Don't throw billion-dollar baby out with bathwater

OPINION: Don't throw billion-dollar baby out with bathwater

Chris Mardon - Fri, 8 Mar 2024

The saying “don’t throw the baby out with the bathwater” cautions against tossing away something valuable alongside something unwanted.

There’s been plenty of discarding of spending from the new Government. Barely a week passes without it stopping something – the clean car discount, Auckland light rail, road tax exemptions, cycling and walkway initiatives, and Let’s Get Wellington Moving.

Amid this 100-day flurry of surplus-restoring cancellations, one drew less attention –

ending funding for the Government Investment in Decarbonising Fund, or GIDI.

GIDI was set up by the previous government to support businesses switching from

fossil fuels to renewable energy. Some of the individual grants were huge. NZ Steel still

stands to receive up to $140 million and Fonterra up to $90 million to help replace coal

with electric-generated heat.

When in opposition, the National Party dubbed these subsidies “corporate welfare”, so

it wasn’t a surprise when Nicola Willis’s December mini-Budget signalled an end to

GIDI with unspent money put back in the consolidated fund.

Risk

While many in the business community quietly applauded the Government exercising

fiscal restraint, the risk of throwing out the proverbial baby is high.

As well as stopping payments to big industrial players, the Government appears to be

binning excellent efficiency schemes proven over decades to use less electricity to

generate the same amount of heat and light.

Previously available funding for energy efficiency in New Zealand businesses and

homes has either been pulled by the new Government, or ground to a halt.

This included $330 million over six years of commercial energy efficiency funding,

ditched in the mini-Budget. The Government appears to be abandoning the co-

investment model which has given very good “bang for buck” for taxpayers – and that

has the potential to slash the cost of living by saving Kiwis $1 billion per year in power.

Ending corporate welfare for profitable New Zealand companies to remove coal-fired

furnaces and boilers – which they legally have to do anyway by 2037 – is one thing.

But cutting funding for energy efficiency will halt programmes and infrastructure dating

from the founding of the Energy Efficiency and Conservation Authority (EECA) by the

fourth National government in 1992.

Benefits

These energy saving programmes reduce electricity demand, lessen how many new

power stations and distribution lines need to be built, and ease cost of living pressures.

Energy efficiency also helps lower New Zealand’s carbon footprint, so it should

logically be part of National’s “strong commitment” to meeting emissions targets.

And it provides useful social investment outcomes – fewer people sick because they

have warmer homes. Reducing the cost of household energy bills means less poverty

and all the negative social outcomes of that. Money invested upfront means less

required later to deal with negative social outcomes.

Energy Minister Simeon Brown spoke at a business event on 20 February about the

energy trilemma – balancing the tough choices between security of supply to keep the

lights on, energy affordability, and environmental sustainability. Most energy options

struggle to support all three legs of the trilemma and are lucky to reach two.

But energy efficiency ticks all three boxes. For example, replacing all the inefficient

light bulbs in New Zealand homes with LEDs would tackle:

• security of supply – lowering a Hamilton city-worth of peak load to help keep the lights on at an 18-1 benefit to cost ratio for New Zealand Inc

• affordability – saving Kiwis $195 million of electricity a year on their power bills environmental sustainability – reducing carbon emissions by the equivalent of taking all cars off New Zealand roads for a year

Wider gains

Rolling out LED bulbs and various other low-cost energy saving measures to 1.5

million New Zealand homes would save Kiwis a collective $1 billion per year in power,

with a four-month payback based on energy savings.

Ironically, the Government withdrew from GIDI partly because it wants the emissions

trading scheme to do the heavy lifting in encouraging business to stop burning fossil fuels.

But the emissions trading scheme doesn’t provide an incentive for commercial lighting

upgrades. Prices of carbon credits could double, with no impact on incentives to install

efficient lighting.

This change has meant many companies which supplied products and services into

these initiatives are casualties, but those I’ve spoken to are committed to working with

the new Government.

We all know that increasing energy efficiency funding for businesses and homes has

positive outcomes – reducing the cost of living by reducing power bills, reducing peak

electricity demand, displacing expensive investment in new generation and increasing

business productivity.

While the business sector understands the rationale for cutting subsidies to big

corporates, there is concern at the demise of energy efficiency programmes.

When consumers are wanting ways to save money, and energy efficiency will avert

construction of more power stations and lines, encouraging energy efficiency is a no-

brainer – and it could be the difference between keeping the lights on this winter or

next winter.

So last week I wrote to the ministers of energy, finance and climate change, asking

them to fund co-investment in energy efficiency as part of Budget 2024.

Ministers need to drain the bath carefully to protect the billion-dollar energy-saving

baby and keep the lights on – because investing in energy efficiency just makes so

much sense for everyone.

Chris Mardon is managing director of Ecobulb.

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