New Zealand spends about $18 billion on energy every year and the Energy Efficiency and Conservation Authority (EECA) estimates that 20% of this is waste.
In anyone’s language that is a lot of waste … $3.6 billion, in fact.
If the New Zealand economy was a business, accountants and efficiency experts would be targeting that $3.6 billion.
While the recent media attention on this sector has focused on cheap loans for domestic solar initiatives, the economic value of this is far from certain. Any Government action within this sector should be focussed on something with a greater certainty of payback.
The EECA estimates that businesses and Government consume around 70% of our total energy. This highlights the large economic energy efficiency potential in the business sector, mostly within the largest 200 energy-using organisations.
There is an opportunity for the Government in this space. Firstly, the barriers around the lack of information about opportunities, lack of organisational capability and lack of available funding within organisations, even for fast payback projects, need to be addressed.
The Budget is an obvious starting point. The first target should be to increase funding and other assistance to help ensure the potential gains are realised for the largest 200 energy-using organisations. Given the large number of SMEs in New Zealand, the Government could also look at ways provide assistance to these smaller businesses.
Renewable energy is another key area the Government should be considering (as long as the economic value adds up).
We are pretty well off in this area. In 2012 renewable energy made up 37% of New Zealand’s Total Primary Energy Supply, which is high by international standards, the third highest in the OECD, against a global average of only 16%. New Zealand is well ahead of the EU in this regard where they are targeting 27% renewables by 2030.
The catch with renewables is that they’re a long-term investment and it takes time for their impact on the economy to be seen. Government incentives would help bridge the gap between the near-term investment cycle and the longer-term return. As an example, the UK Government has offered a price of £155 ($250) per megawatt hour for offshore wind energy which is around three times the current wholesale price of electricity in the UK.
Electricity demand at the moment in New Zealand is flat, but the ever-strengthening economy will put pressure on this sector. When you consider that we are wasting 20% of our energy, any assistance in the Budget, that also has a focus on economically viable, renewable energy, will pay strong dividends in both the near and far future.
Further enquiries, please contact:
Grant Thornton New Zealand National Director, Government Advisory
T: +64 (0)4 495 1724