Electric cars, solar panels, and batteries in New Zealand ...€¦ · moment, it could be in future...

20160608_MCR_Overview_2_YoungEnergyProfNetwk_v02.pptm

Electric cars, solar panels, and batteries in New Zealand – Are we best positioned to take advantage of these technologies?

Presentation to the Young Energy Professional Network Simon Coates, Concept Consulting 8 June 2016

www.concept.co.nz


Context to study

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The same technologies have dominated electricity for decades

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Centralised, economies of scale generation and transport Simple meters

‘Dumb’ appliances


Now, many new technologies are converging to disrupt this picture

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Computing

Communications

Advanced metering

Smart appliances Batteries Photovoltaics

Sensors

Electric vehicles


These technologies represent a huge opportunity…

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Cheaper, more reliable networks

Cheaper, cleaner transport

Cheaper, cleaner energy

Lower retail cost-to-serve


… and are fundamentally challenging grid generation

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NEM grid demand


Uptake of some new technology in New Zealand is starting to accelerate (e.g. solar PV)

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But are things heading in the

right direction for New Zealand?


• Good outcomes will only emerge if the new decision-makers – i.e. consumers – have the right incentives and information

• This currently doesn’t appear to be the case

“Democratisation of energy”

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Decision making is moving from the boardroom… … to the living room


Study being undertaken to examine potential consequences of poor technology uptake

• Three separate reports 1) Environmental outcomes given New Zealand’s renewables-dominated grid generation circumstances 2) Economic consequences

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3) Social consequences – ‘Cost-shifting’ from technology uptake by

some consumers, resulting in network & retail cost-recovery being shifted onto others

– Consequences from altered tariff structures to address the problem, resulting in winners & losers

Particular focus on whether low-income consumers generally better or worse off


Concept study, but with support from 8 organisations

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Summary of emissions report

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Detailed market projections undertaken to examine emissions impact of technology uptake

• Concept’s market models work out least-cost generation build and operation, now and into future, based on key drivers, e.g.: – Demand growth and shape – Fuel & CO2 prices – Generating technology costs

• Run two scenarios – one with new technology uptake (e.g. solar PV, EVs, or batteries), and – one without

• Impact of technology on grid generation build and operation – and hence emissions

• Repeated over many different scenarios (e.g. fuel price, CO2 price, Tiwai in/out, etc.) to determine whether nature and scale of impact is consistent

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Projected NZ generation with / without EVs for sample scenario

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No EV uptake High EV uptake


Majority of future EV demand is met by increased wind generation

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Once system is more in balance, increased EV demand = new baseload (i.e. renewable) generation

V. Early years, increased demand = increased existing fossil gen.


Projected NZ generation with / without solar PV for sample scenario

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No Solar PV High Solar PV


Three ‘phases’ of solar PV impact

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1. Current system overcapacity. Increased PV reduced fossil

2. System in balance. Increased PV = a) Reduced new baseload (i.e. renewable) build. b) No avoided fossil. c) Hydro progressively works harder to provide summer /

winter balancing

3. Hydro seasonal flex is exhausted Increased PV is as per 2., except further seasonal balancing met by increased fossil and increased spill


Considering all effects, EVs represent the biggest opportunity to de-carbonise our economy

• Analysis also considered avoided tailpipe emissions for EVs, and embodied emissions in manufacture of the technology

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Flattening of demand curve more renewables & less thermal


Our situation is different to most overseas countries

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Coal-powered EVs overseas don’t save emissions compared to our wind-powered EVs

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And PVs avoiding overseas coal-fired generation is clearly better than New Zealand PVs displacing wind generation

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Plus overseas summer-peaking markets mean PV has a beneficial seasonal profile


Economic impact of new technologies

Report yet to be finalised, but provisional findings…

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EVs face pricing barriers to their uptake

• Night-time electricity charging price being too high

• Little ability to be rewarded from injecting at peak

• CO2 prices being lower than ‘true’ social cost

• Currently largely offset by avoiding paying for roading charge, – but this is due to be removed

in 2021

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• Scale of economic cost from delayed EV uptake could be $hundreds of millions


Solar PV being over-rewarded for generation

• Principal benefit to consumers from solar PV is avoiding paying average residential tariff

• However, value of solar PV to New Zealand likely to be a lot lower

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Solar PV is being paid for a service it is not providing

• Residential tariff intended to be broadly equitable, and not too inefficient, means of recovering costs given metering & billing technology constraints

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• Not intended to be a means of paying for generation. • Has effect of solar PV being paid as if it were reducing network and retail

costs, whereas such costs are not reduced. – (Indeed, solar PV may increase both network & retail CTS costs)


Although solar PV generally not economic for consumers at moment, it could be in future – but not for New Zealand

• NZIER estimate of economic cost from inefficient uptake of solar PV ≈ $2.7-$5bn

• Our estimate is $1.2bn - $2.6bn

• Renewable grid generation likely to be much cheaper for New Zealand

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None of the technologies avoid the need to build the grid


Summary

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Wrong price signals poor technology uptake

• Too much uptake of technologies which consume most, or generate least, during peak periods – Solar PV – Electric heating

• Too little uptake of technologies which

– Contribute to avoiding peak demand, e.g.: • Non-electric heating (wood or gas) • Home insulation • ‘Smart’ appliances • Vehicle-to-grid electric vehicles (EVs)

– Consume most at off-peak periods, e.g. • EVs

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Getting price signals right is critically important. But challenging!

• Wrong prices to consumers – Worse environmental

outcomes – Higher energy & transport

costs – Poor social outcomes

• Transitioning to the ‘right’ prices won’t be easy – Inevitably winners & losers

• Need: – Evidenced-based basis on

which to make decisions – Appropriate incentives on

networks & retailers – Broader political &

consumer buy-in

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The key lesson from Australia, Hawaii, Germany, UK, ….

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Get things right before it is too late!


Thank you

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About Concept • Concept is a specialist energy and economics consultancy that provides services to clients in New

Zealand, Australia and the wider Asia-Pacific region. • Concept provides advice on energy sector policy, business analysis, restructuring, market design,

regulatory issues, energy modelling, market analysis, and technical issues. • Combining economic rigour, leading modelling & analytical skills, and practical backgrounds in the

energy sector, Concept consultants are able to provide practical solutions to client problems based on robust analysis.

• For more information, visit www.concept.co.nz or email [email protected] .

Disclaimer • The information and opinions expressed in this presentation are believed to be accurate and complete

at the time of writing. • However, Concept and its staff shall not, and do not, accept any liability for errors or omissions in this

presentation or for any consequences of reliance on its content, conclusions or any material, correspondence of any form or discussions arising out of or associated with its preparation.

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www.concept.co.nz

http://www.concept.co.nz/

mailto:[email protected]

Electric cars, solar panels, and batteries in New Zealand ...€¦ · moment, it could be in future...

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