supporting Regional and future scenarios of the future have been
District Plans. These would be used to estab- developed to test our sensitivity to issues and
lish a business environment that maximises the the robustness of energy supply development
community’s ability to create wealth from its plans.
local energy resources without compromising
environmental sustainability or lifestyle, with Scenario 1 – New Norway
specific regard to reducing the impact of global
The global scene
energy issues such as fossil fuel dependence
and climate change. An international agreement on combating
Climate Change is made. An ambitious goal is
It should be noted that in this report ‘commu- set – stabilisation at 450 ppm (parts per
nity’ has a Network Waitaki perspective and million) concentration of CO2 in the atmos-
therefore refers to the area serviced by its phere. National and regional emissions trading
network. This area does not align with the schemes are linked and, over time, one global
District boundaries and so neighbouring areas market for carbon is established.
(and their infrastructure providers) are included,
particularly where there are common interest Increased unrest in the Middle East, plus the
and interface issues. For simplicity the Waitaki cost of carbon, makes energy prices soar and
District and its council will be referred to as with that inflation. That increases cost of oil
representative of the community. substitutes further. The world economy keeps a
reasonable growth driven by China and India.
This document addresses energy issues and As a result, the oil price is high. With many
planning in more detail than the District Plan countries shifting from coal to gas to reduce
with the aim of achieving an updated set of emissions, demand for gas is high – especially
objectives, policies and rules to support their if sourced outside the Middle East. As a result,
implementation. The Waitaki District Council the LNG price follows the oil price all the way
Plan Part II: District Wide Issues, Objectives up to the new level.
and Policies: Energy, July 2004 is reproduced
in the Appendix (Chapter 8). The local scene
The first decade of the new millennium ends
with a big prize for New Zealand. At first, a
1.3 New Zealand’s Position medium-sized gas field is found near Taranaki
from a Global Perspective keeping supply secured well into the 2020s.
The Waitaki plays a significant role in the Then, in early 2010, a large oil and gas field off
national energy supply. Its development has the coast of the South Island is discovered.
always been greatly influenced by national The evaluation of the discovery takes a couple
needs, which in turn are driven by international of years. Apart from a significant amount of oil,
issues. Consideration of global energy issues there is more gas than in the Maui gas field
therefore provides the reference frame for what when found. In 2018, the first export shipment
trends and technology we might expect to see of LNG is made to the Chinese market.
in New Zealand.
The economy is booming due to the discovery
These matters are of great interest to the of hydrocarbons and immigration increases.
National Grid Operator, Transpower, who are More arrive as climate change refugees find
currently conducting an scenario planning living in their former countries becoming
exercise for the purpose of updating their long unbearable. To limit the demand growth in the
term Grid Development Strategy, Transmission booming economy, environmental taxes are
2040. The following information has been introduced. Still, demand is growing fast,
extracted from their consultation material. fuelled by a major transformation of the
transport sector to electric vehicles.
In some respects Transpower’s document is an
Introduction Page 3
Demand is met by generation placed where fuel cells capable of running on reticulated
most economic – typically larger renewable natural gas are taking over as the preferred
installations, including marine energy. As a technology.
spin-off from the offshore industry, New
Zealand is established as a world leader in Otherwise demand is largely met by thermal
harnessing wave energy. power plants built near Auckland and tidal
turbines near Auckland and Wellington.
Scenario 2 – Crisis recalled
Scenario 3 – Fragmented world
The global scene
The global scene
After a turbulent time in 2005-2012, oil prices
Tensions in the Middle East and Russia’s quest
stabilize in a new price band around UD$55-
to return to its former might result in energy
65/bbl assisted, in part, by technological
security of supply being jeopardised world-
improvements in extracting oil from unconven-
wide. With the financial crisis that started back
tional sources. LNG prices are similarly low.
in 2007 still dragging on, most countries try to
The cost of carbon is close to zero as a save themselves rather than cooperate on
disruptive technology innovation that cheaply solving the issues.
removes carbon from the atmosphere. (It could
The major countries scramble to secure their
also be seen as a scenario where due to a lack
energy supplies with most prospective oil and
of international agreement on climate change,
LNG projects being taken by high-bidding
no country is taking significant action, or a
countries sometimes backed with military
scenario where it turns out climate change is
threats.
not happening).
The global economy is growing slowly –
Large and timely investments in mineral
hampered by the import tax barriers being set
exploration and extraction keep inflation down.
up to protect national industry in many
As a result of this, the lower oil price and the
countries. As a result, oil demand is not
limited carbon cost, the global economy is
growing as fast – and supply can keep up with
growing. Every year 100 million people world-
demand. Carbon costs are moderate – with
wide are entering the middle class, demanding,
little international agreement on doing any-
amongst other things, more food.
thing serious though it is clear that the climate
The local scene is changing rapidly. Radical environmentalists
start attacking oil and gas installations
The global demand for dairy products, meat
worldwide – including shipping of oil and LNG.
and fish is a major driver for the New Zealand
economy.
The local scene
Tourism is also doing well. In comparison with Enough natural gas is found to meet local
the rest of the world, New Zealand is not demand though the price closely matches the
outperforming, so immigration levels stay at international LNG price. Methanex decides to
the historical average. close down its operations in New Zealand for
good and as a result there is extra gas avail-
With little constraints on the use of coal, able for electricity generation. This is used by
energy prices are relatively low. As a result of CCGTs in Taranaki with the CO2 being extracted
the high GDP growth and low prices, demand and stored in the oil gas fields of offshore
is growing at a high rate. Taranaki. Building a LNG terminal is considered
Small micro-cogeneration units become uneconomic with the lack of LNG available for
popular, first in commercial settings, but later longer term contracts.
on in households as well. They supply space A new set of “Think Big” projects are initiated
and hot water heating and generate electricity to assist the economy and increase the security
as well. of supply. The projects include major hydro
Typically a Stirling engine is used, but later on developments along the Clutha river and
utilisation of the South Island lignite reserve.
Page 4 Energy Sustainability Plan: Waitaki DistrictScenario 4 – Green communities Transpower has identified the following critical
uncertainities:
The global scene
If weather was considered extreme in the • International Fuel Price. New Zealand is
beginning of the millennium, it got even worse quite dependent on imported fuel and is
in the second decade. Clear signs of positive therefore exposed to pricing risk as it
feedback (self-accelerating climate change) competes for supply. Interestingly, security
were the driver behind an international of supply is not considered critical even
though we have just faced a dry year. In a
agreement of stabilising the level of CO2 in the
dry year it is the pricing risk that is the
atmosphere at 450 ppm.
dominant issue and not the direct lack of
LNG becomes popular in countries that water or generation (the rivers have never
traditionally had used coal for power genera- stopped flowing and the lights have not
been switched off as they were in the
tion as switching to gas was among the
1950s).
cheapest ways of reducing emissions. Biofuels
from sea algae becomes an important source Also of interest is that energy demand is
for transport fuels and results in a rather low not considered a critical uncertainty. There
penetration of electric vehicles. is no shortage of energy supply options (as
long as the sun shines) and the main issue
The local scene is which option is the next least cost for
meeting demand in terms of the costs we
The New Zealand economy is taking a hit due
choose to recognise. In the absence of
to continuing global consumer concern over other costs like carbon and climate change
‘food miles’. Tourism also drops as interna- considerations, New Zealand has had
tional airlines start to bear the cost of carbon plenty of options for meeting electricity
emissions as well. demand without the need to consider
efficiency and any conservation options, i.e.
GDP growth is lower than the OECD average decisions have been confined to what large
and immigration numbers are only kept up by generation and transmission projects will
climate change refugees, which see New be built, where and when.
Zealand as one of the last places to be
• Cost of Carbon
Carbon. In New Zealand the long
severely affected by climate change.
run marginal cost of new generation is so
No LNG terminal is built, partly due to local close between different types of technolo-
gies, that even moderate changes in fuel or
opposition dragging out the resource consent
carbon costs can change the technology
lodged in 2009, but also because of LNG prices
most economic to build. The role of gas in
in combination with the carbon price would
our energy supply system effectively means
make it uneconomic. Instead, New Zealand that New Zealand is a low carbon economy
embarks on a road of conservation and local relative to others with a high dependence
generation, the latter assisted by the price of on coal. Europe for example has been
solar photovoltaic panels coming down rapidly. migrating from coal to gas for some time
now.
An observation on the above scenarios is that
Scenarios 1 and 2 are optimistically relying on • Government Energy Policy
Policy. Clearly a direct
intervention with a proven track record of
hope, i.e. we will be saved by a new energy
being a wild card as governments are
discovery or technology will solve our prob-
changed and respond to public opinion.
lems. Scenarios 3 and 4 are not only more
probable based on today’s position, but their • Climate Change
Change. New Zealand being an
consequences are more of an issue for those export-based economy remote from its
markets is sensitive to its customer’s
planning risk management in more adverse
attitude towards such issues.
conditions. They necessarily will require the
biggest change to the status quo. • New Technology
Technology. This is a cost stack issue,
i.e. not whether there are new technologies,
The actualisation of one planning scenario but which ones will prove to be the most
verses another is affected by the critical cost effective, developed the quickest, and
uncertainties associated with their drivers. adopted by the trend setting economies.
Introduction Page 5• Resource Planning Requirements (RMA). One could argue that the uncertainty
The RMA in many ways is a hurdle to the created by the RMA is that while these
large-scale core infrastructure developments investors continue to push proposals that
of the past, which clearly aren’t going to don’t meet expectations on environmental
meet sustainability into the future. It acts and sustainability issues, the alternatives
to change the cost stack in favour of are not forthcoming because they are not
smaller, more incremental and localised able to compete on an equal basis.
developments. New Zealand infrastructure
Transpower’s document also identifies urbani-
providers have been slow to adapt to the
sation, NIMBY’ism (not in my backyard), and
legislation resulting in infrastructure getting
older and being driven harder. The required global warming as global trends likely to be
change is resisted by those with large ‘imported’ into New Zealand. With regards to
investments locked into the status quo, i.e. this plan it is noted that city-dominated
new more efficient technology as measured politics and national perspective diverges with
by new cost/sustainability considerations provincial communities on some of these
are competitors to their existing business issues.
and devalue their investments.
Page 6 Energy Sustainability Plan: Waitaki District2 ENERGY IN THE WAITAKI
2.1 Waitaki District Dwellings
Statistics at the 2006 • For rented dwellings, the average weekly
Census rent paid for permanent private dwellings
was $140. (All NZ: $225).
• Usually Resident 20,223
Population • 75.9% of dwellings were owned with or
without a mortgage. (All NZ: 68.9%).
• Land Area 7,214 km2
• People per km2 2.8
(All NZ: 9.7)
2.2 Economic Performance
• Age Profile: 18.9% were under
1997-20071
the age of 15 years In 2007, the Waitaki District had almost 8,700
(All NZ: 21.5%). full-time equivalent employees (FTEs) in 2800
20.0% were aged businesses generating $753 million in gross
65 years and over domestic product (GDP).
(All NZ: 12.3%).
Table 2.1 breaks down FTEs, GDP and business
• Unemployment 1.9%
units in Waitaki District by sector for the year
rate: (All NZ: 3.4%).
to March 2007.
• Occupational The most popular
group: occupational group The District performed well in terms of most
was Agriculture, key performance indicators during the latest
Forestry and Fishing. year. The District is in the midst of structural
(All NZ: Manufacturing). changes, particularly in the primary sector, with
significant conversions from sheep to dairy
• Median income: $19,700 farming. Over the ten years since 1997, the
(All NZ: $24,400). economic performance of the District has been
more mixed. Per capita GDP and labour
Income ($) Waitaki District New Zealand productivity growth have outshone the national
5,000 or less 9.5% 12.1% average, but a slow decline in population
5,001 - 10,000 8.3% 7.2% numbers has hampered overall employment
10,001 - 20,000 28.7% 19.5% and, therefore, GDP increases.
20,001 - 30,000 15.3% 13.8%
30,001 - 50,000 20.3% 21.1% GDP per capita and labour productivity provide
50,001 or more 9.6% 16.2% a better picture of the overall rise in economic
Not Stated 8.2% 10.2% prosperity of the people of the District. GPD
per capita has risen 2.0% per annum over the
Households: There were 8,433 households in
Households
last ten years in Waitaki, above the national
Waitaki District Council.
average, led by retail and distribution, and
• The average size was 2.4 people manufacturing and building, and the primary
(All NZ: 2.8). sector.
• 89.3% had access to a telephone Business unit numbers have climbed in all
(All NZ: 87.8%). sectors except primary in the last decade. By
• 68.9% had access to a cellphone far the most impressive rise has been in the
(All NZ: 71.1%). business services sector, where the number of
units doubled, averaging 7.6% per annum.
• 50.2% had access to an internet
(All NZ: 58.0%).
1 Report to Waitaki Development Board: David Norman &
• 89.3% had access to a motor vehicle
Dr Garnesh Nana. Waitaki District Economic Performance
(All NZ: 88.1%). 1997-2007, April 2007. BERL ref#4653.
Energy in the Waitaki Page 7GDP Business
Sectors (2007) FTEs % (07$m) % units %
Primary 1900 21.9 158 20.9 1082 38.3
Manufacturing & Building 2633 30.4 254 33.8 322 11.4
Retail & Distribution 1956 22.6 110 14.6 497 16.9
Business Services 660 7.6 146 19.4 662 23.4
Recreation Services 301 3.5 15 2.0 144 5.1
Social Services 1217 14.0 70 9.2 138 4.9
Totals 8666 100.0 753 100.0 2827 100.0
Source: BERL Regional Database, Statistics NZ
Table 2.1: Composition of Waitaki District economy in 2007
Tourism continues to develop in the District, will cycle. Commodities values in total have
contributing $31.3 million in direct GDP, consistently trended down over the long term
employing 540 people and supporting the so the primary sector can continue to expect to
equivalent of 160 businesses. While tourism- be on a tread mill of having to increase
characteristic industries account for most productivity just to remain competitive. Overall
tourism employment and businesses, a wider the number of business units in the primary
range of industries account for noteworthy sector has declined, i.e. fewer are producing
portions of tourism GDP. more.
The move toward dairy accelerated in 2007. The secondary sector – ‘Manufacturing’,
Six new herds and an additional 6000 cows ‘Electricity, Gas and Water Supply’ and ‘Con-
were added to the industry in Waitaki, and the struction’ – remains the back bone of the local
total now stands at 57,000 cows on 19,066 ha. economy. Irrigation and farm development,
Conversely, sheep numbers were largely flat at cement making, food processing (meat, grain,
891,000. The drop in sheep farming employ- and dairy) are secondary sector businesses.
ment in the last ten years has been matched This sector represents the district’s main
by the rise in dairy employment. employment and population dependence.
Economic Development strategies would
In conclusion, growth in the primary sector is
therefore be expected to develop new opportu-
limited by the fact that dairying is displacing
nities in this sector and protect the existing
existing sheep farming and is just an economic
businesses. In order to maximise retention of
efficiency issue in terms of existing commodity
benefits locally, local ownership and entrepre-
prices.
neurship needs to be considered.
Some diversity in this sector would reduce
2.3 Local Economy risks to the local economic situation. Establish-
Commentary ing the district as a manufacturing-friendly
The Waitaki District Economic Performance location would allow the area to play to its
Reports commissioned by the Waitaki Develop- strengths relative to cities, e.g. stable, quality
ment Board indicate that over the last 10 years workforce, low-cost sites, location on main
growth in GDP for the District (2%) has been transportation infrastructures, proximity to
slightly higher than the national average of resources, energy, water and utility services.
1.8% p.a.
The tertiary sector – ‘Wholesale Trade’, ‘Retail
In the primary sector - ‘Agriculture, Forestry and Trade’, ‘Accommodation, Cafes and Restau-
Fishing’ and ‘Mining’ - this is largely the result rants’, ‘Transport and Storage’, ‘Communication
of higher productivity driven by a shift towards Services’, ‘Finance and Insurance’, ‘Education’,
production of higher value commodities, i.e. ‘Property and Business Services’, ‘Government
dairy displacing grain and sheep. In the long- Administration and Defence’, ‘Health and
term it can be expected that relative positions Community Services’, ‘Cultural and Recreational
Page 8 Energy Sustainability Plan: Waitaki DistrictFigure 2.1: Territorial boundaries for the South Island of New Zealand Services’ and ‘Personal and Other Services’ – businesses and demand for a wide range of shows the greatest development by far. This is supporting services. essentially growth in tourism and recreational- based businesses. Service industries are Business services centred on pure commerce characterised by high employment, low capital activity displays the weakest growth perform- requirements, small locally owned/operated ance. Clearly the Waitaki is not a centre of Energy in the Waitaki Page 9
international commerce. It does, however, have facility is planning to grow significantly.
the capacity for supporting technology-based • Small goods such as bacon, sausage
businesses such as call centres. making, etc., are secondary businesses that
can lever off the presence of the larger
processing facilities and have a similar
2.4 District Economic opportunity to benefit from the North
Powerhouses Otago food quality brand. The loss of the
Mainland bacon factory was more of an
The District’s strengths/opportunities are
issue of loss of local controlling interests
dominated by food production and secondary
than profitability.
sector processing of the local primary produc-
tion. This sector creates its competitive niche • Organic produce
produce: North Otago is ideally
suited to this industry in that it has highly
by targeting the right combination of quality
productive quality soils and a climate not
and value adding to its primary products. It is
conducive to pests and disease. It could
a relatively high employment sector. The main
develop organics as a point of difference
industries and opportunities are listed below: that supports its reputation for food
quality.
• Meat processing
processing: Oamaru’s largest employer
is the Alliance Pukeuri Freezing Works. It is • Greenhouse grown produce
produce: market
the second largest consumer of electricity gardening has been established in North
and currently the largest energy consumer Otago since the arrival of the original
when its coal consumption is also consid- Chinese migrants. The area is well known,
ered. Oamaru is the birthplace of frozen specifically for potato and tomato growing.
meat exports. The Pukeuri Works has a Greenhouse production extends the
killing capacity of approximately 14,000 growing season (and therefore business
sheep per day and its season now extends viability) and maintenance of capacity and
over 10 months. There is also another production needs these facilities to mod-
smaller abattoir business in town. These ernise.
businesses are counted in the most
• Grain
Grain: North Otago has some of the highest
productive meat processing facilities in the
per hectare yields for barley and oat
world. Their survival has always been
cropping land in the world. Grain growing is
linked to a secure supply of animals and
the earliest established local export. The
product development to get the right level
area is well endowed with mills, grain
of value added content.
stores, malting floors, etc. Milligan’s
• Dairy processing
processing: This industry has also operates the historic Ngapara Mill. Quality
had long-term presence in the district with Bakers has a large bakery in Oamaru now
numerous creameries, butter factories and dedicated to pie making. Surprisingly, New
dairy processing facilities. These businesses Zealand imports most of its own locally
have come and gone with the fortunes of used grains for beer brewing, bread
the dairy industry as a whole. A significant making, etc. This is especially the case for
cheese making business has been estab- organic grains. The current issues with
lished on the basis of differentiating itself regard to food safety, food miles, and the
as a local, high-quality product. An impor- cost of importing will eventually lead to a
tant sustainability issue that the District shift back to local production.
faces with dairy development is the need
• Grapes: This is new development for the
to maintain and increase diversity, avoiding
Waitaki Valley with approximately 2000 ha
market uncertainties and the risk of
now planted. Climate and soil conditions
damaging existing key employers. Growth
mean that this industry has a large poten-
in dairy does not represent a high lift in
tial in the district. This will drive irrigation
productivity because it is largely based on
development, and eventually local grape
displacing existing production of another
crushing, processing and storage facilities
kind.
will be needed. North Otago can equally
The newly developed diary factory at support brewing and distilling activity.
Studholme is largest single energy con-
• Wool products: The Summit Alliance
sumer and employer in the Waimate District
Woollen Mills is Oamaru’s second largest
on the north side of the Waitaki River. This
employer and third largest consumer of
Page 10 Energy Sustainability Plan: Waitaki Districtelectricity. It also uses coal-fired boilers for • Animal feeds
feeds: Highly productive, irrigated
its main source of thermal energy meeting land can be dedicated to growing animal
its processing requirements. It is another feed. Animals can then be farmed at less
long-established business in town that productive sites with the net effect being
survived where others have failed else- more intensive production. Waste products
where in New Zealand. Its survival and from industry can be used to compost/
development will be dependent on choos- fertilize (add carbon to soil) and for animal
ing the right niche for quality and value feed more directly (tallow, whey, other dairy
adding so as not to have to compete products, etc).
directly on volume.
• Fishing and Fish Farming
Farming. With such a
• Quarrying
Quarrying: With extensive resources in lime, significant coastline and maritime resources
gold, coal, aggregates, roading materials, fishing is clearly a major economic activity.
and various minerals the Waitaki District However, as very little of this is owned and
has always had a higher than average level operated by local interests, not much value
of this activity. Quarrying and mining is captured by the local economy. Neither
activity accounts for about 4% of its are there any significant processing
employment. facilities. Fleet servicing facilities are also
limited.
• Lime, cement, and concrete making
making:
Concrete has been the number one choice Salmon farming has been established in
of building material for over 2000 years. the region utilising the canal and lake
Cement making is an obvious opportunity system of the Waitaki Hydro-electric
for a location with extensive deposits of all Generation Scheme and has potential for
the key raw materials. This includes further development.
concrete products such as pipes, troughs,
• Other
Other: Other sizable production facilities
etc. Firths, Hynds, and Waiareka Industries
include the Rainbow Confectionary factory.
have pre-casting businesses in the district.
Off-shore oil and gas reserves are ap-
A recent economic study has shown the
proaching viability for bringing ashore and
importance of the concrete industry which
into production.
contributes about $7.44 billion to New
Zealand’s economy. (Source: Grey Matters The Waitaki District also has infrastructures and
Issue 66.) capacity in the following areas of economic
The proposed Holcim Cement Plant will be activity:
the biggest energy user in the district with
• Technology businesses: Local businesses
a 15 MW demand and an 80 GWh pa
include an electronics manufacturer and a
electricity consumption in addition to coal
call centre for TrustPower. To run a call
and waste oil burning.
centre requires access to communications
• Foundry
Foundry: Heavy industry in Oamaru is also infrastructure, local IT support services, and
represented by a foundry. This uses electric a large flexible workforce with appropriate
arc furnaces, and has a number of issues to skills.
address in terms of emissions, efficiency,
• Education: The District is also well en-
etc. It produces water valves and pumps
dowed with quality education facilities,
and so has a local niche in terms of
including three high schools with boarding
irrigation and infrastructure development.
facilities and a polytechnic campus. The
• Fertilizer making
making: Sequestering CO2 and polytechnic is part of the Timaru-based
finding alternative forms of carbon to fossil Aoraki Polytechnic and therefore competing
fuels is a global trend in terms of climate with the Otago Polytechnic. Oamaru is
change. Carbon trading schemes will located only 120km away from the
reward innovation and create opportunities. Universitity of Otago. Oamaru already
In addition to raw products like limestone, provides significant education services to
CO2 as a waste product, can be used as a external markets. Invercargill has estab-
carbon feed stock for fertilizer manufactur- lished a significant economic gain for
ing as can nitrogen from other waste Southland via a low fees scheme at its
products or extraction from the air. Oil, oil polytechnic. The biggest issue with meeting
products, and fertilizer make up approxi- local needs with respect to education is
mately one third of New Zealand’s imports. retaining young educated people locally
Energy in the Waitaki Page 11once they enter the workforce. They need as access and response to events can be
suitable choice and opportunity to develop difficult. Relatively large land area and small
a career in their chosen field. More diversity population size means that infrastructure is low
in the number of businesses with local density and has limited economics.
management roles is needed.
• Health and old age care: Oamaru has a Transport
new well-equipped hospital, which includes Most of the region’s population centres and
a scanner. Larger hospitals are located in towns are located on the State Highway
Timaru and Dunedin. There are several network. The coastal area is serviced by the
large rest homes with residential healthcare
rail system which follows SHW 1 and connects
facilities incorporated. Oamaru is well
Oamaru with international shipping ports at
suited to an older population with flat
Timaru and Port Chalmers. Oamaru itself has a
streetscapes, good civic facilities and
shopping, all within walking distance, and historic port and Moeraki supports a small
low traffic densities. With an aging popula- fishing fleet. There are airports at Oamaru and
tion, continued development of retirement Omarama. Snow and flooding can interrupt
villages and suitable new housing stock is transport systems.
likely to remain a strong opportunity. This
type of housing stock has specific energy Water
supply requirements, e.g. homes are likely With good soils and a dry climate, water is the
to be all electric. key to land-based production. The Waitaki
• Tourism industry: There is significant River is New Zealand’s highest flow volume
tourism potential in the region and the area river so water is not a resource that is lacking
has already established a brand in eco and in this area. However the water is shared with
heritage tourism for which it has a major national uses such as generation and is closely
inventory of assets outstanding in terms of watched by neighbouring cities as a potential
quality and significance. Oamaru can
for supplying their needs. The Waitaki Water
develop into a visitor destination in its own
Allocation Plan has been implemented to
right if it were to invest in some corner-
stone attractions and interpretive facilities. balance competing interests. It remains
This is a relatively low-cost economic important for the local economy that it sus-
development option because the core asset tains priority use of the resource. There is an
on which these facilities can be built optimum mix between managing water use
already exists. Triggering tourism in this through dry land sustainable management
way will lead to private investment in practices and investment in water-distribution
accommodation and hospitality and infrastructure. It is uncertain where the opti-
entertainment businesses. This activity sits mum point will settle in the long term as
in the tertiary economic sector and is export markets are unstable with regard to
labour orientated, i.e. employment inten-
demand, pricing and exchange rate.
sive and dollar-for-dollar investment
generates greater economic wealth. The There has been major investment in irrigation
tourism industry has a high demand for development in recent years with the North
reliable and secure energy supply.
Otago Irrigation Company Black Pt Scheme
extending irrigation to 20,000 ha beyond the
2.5 Local Resources Waitaki Catchment. There are currently six older
boarder-dyke irrigation schemes operating in
Geography
the Waitaki Valley. Farming intensification is
The region’s geography is described as flat on driving a shift to more efficient forms of
the numerous river flood plains, rolling irrigation.
downlands between the coast and foothills,
and mountainous in the remote backcountry. It There is an extensive network of rural water-
is prone to snow, wind storm, flooding, and supply schemes. Limitation of capacity is
drought conditions with regular events that constraining residential development in rural
would be considered extreme in other loca- townships. However, the Oamaru Water Supply
tions. Accordingly its infrastructure needs to be system has just been graded to high treatment
strong, resilient, well designed and maintained, standards and has sufficient capacity to service
Page 12 Energy Sustainability Plan: Waitaki Districtoutlying communities. This water is abstracted of the thermal energy consumed comes from
from the Waitaki River utilising irrigation outside the region.
infrastructure to replace an older gravity-race
scheme. It is a possibility to reinstate gravity Oil products for transportation and agricultural
water supply via upgrade with pipes to create activity are a critical lifeline for the District. Any
a more energy efficient delivery system. threat of disruption to either the electricity grid
or the supply of liquid fuels will have a major
Any farm-based economy with dry land effect on the communities and their economic
conditions needs a sustainable Water Manage- resilience.
ment Plan to secure and maximise its future
potential. Rainwater and grey waste water Domestic space heating is an important
remain largely under-utilised resources. concern with its effects on health, comfort and
air quality in many areas. In order to better
Waste water understand the vulnerability of the District to
disruption of its energy services it is necessary
Reticulated sewers and treatment plants exist
to look at the issue from a total system
for Oamaru and all rural townships. These
perspective and to understand the interrela-
facilities are conventional with very little
tionships between the individual supply chains
innovation such as reuse or collecting bio-gas.
that make up the total system.
Large facilities tend to have some pre-treat-
ment and waste reduction on site. The Pukeuri In the Waitaki District the important supply
works supplements its on-site waste manage- chains present are:
ment with a composting operation. There are
limited industrial development sites available • electricity;
in close proximity to the Oamaru Sewerage • coal;
Plant. Farm effluent is subject to management
• wood;
plans.
• LPG; and
Solid waste • transport fuels.
This is still largely treated as a problem rather
This report takes a first look at the delivery of
than as a resource. No innovation in terms of
these services, and their contribution to the
rubbish burning or gas collection exists.
Waitaki District energy system. Information is
Landfills are constrained and expensive. The
given on the current supply situation and
district should be able to manage costs to
comment provided on the potential contribu-
local businesses more effectively than larger
tions for the future. A majority of the informa-
competing city economies.
tion presented here is from the public domain.
People From this commentary vulnerabilities have
The workforce is generally considered to be been highlighted and potential risks to supply
stable, literate, and low waged. exposed. In addition, the interrelations be-
tween the supply chains are investigated,
Missing energy related infrastructures include
particularly where these may cause interruption
reticulated gas pipes and reticulated hot-water
of supply. With the resources available to the
pipes for community heating schemes.
study it has not been possible to quantify the
likely risk outcomes in a formal way. Instead,
2.6 Energy use our aim has been to inform and advise on
future district action to mitigate identified
There is limited information available on
vulnerabilities.
energy use patterns within the District and the
dependencies that ensue. What is known is
2.6.1 Energy changes
that despite significant local resources, all
sectors of the community are strongly depend- Energy changes over the past 20 years (1986 to
ent on electricity for household energy use and 2006) and the fractions of types of energy that
liquid fuels for transportation. While electricity are unlikely to be greatly different in the
is generated in the District, a large percentage Waitaki District compared with those published
Energy in the Waitaki Page 13for Christchurch City are: ported approximately 15km to the cement
plant at Weston. Up to 210,000 tonnes per
• An annual average growth of all energy use annum will be quarried for approximately
of approximately 2.5%. 30 years. In most industrial processes in
• Oil products dominant at 64% (2006) of all the Waitaki, thermal load represents the
energy use. biggest use of energy and this is typically
provided by coal burning boilers supple-
• Transport (vehicles) is the biggest user of mented with electric heating to allow boiler
energy at 33% (2006) of total energy. turn-down. Coal is still a significant
• Electricity use rises steadily but maintains residential heating fuel in the older housing
its market share at around 25%. as the local foundry previously manufac-
tured a range of solid-fuel (wood/coal
• 79.5% (2006) of all energy used is non- multi-fuel) burners and these are still in
renewable.
renewable common usage.
(http://www.ccc.govt.nz/environment/ • Firewood remains an important residential
sustainableenergy/energystrategy.pdf ) fuel in Waitaki and until recently there was
little formal concern with air pollution in
However there are other areas that are ex-
Oamaru, but smoke from choked off log
pected to be significantly different in Waitaki burners is causing high pollution conditions
compared with Christchurch: during thermal inversions.
• Despite a slowing down of the trend in • In Christchurch wood pellets are the only
recent years Waitaki has a reducing part of the ‘wood’ fuel type that is showing
population dropping 0.3% in the past 11 a steady growth. Pellets are relatively
years, compared with Christchurch which is expensive in Waitaki compared with the
growing approximately 1% per annum. A readily available waste timber from local
more significant trend for the district is that sawmills and firewood merchants. Pellets
its population is aging. are, however, a clean convenient option for
the older population who prefer the
• The airport at Oamaru is a small operation
ambience of a living flame.
so, although increasing from zero to a
return flight every day, it is still not • In Christchurch CO2 emissions have risen
significant in terms of energy consumption dramatically over the last 20 years to reach
growth. The planes that fly in and out of 3.27 million tonnes in 2006 compared with
Oamaru are currently fuelled at Christch- 1.55 million tonnes in 1986. The ORC
urch. website reports that there have been 3
high pollution days in Oamaru since 1 July
• Oamaru’s gas works have been closed for
2008 when monitoring equipment was
several decades. The housing stock at the
installed, with the highest PM10 reading
time had to adapt to another energy
being 53.8 ug/m3 (above the 50 ugm3
source. This was typically electricity for
health standard).
water heating and solid fuel burners for
space heating. These appliances are now at
2.6.2 Description of Waitaki’s
the tail end of their life expectancy.
Electricity Supply from a Local
• LPG use in Waitaki is unknown but anecdo- Perspective
tally capturing a growing market share.
There are no reticulated subdivisions like 2.6.2.1 Governance
Queenstown and Christchurch, but an The national electricity supply is quasi-
effective bottle distribution service exists. regulated through Government Policy State-
LPG appliances are often a first choice by ments implemented by the Electricity Commis-
property developers because they have sion who are responsible for governance of the
lower capital costs and no network connec- industry.
tion fees. LPG market share exceeds 5% in
Christchurch. Generation is governed via a set of energy
• Coal use in Waitaki is predicted to signifi- market rules determined by the Electricity
cantly increase for cement production. The Commission. Transmission pricing and invest-
lignite coal is to be open cast quarried ment is governed directly by the Electricity
from a deposit located in Ngapara trans- Commission and its governance rules. Line
Page 14 Energy Sustainability Plan: Waitaki DistrictFigure 2.2: The red line shows the 24 hour average PM10 health guideline of 50 µg/m3.
(Source: http://air.orc.govt.nz/airinfo/showsite.asp?s=154#gif180)
companies are also regulated directly by the Ideally market minimum operating zones
MED and Commerce Commission. should be applied on a regional or island
basis. This may smooth out volatility in the
Government Policy Statements define the supply price risk.
Electricity Commission’s objectives with regard
to Security of Supply, Transmission upgrade, Distributed generation (DG) and demand-side
Reserve Generation, renewables, and energy management (DSM) tend to sit outside market
efficiency. structures and therefore are not yet main-
stream solutions. There are practically no
An issue of local concern is that the electricity significant DG or DSM initiatives in the Waitaki
system is operated to national objectives District.
rather than optimal local conditions. Applying
local resources to overcome a national security 2.6.2.2 Generation
issue, for example, may not be the best
The Waitaki Catchment is home to the eight
outcome for South Island electricity users and/
hydro-electric power stations (1300 MW of
or Lower South Island users. South Island spot
installed capacity) of the Meridian Energy
prices can be higher than the North Island if
owned Waitaki Power Scheme, which generates
the South Island hydro lakes are run low to
approximately 14% (6,000 GWh) of the national
maintain security in the North Island. This
electricity production (42,000 GWh). Fifty-five
situation can become pronounced if the
per cent of New Zealand’s electricity is gener-
national security risk has since past, but the
ated from hydro power schemes so the Waitaki
South Island remains dry.
generation represents 26% of all hydro energy
When such conditions require energy to be produced nationally (Energy Data File).
transported south from the Waitaki Valley into
All of this generation is grid connected and
Otago/Southland, local line companies are put
owned by the Government through its SOE,
under pressure to compromise their security (in
Meridian Energy Ltd. The water resource has
terms of grid configuration) to allow maximum
been taken from the local community in the
transfer south. Water management is a competi-
interests of national benefit. That is, there is
tive issue between generators/retailers whereas
no mitigation paid to the local community for
transmission security is a contracted service.
the use of its local resources. In a private
Local security should not be compromised to
commercial development scenario, it would be
compensate for generator’s risk-taking.
Energy in the Waitaki Page 15reasonable for the community to expect a large-scale hydro development exist on the
greater share of the benefits for the use of Clutha River at Luggate, Queensberry, and
their resources (consider Holcim’s recent Tuapeka. This river is less developed than the
consent for example). Waitaki River and therefore has lower cost
options.
While representing 60% of the nation’s hydro
storage, the Waitaki Scheme is essentially
designed and operated as a ‘run of the river’
hydro-electric generation scheme. Its storage
allows water to be managed in a half-hourly
spot market on a weekly and daily basis rather
than for seasonal peaking.
Meridian manages the water on the basis of
best commercial advantage in the competitive
energy market rather than to national security
objectives (which are responsibility of the
Electricity Commission). Local position does
not feature in these considerations. In times of
constraint the local supply is subject to
national issues and responses can be to local
disadvantage.
Apart from lack of storage, there are issues with
provision of spinning reserve, lack of backup
generation, lack of diversity, and remoteness of
load. These issues challenge the use of water
for generation as the most economically
efficient application of the resource.
Figure 2.3: South Canterbury/North Otago
Continued development of large scale grid- transmission map (Source: TPNZ Annual
connected generation is therefore challenged by Plan 2008)
the RMA and competing local interests. The
Electricity Commission’s own planning concludes
that more commercially attractive options for
Figure 2.4: South Canterbury/North Otago transmission schematic (Source: TPNZ Annual Plan 2008)
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