Advocating for climate policy
Leadership means speaking up when it counts
Being a 100% renewable energy company is great but it’s not enough. We’re taking action in our business, working with our customers, our suppliers and our people to help effect change. We also speak up strongly for the policies and regulations we think will make the biggest difference in meeting the climate challenge head-on in the next decade of change.
Timely consents support climate action
Resource and other consents govern our ability to contribute as fully as possible to renewable development that can displace thermal generation and decarbonise the New Zealand economy. The policy framework for consenting new renewable electricity generation projects in New Zealand requires improvement in our view.
Part of the problem is that while the current Resource Management Act 1991 now explicitly requires a consideration of climate change factors, it doesn’t in our opinion allow for a fair and balanced conversations on resource consents for renewable electricity generation. We believe it’s important that stakeholders have the time to engage appropriately on proposed changes and developments covered by the Act, but the lack of movement in accelerating the resource consent process remains a significant hurdle for us, even as the price of building wind farms continues to fall. It’s heartening to see the Government indicating that it wishes to see the resource consent process take less time, and we look forward to seeing this progress.
100% renewable electricity has consequences
In February 2020, we made a submission to the Ministry of Business, Innovation and Employment on accelerating renewable energy and energy efficiency. In our submission we said that we were concerned that the goal of pursuing 100% renewable electricity generation could result in worse emission outcomes as it could drive up the cost of electricity, reducing the incentive to electrify transport and industrial process heat. We pointed out that modelling by the Ministry, the Interim Climate Change Committee, Meridian and others consistently showed that even under business-as-usual scenarios, renewable generation would increase to around 95% of market share by around 2035 without any need for regulatory change. We believe that the real prize for New Zealand is the electrification of sectors of the economy that are heavily reliant on fossil fuels (transport and industrial heat).
We continue to stand by this analysis and position, and advocate for the pursuit of radical emission reductions throughout the economy. This may mean leaving the last couple of percentage points of the electricity grid alone until the rest of the energy consumption in New Zealand has been decarbonised.
A high cost per tonne of carbon abated also rules out solar as an effective climate action response in the near term, although solar can provide resiliency of electricity supply in emergency situations (when paired with batteries), provide support for distribution networks, and increase energy independence for those who can afford solar systems.
Tackling the last five percent
In FY20 we looked to increase the overall renewable energy available to us in the event of dry conditions by unlocking access to additional storage at Lake Pūkaki, the country’s largest hydro storage lake. Access to the extra storage at Lake Pūkaki could provide enough electricity to power the equivalent of around 50,000 homes.
We’ve had access to 545 gigawatt hours (GWh) of storage in Lake Pūkaki during dry conditions under existing resource consents for some time, but engineering and operational constraints have limited how much of this could actually be used. When we reviewed this arrangement in FY20, we re-evaluated those constraints and we now believe access to the remaining 367GWh is feasible. This additional storage has now been incorporated into Meridian’s operations and we’ll continue to refine it. In essence, the country’s largest battery just got bigger.
Emissions Trading Scheme strengthened
Perhaps not surprisingly given our commitment to a sustainable future, we view the current electricity market structure alongside a reformed New Zealand ETS as a key enabler of achieving the best long-term outcomes for New Zealand and the objective of reducing emissions at least cost.
We have been, and continue to be, a strong supporter of ETS reforms, including the Climate Change Response (Emissions Trading Reform) Amendment Bill. Well signalled limits on the availability of emission units and resulting expectations of emission pricing will enable a market-led response that identifies the most efficient investments in emission reductions over time, across all technologies, and throughout the economy. Because of this, businesses and individuals will be able to invest with confidence, and competition and innovation will flourish as we reduce emissions over time.
Our view is that emission reductions should begin as soon as possible to put Aotearoa on track to meet our emission-reduction targets and ensure that mitigation steps are not left until it’s possibly too late. For the ETS-based approach to be a success, the Government must be willing to accept the higher emissions prices that will result from the sinking lid and resist the urge to intervene unless there is a strong case for doing so. Leaving climate change mitigation until later would also push the cost of emission reductions onto later generations.
In most sectors of the economy the ETS provides an appropriate price incentive to ensure New Zealanders favour low-emission alternatives. However, for the ETS to be an effective policy tool, we believe it must operate to limit emissions over time and send increasingly strong price signals as economy-wide emissions reduce. To date this hasn’t been the case, as the ETS excludes some sectors and offers others fixed-price options that allow them to emit as much carbon as they want to at those prices. Our view is that the Government should generally be cautious in considering additional, sector-specific interventions. This is because there could be unintended consequences and a risk that emission reductions are not as efficient as they could be under an economy wide ETS.
Climate-related disclosure may become mandatory
We strongly support steps to encourage investment that will help the transition to a net-zero carbon economy. In July 2019 we were the first New Zealand-listed issuer to publish a climate risk disclosures report, prepared in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Since then, the Government has said it intends to move to a position where the effects of climate change become routinely considered in business and investment decisions in New Zealand.
A mandatory disclosure regime would be consistent with existing commitments made by large sections of the business community through the Climate Leaders Coalition to assess and disclose climate change risks. We believe that other large-scale entities shouldn’t be excluded from the disclosure regime because they’re privately owned. Disclosure by these large, privately owned firms would further enhance the resilience of the New Zealand economy.