UPDATE: Take care to avoid “unnecessary” cost

Renewable Energy

UPDATE: Take care to avoid “unnecessary” cost in
electrifying economy – Vivid

(Adds comment from First Gas,
detail of Vivid scenarios, from 9th paragraph.)

By Gavin

Dec. 10 (BusinessDesk) – Relying on electrification
of heavy industry and transport to meet the country’s
emission-reduction goals would risk “unnecessary” cost
and may close out hydrogen export options longer term, Vivid
Economics says.

Expanding renewable electricity generation
and using that power in light transport and industry, and
using large-scale afforestation to offset emissions from
more challenging sectors, appears a “sensible strategy”,
the London-based consultancy says.

But focusing on
electricity when the relative costs of hydrogen, carbon
capture and storage and the upper limits of afforestation to
cater for hard-to-treat sectors are unknown is risky.
Difficult sectors include dry-year power supply,
high-temperature industrial heat and long-haul

Meeting the country’s 2050 emissions targets
using a diversified mix of afforestation, gas for winter
peaking generation and more renewables and biomass for
industry could cost $3.8 billion to $4.6 billion, or $800
per person a year, Vivid said in a report commissioned by
First Gas and Powerco.

But if hydrogen or electrification
is needed for those hard-to-treat applications, the cost
rises to between $6.2 billion and $7.2 billion, or $1,250
per person a year.

“If innovation in hydrogen
technologies outpaces innovation in electrification
technologies, then ruling out this option could reduce the
affordability of meeting the net zero target.”

government is keen on getting New Zealand’s power
generation system 100 percent renewable by 2035, despite
strong warnings from the industry and the Interim Climate
Change Committee that such a strategy would be prohibitively
expensive and inefficient in terms of emission

But the government has also backed biomass
projects and hydrogen trials. A string of hydrogen projects
are getting underway, with some of them reliant on natural
gas – at least initially – and some also relying on carbon
capture and storage to manage their emissions.

Gerritsen, commercial and regulatory manager at pipeline
operator First Gas, said it’s important the country
understand the trade-offs between the cost and environmental
outcomes of the choices it faces and that it not narrow its
options prematurely.

While the country’s renewable
electricity supply is a big advantage, he said there is an
overly simplistic belief in the ability of electricity to
displace higher-carbon energy. He noted that the electricity
system is the smallest energy provider on the North Island,
where last month it delivered about half the energy of
either the gas network, or the liquid fuel sector.

need to be realistic and we need to understand what are the
capabilities of that system to meet New Zealand’s
demand,” he told officials, executives and journalists at
a launch of the report in Wellington.

Gerritsen said
failing to be realistic about the costs of decarbonisation
risks the type of backlash seen in Australia, where the
government of Scott Morrison has had to abandon a raft of
policy initiatives aimed at increasing the use of renewable

“We would prefer to see something that is a bit
more measured and a bit more step-wise in how we move toward
a net zero target, rather than having these rear-guard
actions or really strong adverse responses to what will be
an increasing cost picture in terms of achieving

The three scenarios Vivid developed
don’t consider agricultural emissions, or allow for the
use of international carbon credits to meet New Zealand’s
emissions targets. They have as their starting point the
high level of afforestation identified by the Productivity
Commission in its study earlier this year.

Gerritsen noted
that high afforestation remains a critical uncertainty for
climate policy here, even though the prevailing view is that
a carbon price of $25 to $50 a tonne will have landowners
getting back into forestry “big time.”

The diversified
mix scenario assumes there is sufficient afforestation to
offset the emissions of the hard-to-treat sectors. The green
gas scenario assumes there isn’t and that hydrogen and
biogas technologies evolve quickly to become the least cost
alternative, with the country’s pipelines repurposed for
their use. The all-electric scenario assumes all gas use is
phased out.

Vivid says hydrogen could offer additional
advantages over electrification if it helps establish an
export industry for the fuel. Development of a hydrogen
export sector could also help meet the country’s unique
dry-year generation problem, which occurs when the small
lakes that store water for hydro-electricity generation are
low. In dry years, surplus hydrogen exported during normal
years could be used domestically instead.

“It is
therefore a policy and commercial priority to carry out
further investigation into the costs and technical potential
of forestry, hydrogen and electrification options in New
Zealand,” Vivid says in its 54-page report.

certainty over the relative potential for hydrogen and
electrification to address GHG emissions in hard-to-treat
sectors is needed before long-term decisions can be made on
the role of gas infrastructure in meeting the net zero
emissions target.”

Further research should include a
comprehensive study of afforestation, particularly
‘tipping points’ where small additional increases in
afforestation might create large impacts on economies,
ecosystems and communities.

A technical-economic
assessment should be undertaken to assess the potential
applications of hydrogen and electricity. Trials under way
in the UK and Australia on the blending of hydrogen into the
existing gas network should also be considered.

Vivid says
a full feasibility assessment of carbon capture and storage
is also needed, including the availability of suitable
storage sites, operational safety and long-term integrity of
CO2 storage.

First Gas chief executive Paul Goodeve says
the report highlights the need for policymakers to take a
cost-effective approach in the transition to a low-carbon
economy if the public are not to be over-burdened.

this research shows is that there is no easy answer to
achieve a low-carbon economy,” he said. “A key element
is affordability. We need to find affordable ways to meet
winter electricity peak demand and maintain the
competitiveness of large industries that use gas for


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