30 MAR 2021

Contact’s submission on the Climate Change Commission draft advice report

In February 2021 the Climate Change Commission released its draft advice and evidence report. Since then we have considered the report and our submission is downloadable below.

A quick executive summary of our submission is as follows; 

General

• Electricity generation represents 5% of New Zealand’s total gross emissions (4 million tons of CO2e in total), and the Commission states that a reduction of ~56% will be required to meet total targets. This represents a target of approximately 93% renewable generation by 2030.  At the moment Contact’s electricity is 83% renewable but we expect to be 95% renewable by 2024 i.e. 6 years ahead of the 2030 target.
• NZ must adopt the lowest cost mitigation opportunities to remain internationally competitive and minimise the impact to consumers, enterprises and businesses.  Contact applauds the Commission’s analysis and sensible recommendations to achieve this balance.
• Agree that 95% renewable generation by 2035 is a sensible goal (rather than 100%): The Commission correctly identifies the very high abatement cost of $1,200 per tCO2e required to achieve 100% renewable generation by 2030, consistent with previous expert analysis by the ICCC and the Productivity Commission.
• We agrees with the Commission that the government should approach the pumped hydro project being considered at Lake Onslow cautiously in the face of lower cost, lower risk and less intrusive alternatives, and take a balanced view of environmental sustainability overall including challenges with water. We are engaged in the consultation and we hope the investigation work will have a broad scope to ensure a wide range of options are canvassed and considered.
• Emissions Trading Scheme: An ETS with the right settings is an effective market-based mechanism to price carbon and create incentives to decarbonise across New Zealand.  It will encourage the substitution of the highest cost thermal plant to renewable generation to occur first, resulting in the lowest cost approach to removing carbon.  Contact agrees that reductions to industrial allocations is necessary to meet the carbon budgets. We also recommend that ETS funds are ring-fenced and specifically used for further decarbonisation initiatives.
• Geothermal has a strong future: NZ is a world leader in geothermal, and further development opportunities exist to increase baseload geothermal generation.  We believe the Commission’s analysis underestimates the generation contribution that geothermal can make.  We expect geothermal generation will contribute 12TWh by 2030, rather than 10TWh estimated by the Commission.
• Decarbonisation will require significant investment.  In the electricity generation sector, multi-billion dollar investment will be required by 2030 alone.  Providing investors with certainty is critical.  We agree with the Commission’s recommendation that political consensus be achieved across the political spectrum so that the private sector can invest with long-term confidence.

Decarbonising electricity generation

• We are building a 152 megawattt geothermal power station at Tauhara: New Zealand’s leading baseload, low-carbon, renewable electricity investment. Tauhara power station is set to be completed in mid-2023 and will deliver 3% of NZ's electricity needs and power the equivalent of 175,000 homes. Tauhara’s geothermal generation will replace fossil fuel generation and reduce NZ’s emissions by 450,000 tons of carbon dioxide each year. This is the equivalent of removing at least 200,000 petrol cars off the road.
• Other renewable generation investments: Working on new geothermal, hydro and wind opportunities. This includes the replacement and potential expansion of the Wairakei geothermal plant (by a further 70MW), a hydro turbine refurbishment programme, and an exclusive partnership with wind generation experts Roaring Forties to explore and consent wind projects across NZ.
• Exploring investments to reduce peak demand: Includes a potential 50 megawatt battery in the North Island to leverage renewable generation during periods of low demand each day. We believe the Government's transmission policy settings require urgent change to accelerate these types of investments.
• Thermal asset review: We are reviewing our remaining thermal assets (~17% of our generation portfolio). We want rapid removal of coal and diesel from the electricity system, but we agree with the Commission that gas will continue to have a limited place in generation in the medium term.
• Science-based Target Initiative: We were the first Kiwi generator in New Zealand to introduce science-based targets to measure and independently validate carbon reductions.  We have extended our commitment to reduce our Scope 1 and 2 emissions by 45% by 2026.

Supporting New Zealand to decarbonise:

• Electrification of Process Heat: We are working with commercial customers to electrify process heat, and we endorse the Commission’s support for further subsidies to accelerate such electrification.  Last year Contact worked with Open Country Dairy to provide New Zealand’s largest electrically powered 13MW boiler at Awarua, Southland.
• Hydrogen and hydrogen-based chemicals: These will support fuel transition and carbon abatement strategies in selected global energy markets, and provide a platform to decarbonise New Zealand’s own transport and industrial sectors. We are co-funding a $2 million feasibility study to investigate the potential of a large scale, renewable hydrogen or hydrogen-based chemical production facility in the lower South Island.  The findings of that study are expected in the middle of 2021.
• Simply Energy: We own Simply Energy, a Wellington-based company that delivers energy solutions for generators, distributors, retailers and commercial customers.  Simply Energy helps its customers reduce emissions and support grid stability through demand flexibility.