Retailers and lines companies must fill energy efficiency vacuum

Chris Mardon - Mon, 29 Apr 2024

Previous governments saw value in encouraging people to increase the energy efficiency of appliances and industrial processes. Aided by money from government,

these leg-ups worked well.

But the new coalition placed a bomb under three decades of incentives and detonated it. Skeletal remnants left standing will hopefully remain, but that depends on

decisions in the May Budget.

The coalition’s first target for saving money involved axing the $1 billion GIDI fund that

was used to incentivise the installation of efficient lighting, heating, electric motors and

removing coal-fired boilers.

Because some projects were with large corporates, this successful co-investment

model was dismissed as “corporate welfare” and ended hastily in the new

government’s first 100 days.

Second, the new government is progressing a steady increase in the fixed component

of electricity bills, a process started by the last government. This removes a cross

subsidy, but also lessens the incentive for homes to lower their electricity consumption.

This double-whammy is a huge set back to energy efficiency, an enabler of lower

carbon emissions.

More importantly at this moment, investing in energy efficiency would reduce power

bills, trim total consumption, assist with reducing load on distribution assets, and lessen

the need for additional capital into generation assets.

It also helps avoid blackouts on cold, still winter evenings. Energy efficiency is a no-

brainer, which is why it’s mentioned 128 times in the Climate Change Commission’s

2021 independent advice to government.

With little left standing, the focus must switch to what’s next. As a stalwart in energy

efficiency, I see three things that should now happen:

Energy efficiency lowers looming multi-billion bill for carbon offsets

The first is that the government should reconsider its co-investment for energy

efficiency programmes.

The bill for climate change is coming. The Climate Change Commission said this

month that New Zealand will, in 2030, need to offset 100 million tonnes of carbon

emissions, which will cost about $6 billion.

But that estimate is based on today’s carbon price of around $60 per tonne of carbon

dioxide. It will likely be much higher in six years.

However, “low-hanging fruit” energy efficiency opportunities exist that are considerably

cheaper per tonne of carbon saved than purchasing much more expensive carbon

offsets internationally.

For example, replacing all 29 million inefficient light bulbs in New Zealand homes with

LEDs would reduce carbon emissions by an amount that’s equivalent to taking all cars

off New Zealand roads for a year – while helping keep lights on during cold winter

evenings by delivering a Hamilton city-worth of peak load reduction. This has an 18:1

benefit to cost ratio for New Zealand Inc.

Incentivise lines companies and retailers

Energy utilities should be obligated and incentivised to improve energy efficiency.

These regulated incentives would focus on electricity retailers and lines companies.

Regulating energy utilities to improve energy efficiency sounds controversial but it is

relatively common in overseas countries.

The International Energy Agency of 31 member nations is a strong supporter because

utility-funded programmes provide several unique advantages.

Energy utilities have access to finance, which puts them in a strong position to fund

energy efficiency projects.

Due to their reach and resourcing, utilities are capable of deploying energy efficiency

actions quickly on a large scale.

In New Zealand, nearly every person and business is an energy utility customer, and

with the right regulatory incentives, utilities are well-placed to promote energy efficiency

through identifying and deploying energy-saving opportunities for their customers.

Energy efficiency has a very good return on investment and is a key ingredient of

socially inclusive, cost-effective energy transitions.

It’s also part of the evolving framework of energy utility business models that

increasingly focus on demand-side savings and flexibility to operate electricity

generation and distribution systems reliably.

Increase advocacy for energy efficiency

Stakeholders left stunned by the rapid change in the environment need to advocate

collectively, amplifying the voice of energy efficiency.

This is especially pertinent given the cancelling of the entire GIDI fund in one foul

sweep.

A discussion has started on forming an industry association modelled on Australia’s

Energy Savings Industry Association, which focuses on energy efficiency markets but

also on issues affecting industry and implementation of energy efficiency activities.

This style of focused collective advocacy is needed desperately in New Zealand.

Those keen on sticking up for energy efficiency and willing to help in a constructive

manner should get in touch.

New Energy Minister Simeon Brown has a lot on his plate and certainly some

significant challenges ahead.

While we’re in a more fiscally constrained environment, it’s not clear what alternative

initiatives he has in mind to progress energy efficiency.

Budget steer

Budget 2024 will provide some clarity as to the direct investment the government will

put into funding energy efficiency, carbon mitigation and environmental concerns.

The Minister may be considering directly regulating utilities to undertake energy

efficiency initiatives, but this is not yet clear.

He does say he’s looking at market-based approaches to energy policy as the best

means of achieving social, economic and environmental goals in the energy system.

He wants to “mobilise private capital and leverage the energy efficiency regulatory

regime” to enable energy efficiency gains.

It’s imperative that the voice of energy efficiency is amplified ten-fold so government

hears the benefits and resumes direct support for energy efficiency – or puts measures

in place to use the powerful reach and finance of utility companies as its go-forward

market-based solution.

I believe the Minister understands the importance of effective energy efficiency

measures, so watch this space.

*Chris Mardon is managing director of Ecobulb, a lighting company that focuses on

energy efficiency.

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