Some readers may be interested in this article on NZ energy policy in the latest edition of the Geoscience Society of New Zealand Newsletter 25: July 2018. Pages 33-35.
By Chris Uruski and Don Haw (retired geoscientists).
DOES THE GOVERNMENT HAVE AN ENERGY POLICY?
"Recent government moves to restrict oil and gas exploration are irrational. The stated strategy is to comply with the Paris agreement to limit CO2 emissions and this is to be achieved by transition to renewable energy. But there is no link between exploration and CO2 emissions, and no apparent plan for achieving the transition.
The ultimate aim of reducing emissions is to stop global warming, and to achieve that end, the rest of the world must also cut CO2 emissions. The hope is that the world will follow New Zealand’s lead. But, restricting oil and gas exploration cannot affect New Zealand’s emissions. The only way to reduce emissions is to reduce demand for and use of oil and gas but restricting and ultimately stopping exploration will not do either. If petroleum is not produced locally, it will continue to be imported.
The process of transitioning to renewables will be complex and energy-hungry. Energy will be required to build new technologies, some of which do not yet exist. In 2000, Sheikh Yamani, the then Saudi Minister of Oil, predicted the end of the oil age with his famous quotation “The stone age did not end for lack of stones and the oil age will not end for lack of oil”. The inference is that every development builds on existing technology. Energy from oil and particularly gas will be necessary to supply the increasing demand for electricity as electric vehicles become more numerous. Oil and gas will certainly be valuable chemical feedstocks for the foreseeable future, to produce the plastics and other goods that we rely on to maintain our living standards. Today’s more efficient vehicles rely on plastics as do appliances, computers and smart phones. Every electrical generator, cable and device needs plastics for insulation.
Most oil products in New Zealand are used to power motor vehicles, aircraft and ships. Replacing our 3.5 million fossil fuel-burning cars with electric vehicles would have the greatest impact on CO2 emissions, as about 60% of oil used in New Zealand is by our cars. But this will take many decades even if only electric vehicles were to be imported from now on.
Internal combustion engines will remain the only feasible power sources for air and sea travel for some time. There is no alternative to jet fuel for air-liners. Hydrogen as fuel is a possibility, and research is being carried out, but unless there is an unexpected breakthrough it is some way off. Shipping could be wind-assisted but back-up alternative power sources would be needed to reduce dependence on the weather and to power vessel electrical systems. About 85% of gas consumption in NZ is for industrial purposes. At present New Zealand exports gas as methanol used as a chemical feedstock and uses gas to power a number of industries and power stations. The rest is used in transport, agriculture forestry and fishing except for about 4% used in homes. At current rates of use, we have about 11 years of gas left. If the methanol exports were to be stopped, our gas reserves would last longer, but our balance of payments would suffer. Eventually, industries that rely on gas will have to either close or transition to renewables.
Gas is of strategic value for fuelling peaking power stations that supply shortfalls due to seasonal low water levels in South Island lakes and possible natural disasters that could also affect electricity supply across Cook Strait. Once we no longer have gas, we will have to either import it, which means building an LPG terminal, or households and industry might transition to electricity, putting more strain on supply. Each alternative is likely to cost billions of dollars. Replacing the fossil-fuelled vehicle fleet with electric cars, trucks and tractors should cost little more than continued importation of vehicles with internal combustion engines, but it will impose a strain on the existing electricity generation and distribution network. Electricity generation and transmission capacity will have to be boosted. New power stations will be required and the distribution network also needs to be more robust that at present. Around 150 petajoules (Pj) of electricity is generated each year and transport consumes around 190 Pj of oil. Even accounting for the greater efficiency of electric vehicles, eventually, we would still need to at least double electricity supply to keep cars moving. If industries such as steel making also transition to electricity, we can probably expect to have to triple today’s electricity generating capacity. Supplying future demand for electricity will be complex, expensive and the solution may not be obvious.
Last year, 85% of electricity was generated by renewable energy. Hydro power is responsible for 60% of electricity generation, but resistance to new projects on environmental grounds is so great that there is little room for expansion. Geothermal energy has been increasing and now accounts for about 17% of electricity generation and there is potential for expansion, but wind power, which currently makes up about 5% of generation, is faced with resistance from the public who don’t want wind farms within sight.
Significant investment would be needed into renewable technology research that promises returns and to assist industry to making new technologies commercially-viable. Alternatively, we could choose to import most of the equipment necessary as we do today.
On average, royalties from oil and gas production amount to around $300 million per year in addition to a similar amount of company tax.
The investment required to achieve a carbon-neutral economy will be many billions of dollars. It looks like the farmers will have to work hard to achieve the government’s goal. But restrictions may also be imposed on agriculture as around 30% of the country’s CO2 emissions come from farms.
It is argued that the end of oil exploration would see a massive rise in jobs in the “green industry”. Investment that previously went into the oil industry will be freed for investment into green technology and thereby create numerous jobs. This appears to have some validity, with recent reports that several regional and city councils and pension funds have divested investments in oil and gas. However, little of that previous investment in oil went to companies operating in New Zealand, of which there are few, and most of it went to multi-national companies that do not explore in New Zealand. Most investment in oil and gas exploration in New Zealand comes from international exploration companies rather than from New Zealand. Exploration attracts investment from overseas and the so-called ethical investment strategies of New Zealand organisations are largely irrelevant unless money freed up from investing in major overseas companies is re-invested in New Zealand. Restricting exploration will restrict exploration company investment in New Zealand and can only lead to fewer jobs in the sector.
It seems that proponents of green technology are expecting “them” to invent revolutionary new technology with no conception of whom “they” might be. Most research, development and construction of equipment for renewable energy generation and storage happens overseas. So far, New Zealand has imported most of its wind turbines, solar energy systems and storage batteries and little is manufactured here.
New Zealand must decide whether it is best to continue to import most of the equipment and technology needed to effect a transition to green technology, or to build it here and become a net exporter. Jobs would only be created if we do it here, otherwise, they’ll stay with our current suppliers, in China, the USA and Europe.
The idea that restricting and ultimately stopping oil and gas exploration in New Zealand will reduce CO2 emissions is [unknown] at best. There is no causal link. A coherent energy policy needs to plan for future energy needs, and should not include implementing, in isolation, a change that provides nothing but a feelgood ‘green’ moment for the government. There must be a clear plan for achieving the goal of a carbon-neutral economy. That plan should build on what we have now and what is possible.
Oil and gas will be essential for some time to come.
Replacing fossil-fuel with electric vehicles will take many decades, there is no alternative to oil for air travel, and shipping will need diesel, even if sail returns to fashion. Oil will be needed for plastics and pharmaceuticals. With an increasing load on the system, we will need gas to generate electricity until we are prepared to build more hydro stations, and until wind farms and solar power on a grand scale become technically and economically feasible. It would make better sense for the government to enlist the oil industry’s assistance to help it achieve climate and energy goals than merely to restrict its operations."
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