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ENERGY POLICIES OF IEA COUNTRIES New Zealand 2017 Review Secure Sustainable Together ENERGY POLICIES OF IEA COUNTRIES New Zealand 2017 Review INTERNATIONAL ENERGY AGENCY The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Secure Greece Sustainable Hungary Together Ireland Italy Japan Korea Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2017 Spain International Energy Agency Sweden Website: www.iea.org Switzerland Turkey United Kingdom Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are also participates in available online at www.iea.org/t&c/ the work of the IEA. Foreword The International Energy Agency (IEA) has been conducting in-depth country reviews since 1976. A core activity, the process of review by peers not only supports member countries’ energy policy development and mutual learning, but also encourages exchange of international best practice and experience. In short, by seeing what has worked – or not – in the “real world,” these reviews help to identify policies that achieve objectives and bring results. FOREWORD In 2016, the IEA decided to modernise the reviews by shifting their focus to key energy security challenges in fast changing global energy markets and to the transition to a clean energy system. This report on New Zealand is the first review under this modernised structure. It analyses oil, gas and electricity security, the competition in energy markets and offers pragmatic policy advice on how to design energy and climate policies for the energy transition. New Zealand’s power markets are fundamental to the energy system transformation and to the decarbonisation of the economy at large. Therefore, the spotlight of this review is on the electricity sector. The new format of the review offers insights into two special focus areas, which were chosen by the New Zealand government, renewable energy integration and electricity distribution. The special focus chapter on renewable energy evaluates opportunities and challenges for increasing the share of renewable energy in the power sector and beyond, in industrial heat and transport, while ensuring their continuous system and market integration. Electricity distribution networks and retail markets are at the heart of the energy system transformation, with more digitalisation, higher shares of electric vehicles, battery storage and growing decentralised and intermittent renewable energy. The report reviews the structure, governance and regulation of the electricity distribution service sector in New Zealand and provides recommendations for network regulation and retail market reforms. The primary aim of this report is to support New Zealand in its quest for a secure, affordable and environmentally sustainable transformation of its energy sector and economy. It is my hope that the country reviews will guide our member governments in their energy transition and contribute to a cleaner, more sustainable and secure global energy system. Dr. Fatih Birol Executive Director International Energy Agency 3 © OECD/IEA,2017 THE ENERGY SYSTEME AT A GLANCE Foreword 3 1. Executive summary 13 Progress and challenges 13 Energy system transformation 14 Special focus 1: Renewable electricity towards 90% 15 Special focus 2: Electricity distribution development 16 Energy security 18 Key recommendations 19 TABLEOF CONTENTS 2. The energy system at a glance 23 Country overview 23 Institutional framework 24 Changes in supply and demand 26 Changes in emissions 29 References 31 PART I. ENERGY SECURITY Summary of Part I 33 3. Natural gas 35 Overview 35 Supply and demand 35 Gas regulatory framework 38 Gas infrastructure 39 Gas market structure 42 Gas security policy 43 Gas prices and taxes 44 Assessment 45 Recommendations 47 References 47 5 © OECD/IEA,2017 4. Oil 49 Overview 49 Supply and demand 49 Oil regulatory framework 52 Oil infrastructure 54 Oil retail market structure 56 Oil security 57 Oil prices and taxes 58 Assessment 59 Recommendations 60 References 60 5. Electricity 61 Overview 61 Institutions and regulatory oversight 61 Wholesale market 63 Retail market 73 Electricity networks 83 Regulatory framework 87 Security of electricity supply overview 89 Reliability of electricity supply 89 Generation diversity 91 Generation resource adequacy 92 Generation availability and flexibility 93 Security of supply legal framework 95 Network adequacy 99 Assessment 101 Recommendations 107 References 108 6. Special Focus 1: Renewable electricity towards 90% 109 Overview 109 Introduction 109 6 © OECD/IEA,2017 Supply and demand 110 Potential and prospects for increased renewable generation 112 Conclusions on prospects for growth and resulting priorities 113 Power system context for renewables integration 114 Priority 1: System operation at high shares of variable generation 117 Priority 2: Resource adequacy with higher shares of renewable energy 120 Priority 3: Market design ensuring economic efficiency and robust price signals 121 Assessment 123 TABLEOF CONTENTS Recommendations 124 References 124 7. Special Focus 2: Electricity distribution development 127 Overview 127 Electricity distribution sector 127 Regulatory framework 133 Emerging policy issues 139 Strengthening the governance framework 141 Assessment 160 Recommendations 162 References 163 PART II. ENERGY SYSTEM TRANSFORMATION Summary of Part II 165 8. Energy system transformation overview 167 Energy system trends 167 Carbon intensity 168 Energy intensity 169 Renewable energy supply/demand 171 Energy strategies 173 GHG targets 174 Energy and climate scenarios 174 7 © OECD/IEA,2017 Mitigation and adaptation 175 Energy RD&D strategy 178 Assessment 180 Recommendations 184 References 184 9. Electricity and heat 187 Overview 187 Supply and demand 187 Heat supply and demand 191 Policies and measures 192 Assessment 193 Recommendations 195 References 195 10. Industry 197 Overview 197 Energy consumption and efficiency 197 Policies and measures 201 Case study: The changing role of coal 201 Assessment 206 Recommendations 208 References 208 11. Transport 209 Overview 209 Energy consumption and efficiency 209 Policies and measures 212 Case study: Electrification of the transport sector 213 Assessment 216 Recommendations 218 References 218 12. Residential and commercial 219 Overview 219 8 © OECD/IEA,2017 Energy consumption and efficiency 219 Policies and measures 221 Assessment 224 Recommendations 226 References 227 PART III. ANNEXES ANNEX A: Organisation of the review 229 ANNEX B: Energy balances and key statistical data 232 TABLEOF CONTENTS ANNEX C: International Energy Agency “Shared Goals” 236 ANNEX D: Glossary and list of abbreviations 238 9 © OECD/IEA,2017 LIST OF FIGURES, TABLES AND BOXES Figures 2.1 Map of New Zealand ...................................................................................................... 22 2.2 TPES, 1973-2015 ........................................................................................................... 26 2.3 Breakdown of TPES in IEA member countries, 2015 .................................................... 27 2.4 Energy production by source, 1973-2015 ...................................................................... 28 2.5 TFC by sector, 1973-2014.............................................................................................. 28 2.6 New Zealand’s greenhouse gas emissions by sector, 1990 and 2014. ......................... 30 2.7 New Zealand’s greenhouse gas emissions by gas, 1990 and 2014. ............................. 30 2.8 CO2 emissions by sector, 1973-2014 ............................................................................. 31 2.9 CO2 emissions by fuel, 1973-2014 ................................................................................. 31 3.1 Natural gas supply by source, 1973-2015.....................................................................
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