New Zealand can play leading role in smart energy systems, says new IEA report

New Zealand has long been a global leader in developing effective energy markets, renewable energy and establishing robust policies for electricity security, linked to its unique natural resource base and geography.

Over the past decade, New Zealand’s growing energy needs have outpaced improvements in energy efficiency, mainly because of the country’s expanding economy and growing population, according to the International Energy Agency’s latest study of New Zealand’s energy policies.  

The report, Energy Policies of IEA Countries: New Zealand 2017 Review, points out that staying competitive in industry, while limiting greenhouse gas emissions outside of the power generation remains a technology and policy challenge.

New Zealand set ambitious goals to cut its greenhouse gas emissions to 30% below 2005 levels by 2030. To be in line with the Paris Agreement, it will have to adopt policies supporting the energy system transformation, encouraging greater energy efficiency, electrified transport and expanding renewable energy in the buildings, heat and industry sectors. The IEA commends New Zealand for its new initiatives, the electric vehicle programme and the update to the New Zealand Energy Efficiency and Conservation Strategy.

“Government policies, including targets and standards, are needed to open up the potential of energy efficiency in industrial heat, buildings and transport. Strong standards and policies will guide technology innovation and growth,” Dr. Fatih Birol, the IEA Executive Director said when presenting the report today. “New Zealand is a world-class success story for renewables and has excellent opportunities for using even more renewable energy in heat, but also in power supply and for the electrification of transport.”

New Zealand serves as a model for effective energy markets and secure power system operation. But the IEA report shows that security of supply cannot be taken for granted, and can be strengthened through a strategic reserve auction. The country’s unique hydro-based power system brings challenges for maintaining physical security of supply. A purely market-based system may not provide a timely or fully effective response to low water levels at all times.

Security of supply will also be strengthened by boosting investment in the country’s large oil and gas resource base. The role of gas has grown in the residential sector, in power generation, and industry. However, New Zealand is not connected to the global LNG markets and does not have long-term visibility for natural gas demand and supply.

The IEA applauds New Zealand’s electricity and gas market reforms and encourages the market regulators to continue on this path. Despite ownership changes and partial privatisations, the electricity sector has only a few large players in combined retail and generation markets. However, the retail market is developing with smaller companies gaining ground across the country. 

As the energy sector becomes more decentralised and local, with greater shares of wind, solar, battery storage and electric vehicles, the government should make sure that consumers and market participants are encouraged to build a smart system. The widespread deployment of smart metering and the emergence of new technologies in New Zealand provide excellent opportunities for more efficient, innovative and competitive electricity retail and distribution.