After defying the political odds to become the world’s youngest female leader, New Zealand’s Prime Minister is taking on a different kind of power challenge.
Jacinda Ardern aims to switch the electricity grid entirely to renewables by 2035, which would place the South Pacific island in a small club of nations ditching fuels like coal and natural gas to cut carbon emissions. While the country of 4.7 million people already gets more than 80 percent of its electricity from green sources, maintaining reliable supply and affordable rates will become more challenging as it nears its goal.
Ardern, 37, took power in a coalition after winning the backing of a minor nationalist party last month, a rise that’s drawn comparisons with the generational leadership changes in countries like France and Canada. Ardern won support from younger voters with her focus on climate, which she described as “my generation’s nuclear-free moment” — a reference to New Zealand’s ban on nuclear ships in the 1980s. Her longer-term target is zero carbon emissions by 2050.
But a renewables-only power market “may not deliver all the reliability that we’ve become used to,” said Toby Stevenson, a Wellington-based director with Sapere Research Group, which provides consultancy services to corporations and government bodies, and chairman of electricity retailer King Country Energy Ltd.
Coal and gas-fired plants supplied 16 percent of New Zealand’s electricity generation in 2016, according to the International Energy Agency, with nearly 60 percent coming from hydropower. Removing those fossil fuels from the grid may spark supply-security issues that policy makers or regulators need to address, according to Stevenson.
New Zealand’s reliance on hydropower leaves prices vulnerable to spikes amid dry weather as lake levels drop and coal- and gas-fired plants make up the shortfall. Phasing out fossil fuels too quickly could lead to “very volatile” spot prices for the wholesale market, according to Greg Sise, managing director of Dunedin-based consultancy Energy Link.
Just a handful of countries including Iceland and Norway have almost entirely eliminated fossil fuels from their grids. Geothermal pockets and hydroelectric dams dominate Iceland’s energy mix, while Norway, one of Europe’s biggest oil and gas producers, covers nearly all of its electricity needs with hydropower generated by lakes and glaciers.
Even reaching New Zealand’s rate of renewables has stumped others in Asia-Pacific. Australia, which relies on coal for the majority of its power, has botched the transition toward clean energy, leaving it with some of the highest power prices in the world and deepening political turmoil. Taiwan has struggled to shift away from coal, highlighting issues with the reliability of its grid and raising scrutiny of the current administration’s policies.
Thanks to its own large hydropower resources, New Zealand is a long way down the road to meeting its target. Renewable generation peaked at 93 percent in the 2016 winter, according to the state-owned grid operator Transpower New Zealand Ltd.
And planned investments in new generation capacity are already dominated by renewables, data from the nation’s Electricity Authority show. Of the project pipeline that totals 4,080 megawatts of capacity, only 460 megawatts will come from gas, with the rest filled by wind, hydro and geothermal.
Mapping out New Zealand’s transition to a lower carbon economy is the focus of an inquiry by the nation’s Productivity Commission, the government’s independent advisory body. Ardern has also floated the idea of an independent commission to help reach her 2050 zero-emissions goal, which would require eliminating fossil fuels in vehicles. Ardern hasn’t yet released details of her plan, and a spokesperson for Climate Change Minister James Shaw didn’t respond to an emailed request for comment.
Contact Energy Ltd., the largest publicly traded New Zealand power company with a capitalization of NZ$4.12 billion ($2.8 billion), said both the renewables and emissions targets should be supported.
“New Zealand needs to act on climate change,” Chief Executive Officer Dennis Barnes said in an email. Batteries, solar and electric vehicles will help bridge the transition, Barnes said, and establishing government targets and an independent commission are “crucial to provide certainty for businesses, investors and the public.”
Phasing out fossil fuels from the power grid should be a priority for the Labour-led government, according to environmental campaigner Greenpeace New Zealand. Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar,” Greenpeace NZ’s climate and energy campaigner, Amanda Larsson, said in an email Tuesday.
Ardern needs to balance energy affordability and security with environmental sustainability, according to John Carnegie, executive director for energy at Business NZ, which represents some of the nation’s large companies.
“It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered,” Carnegie said.