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Electricity, Energy, and the Environment: Environmental Performance Assessment 1 July 2004–30 June 2005

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Electricity, Energy, and the Environment: Environmental Performance Assessment 1 July 2004–30 June 2005 Electricity, energy, and the environment: Environmental performance assessment 1 July 2004–30 June 2005 May 2006 Parliamentary Commissioner for the Environment Te Kaitiaki Taiao a Te Whare Paremata PO Box 10-241, Wellington, Aotearoa New Zealand www.pce.govt.nz ELECTRICITY, ENERGY, AND THE ENVIRONMENT: ENVIRONMENTAL PERFORMANCE ASSESSMENT 1 JULY 2004–30 JunE 2005 2 This report and other publications by the Parliamentary Commissioner for the Environment (PCE) are available free of charge at www.pce.govt.nz. Investigation team Doug Clover (Project leader) Iain McAuley East Harbour Management Services Internal reviewers Helen Beaumont Michael Moodie Pat Martin External comment Those agencies directly mentioned in the report have had an opportunity to comment on a draft. Comments were received from: Electricity Commission Ministry of Economic Development Energy Efficiency and Conservation Authority Ministry for the Environment Editing Write Group Limited, PO Box 9840, Wellington Proof reading Philippa Le Couteur Design and layout Kathryn Botherway Cover illustration Simon Shaw, Watermark Ltd, www.watermarkltd.com Bibliographic reference Parliamentary Commissioner for the Environment. 2006. Electricity, energy, and the environment: Environmental performance assessment 1 July 2004–30 June 2005. Wellington: Parliamentary Commissioner for the Environment. This document may be copied provided the source is acknowledged. ISSN 1177-0066 PARLIAMENTARY COMMISSIONER FOR THE ENVIRONMENT pce 3 Contents Preface ...........................................................................................................6 Guide to the report .......................................................................................8 1 Setting the scene ................................................................................9 1.1 Security of supply ..........................................................................9 1.2 New sources of energy ..................................................................9 1.3 Micro-scale solutions .....................................................................9 1.4 Proposals for large-scale solutions .................................................9 1.5 NPSs for electricity generation and transmission ..........................10 1.6 Availability of natural gas ............................................................10 1.7 Increased reliance on coal ...........................................................11 1.8 Developing energy policy ............................................................11 1.9 Pilot electricity efficiency programmes .........................................11 2 Areas for action ................................................................................12 2.1 Introduction ................................................................................12 2.2 Recommendations for the Electricity Commission ........................12 2.3 Recommendations for the wider electricity sector ........................15 3 Assessment framework ....................................................................19 3.1 Energy responsibilities in central government ..............................19 3.2 Parliamentary Commissioner for the Environment’s role ...............20 3.3 Assessment criteria .....................................................................21 3.4 Dimensions of environmental performance .................................22 3.5 Assessment objectives, methodology, and scope .........................24 3.6 Assessment time frame ...............................................................25 3.7 Recommendations and actions from the first assessment report ..26 4 Developments in New Zealand’s electricity sector .........................28 4.1 Electricity sector trends ................................................................28 4.2 Uncoupling electricity generation, economic growth, and carbon dioxide emissions ............................................................28 4.3 Electricity and energy policy issues ...............................................37 4.4 Demand-side developments ........................................................42 4.5 Supply-side (generation) developments .......................................44 4.6 Transmission and distribution issues.............................................49 4.7 Electricity prices and market developments .................................49 ELECTRICITY, ENERGY, AND THE ENVIRONMENT: ENVIRONMENTAL PERFORMANCE ASSESSMENT 1 JULY 2004–30 JunE 2005 4 5 Assessment of the Electricity Commission’s environmental performance ......................................................................................52 5.1 Overview of the Electricity Commission .......................................52 5.2 Environmental sustainability framework ......................................53 5.3 Demand-side programmes ..........................................................53 5.4 Supply-side programmes .............................................................56 5.5 Electricity market issues ...............................................................61 5.6 Stakeholder relationships and consultation ..................................62 6 Assessment of electricity sector’s environmental performance ....64 6.1 Government policy for electricity .................................................64 6.2 Electricity-related environmental performance indicators .............67 6.3 Demand-side assessment ............................................................68 6.4 Supply-side assessment ...............................................................73 6.5 Electricity prices and the competitive market ...............................75 6.6 Metering technology ...................................................................76 6.7 Sustainability reporting of electricity generation organisations .....77 6.8 Distributed generation ................................................................84 Glossary and abbreviations ........................................................................85 Endnotes ......................................................................................................90 References ...................................................................................................92 Appendix A: Operation of Whirinaki ........................................................95 Appendix B: Regional Council energy initiatives .....................................98 PARLIAMENTARY COMMISSIONER FOR THE ENVIRONMENT pce 5 Tables 2.1 Electricity sector responsibilities ............................................................12 3.1 PCE’s priorities for the environmental performance assessment ............21 3.2 Environmental objectives of the GPS on electricity governance .............22 4.1 Wind projects with confirmed resource consents .................................45 4.2 Wind projects currently in the resource consent process .......................45 4.3 Wind power proposals currently being investigated .............................46 5.1 Cooperative activities identified in the MoU between EECA and the Electricity Commission .........................................................................55 6.1 Electricity generators’ sustainability reporting .......................................78 Figures 4.1 Uncoupling electricity generation, economic growth, and carbon dioxide emissions 1990–2005 ..............................................................28 4.2 Hydro and thermal generation 1990–2005 ..........................................29 4.3 Electricity generation mix (GWh) 1975–2005 .......................................30 4.4 Electricity generation mix (%) 1975–2005 ............................................31 4.5 Electricity generated by renewable sources 1990–2005 ........................32 4.6 Efficiency of thermal electricity generation 1990–2005 ........................32 4.7 Efficiency of electricity transmission and distribution 1997–2004 .........33 4.8 Industrial and commercial sector electricity use and economic growth 1990–2004 .............................................................................34 4.9 Residential sector electricity use, population, and number of households 1992–2004 .......................................................................34 4.10 Residential sector electricity use per person and per household 1992–2004 ..........................................................................................35 4.11 Real electricity prices 1990–2004 .........................................................36 4.12 Nominal electricity prices 1990–2004 ...................................................36 ELECTRICITY, ENERGY, AND THE ENVIRONMENT: ENVIRONMENTAL PERFORMANCE ASSESSMENT 1 JULY 2004–30 JunE 2005 6 Preface As I write this preface in May 2006 I reflect on the growing awareness of climate change. New Zealand has had its first major climate change conference, Tim Flannery released his book The Weather Makers, new research is appearing constantly, and Time magazine’s cover featured climate change with the heading, Be worried, very worried. The implications are enormous. We are entering arguably the most turbulent period in human history. As we design policies, technologies, and electricity systems for the future, our past experiences will increasingly count for less. The necessity and urgency of weighting our decisions in terms of this future rather than our past is highlighted by a statement Prime Minister Tony Blair made
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