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Energy Use

Energy is not just a resource; it is the breath of the Universe. Energy binds the nuclear particles that hold atoms and all matter together. Its flow through organisms and ecosystems sustains all life, and its flow through machines and powerlines sustains modern society (see Box 3.2). Underlying all energy flows are basic physical constraints which are summarised in the Laws of Thermodynamics. The two most significant laws state that energy cannot be created or destroyed (that is, the sum total of energy in the Universe is fixed), and that energy moves from concentrated states to more dispersed states (that is, the amount of ordered energy in the Universe is decreasing).

This means that the daily struggle for life is basically a struggle for limited energy resources, with the gains of one organism or group often being at the expense of others. It also means that each energy transfer generates waste, either as heat or disordered matter. From this we can infer that, as society's energy flows increase, so does the potential for climate warming and pollution.

Energy is sought and consumed not for any intrinsic value that it may have, but rather, for the work it does (e.g. warming our bodies, powering our muscles or our cars, providing light when the sun has gone). Energy demand is therefore referred to as a 'derived demand'. In other words, the demand is not for the energy itself, but for the 'services' it provides. The provision of energy services makes up around 3 percent of New Zealand's GDP and it plays a critical role in our economy as an essential input into almost all our industrial, commercial, transport and household activities.

These days, energy is measured in joules (J). Lifting a cup of coffee from the table to your mouth takes about one joule of energy (Redshaw and Dawber, 1996). The standard 'food calorie' (actually a kilocalorie) is an older and less precise unit, roughly equivalent to about 4,186 joules. The large amounts of energy consumed by machines, cities and nations are commonly measured in larger units such as megajoules (MJ) or petajoules (PJ).

One megajoule is a million joules (106 J), or about 240 food calories. The recommended minimum food requirement is about 10 MJ per day, and the average New Zealander eats about 14 MJ per day (see Table 3.2). One petajoule is a million billion joules (1015 J) and is equivalent to about 23,000 tonnes of burning oil, or the yearly electricity supply of a city the size of Napier. In 1996, New Zealanders consumed nearly 430 PJ of energy-almost 10 million tonnes of oil equivalent.

The other important unit of measurement is the watt (W) which is used to measure power. Power is the rate at which energy is converted from one form (e.g. heat) to another (e.g. electricity). One watt of electricity represents the conversion of one joule per second. A megawatt (MW) is one MJ per second. A megawatt-hour (MWh) is one MJ per second sustained over an hour-3,600 MJ in all. In a year, New Zealand's total electricity use comes to about 30 million MWh, or nearly 110 PJ, which is about 2.5 million tonnes of oil equivalent.

It is misleading to think of energy consumption just in terms of the final amount consumed by the car, electric light or heater. Before reaching us, many forms of energy are converted from their initial state (primary energy) into a more convenient state (consumer energy). Where conversion involves heat, large amounts of energy are lost. For instance, only 10 percent of the primary energy in geothermal steam is actually converted into electricity. In the case of synthetic petrol, about 50 percent of the primary energy is lost when converting it from natural gas (and approximately 60 percent of the remaining energy is lost in the car engine). Furthermore, some primary energy is diverted into non-energy products (such as plastics made from oil, and chemicals and fertilizer made from natural gas). This means our total energy consumption is actually much greater than our end use might suggest.

Box 3.2: Energy and human society

Most of our energy comes from the Sun's radiation and from the forces of gravity and volcanic heat deep within the Earth. The Sun's rays provide the heat that keeps the Earth's temperature within the range of liquid water. That heat also creates the wind, ocean currents and clouds by raising air and water pressures and evaporating water. The downward pull of gravity powers the the fall of the rain, the flow of running water, and the movement of glaciers, avalanches and landslips. The violent energy of volcanic eruptions and upwellings shapes continents, shunts tectonic plates, triggers earthquakes, and heats the world's geothermal aquifers, geysers and mud pools. These are not the only energy sources on Earth. The atoms that make up all matter consist of particles held together by nuclear energy. This nuclear energy leaks slowly out of many substances through radioactive decay. Fifty years ago humans learned how to unleash it rapidly from substances such as uranium, thus releasing large amounts of heat and explosive power. Nuclear energy is not used in New Zealand but many countries use it as a fuel for heating steam to generate electricity, and as the explosive component in nuclear weapons.

The above energy sources shape the physical environment in which living things grow and die. But the energy for life itself is carried in chemical form, specifically the large carbohydrate and lipid molecules which provide us with food and fibre (i.e. sugar, starch and wood, vegetable oils and animal fats). These carbon-based (or organic) compounds are formed in a process called photosynthesis whenever sunlight strikes the chloroplasts of plants, algae or cyanobacteria. The carbon compounds forged by solar energy become fuel stores whose chemical bonds hold the energy until such time as they are broken down (or oxidised) through digestion, rotting or burning. At this point, the energy is chemically transferred to other molecules or is simply released as heat. Non-photosynthesising organisms (i.e. animals, fungi, protozoans and most bacteria) cannot capture the sun's energy directly and so must get it chemically by preying on plants, algae, cyanobacteria or each other.

In the struggle for energy, humans have emerged supreme. We did this, first, by colonising new land. This happened twice on a global scale. A million or so years ago, our ancestor species Homo erectus radiated out of Africa to occupy much of the Old World from Asia to Europe. Eventually, however, the species succumbed to the encroaching Ice Ages, except in tropical Southeast Asia (Swisher et al., 1996). The second colonisation phase began about 100,000 years ago, when small bands of our own species left Africa to radiate throughout the world, displacing many large animal species, including the remaining H. erectus people and our Neanderthal relatives in Europe (Stringer and McKie, 1996 ). By occupying new land we increased our access to productive soils and to the energy-rich carbon supplies stored in the wild plants and animals that lived on them.

Another victory in our quest for energy services was the mastery of fire. Cooking expanded the dietary options by making some inedible food edible. It also enabled warmth to be generated from inedible plant material (i.e. wood). And, for the first time, it enabled large areas of land to be cleared of vegetation with very little effort. This was useful for hunting and for fostering grassland ecosystems rather than forest ones. One of the oldest known cooking hearths, complete with charcoal, tools and charred rhino bones, was lit by Homo erectus in the Brittany region of France between 380,000 and 465,000 years ago (Patel, 1995). Other fireplaces of similar age are known from southern France, Hungary, and China. Hundreds of thousands of years later, when our species ventured out of Africa, firesticks and flint were a vital part of the toolkit.

The next major energy revolution occurred in the last 5-10 percent of our existence as a species. This was the development of agriculture a mere 250-500 generations ago, following the last Ice Age (Bunney, 1994; Lewin, 1996; Normile, 1997). The capture and storage of photosynthetic energy in the form of grain and other crops greatly expanded the human energy budget. It also transformed the economy from one which depended on diverse natural ecosystems to one which actively replaced them with just a few crop and livestock species. The impacts of the agricultural revolution were later magnified by the domestication of the horse, the ox and the donkey for transport and labour, as well as the invention of the sail and wheel for transport, and of the windmill and waterwheel for mechanical labour. Agricultural wealth also allowed the accumulation of large amounts of food wealth, the growth of large non-productive sectors (e.g. priests, artisans and soldiers) and the capture and maintenance of large pools of human slave labour. The result was population growth and ever wider and more efficient colonisation and exploitation of the land's photosynthetic resources.

Today, a quarter of the Earth's land surface (24 percent) has been appropriated for pasture to convert the sun's energy into grass which is then converted into animal waste, metabolic heat and livestock products. A further 10 percent has been appropriated for agricultural crops. About 3 percent is occupied by human settlements. The remaining 62 percent is not used, being divided equally between forests (which are shrinking daily) and dry lands-deserts, ice and snow (World Resources Institute, 1994). By the mid-1980s, humans had commandeered almost 40 percent of the land's total photosynthetic energy-3 percent in food, animal feed and firewood, and 36 percent in crop wastes, forest clearing, desert creation, and conversion of natural areas to settlements (Vitousek et al., 1986).

Although the agricultural revolution greatly increased the amount of photosynthetic energy available to human beings, it was only within the last four or five generations that an even greater energy revolution occurred with the harnessing of electricity and 'fossil fuels' (i.e. coal, oil and natural gas, and their derivative products, petrol and diesel) to drive machines and appliances. One tonne of burning oil releases as much energy as the hourly output of a herd of 16,000 work horses (around 44,000 MJ). As a result, a couple of modern trucks can do more work than the entire transport system of London, New York or Paris could 150 years ago (Foley, 1976). Discovering the fossil fuels was like finding vast new lands-literally. These energy-rich compounds occupy millions of 'ghost acres' beneath the ground (Catton, 1980). They are the remains of long-dead forests and marine life whose carbohydrates have been transformed into hydrocarbons.

Today New Zealanders harness energy from many different sources. Fossil fuels account for about two-thirds of New Zealand's energy, while hydro-electricity and geothermal steam make up most of the remaining third. Minor sources are firewood, biogas (from rotting vegetation), and solar heating and wind power (both generated by the sun's heat). Some of this energy is used directly for cooking and heating but most is converted into mechanical and electrical energy. The conversion of heat to mechanical energy occurs inside the cylinders of the combustion engine where controlled explosions rotate a crankshaft that is attached to the working parts of a machine. The conversion to electrical energy occurs inside thermal power stations where high pressure jets of steam, either from geothermal sources or from boilers heated by fossil fuels, spin giant turbines. These are attached to electromagnetic generators which create the electrical current that flows out along the nation's power lines. Hydro power stations achieve the same result by using flowing water (powered by gravity) to spin the turbines. The technique is basically a modification of that used in early industrial Europe when millwheels, or waterwheels, were placed in streams. The millwheel was attached to a shaft whose other end was attached to machinery inside the mill. As the flowing water turned the millwheel, the shaft rotated, driving the machinery. Today, the flowing water generates 70-80 percent of New Zealand's electricity.

The energy revolution of the past century has allowed the average citizen in a developed nation to consume about a hundred times more energy than our hunter-gatherer forebears. We now live as our ancestors believed only gods could live, empowered with instant communication, instant light, rapid transport and the power of flight. We have built a near-magical world of aeroplanes and cars, plastics and other synthetic materials, hot water and frozen food, television and telephones, and so on. The accelerating spiral of invention and investment has created a world economy which is under constant expansion and growth. As part of this our aspirations keep rising to new heights of material comfort, including our desire for services (such as heat, light and locomotion) which consume a lot of energy. Even as our numbers multiply, we each hope to capture more of the Earth's resources than did our parents. This is the historical and global context in which modern New Zealanders are now using energy and planning their future.

New Zealand's Energy Resources

The energy sources for pre-European Māori society were human labour (powered by food), fire (powered by wood), and in some areas geothermally-heated water. Wind power was also used to drive the sails of the first Māori canoes. The early European immigrants, refugees from the coal-powered Industrial Revolution, had much the same range of energy supplies-with one significant addition: the horse.

By the time it reached New Zealand, the horse was long established as the world's main work animal. Its main energy sources were oats and grass. But even as it got here, the horse-driven economy was being overtaken in Europe and North America by coal-driven steam locomotives. These 'iron horses' did not make an impression in New Zealand until the 1870s when sufficient coal began to be mined and when sufficient human labour arrived to build the railway lines. The horse remained dominant until the early days of this century, but finally succumbed to the Ford motor car and the Fordson tractor in the years after the First World War.

These petrol-driven vehicles also spelt the end of coal's dominance. But, unlike the horse, coal's lesser role was still secure, both as a train fuel and as the main fuel for domestic fires, industrial boilers and furnaces. It also became an important fuel for generating steam to make electricity. Coal production reached a peak in the 1920s, dipped slightly in the 1930s depression, and remained high for four more decades (see Figure 3.3).

Figure 3.3: Trends in New Zealand's consumption of primary energy

In 1924 New Zealand consumed approximately 100 petajoules of primary energy-primarily from coal, but also firewood and imported oil. In 1996 New Zealand consumed approximately 670 petajoules from a variety of sources:

  • Water, used to generate electricity - approximately 100 petajoules.
  • Geothermal steam and hot water, used to generate electricity and for domestic hot water - approximately 80 petajoules.
  • Firewood and other renewable fuels - approximately 40 petajoules.
  • Natural gas (mainly methane, some propane, butane and others) - approximately 190 petajoules used for: power station fuel (27%); fuels (CNG and LPG) for industry boilers, home heating and transport (21%); synthetic petrol (18%); and non-energy producing chemicals and fertiliser (methanol and urea) (34%).
  • Indigenous oil from wells off Taranaki - approximately 40 petajoules.
  • Imported oil and oil products (for example, petrol and diesel), burnt motor fuel and lubricants for transport and in power stations to generate electricity - approximately 180 petajoules.
  • Coal, used in thermal power stations, industrial furnaces and home heating - approximately 40 petajoules.


  1. Primary energy is the energy content of a resource at the point of extraction or importation. A third of energy is lost after this point, either as waste heat (e.g. in generating electricity from fossil fuels and geothermal steam) or as non-energy products (e.g. methanol and urea from natural gas). As a result, the amount of energy actually consumed in mechanical movement, useable head and electricity is considerably less than the amount extracted.
  2. Data are decadal 1924 to 1974, yearly thereafter.
  3. 'Firewood and other renewable fuels' includes wood, biogas (e.g. methane generated from rotting matter by bacteria) and industrial waste, but not water-based renewables (i.e. geothermal steam and hydro).

Source: Ministry of Commerce

From the 1930s, oil and hydro-electricity became increasingly significant as the car culture expanded and as networks of power lines filled the skyline on every street, connecting the nation's homes to a world of electric lights, ovens, refrigerators, heaters, radios, vacuum cleaners and washing machines. From 1950 to 1980, oil and hydro-electricity were the dominant sources of energy in New Zealand.

Following the second 'oil shock' after the Iranian revolution of 1979 the Government embarked on the 'Think Big' growth strategy which aimed to make New Zealand at least 60 percent self-sufficient in energy and to also attract foreign investment in energy-intensive industries. The strategy called for more hydro development, intensified oil exploration, and the use of our recently-discovered natural gas reserves, either directly or to manufacture synthetic petrol.

A high dam was built at Cromwell on the Clutha River to generate electricity for a second aluminium smelter (proposed for Aramoana near Dunedin, but later abandoned). The New Zealand Steel mill at Glenbrook, south of Auckland, was expanded. Petroleum exploration was intensified off the Taranaki coast where several wells were already producing significant quantities of oil. Until the 1970s, New Zealand had imported all its liquid fuels (i.e. oil, diesel, petrol), but from the mid-1970s to the late 1980s locally produced oil increased and imported oil declined. The trend has since reversed, and will continue to do so as Maui gas continues to decline. Natural gas had only been lightly exploited until the late 1970s when the small Kapuni gas field was joined by the much larger Maui field and several other small ones.

Today, New Zealand has an abundance of energy resources, though some of these (such as Maui gas) are moving towards the end of their exploitable life, and others (such as wind power) are only just beginning to be recognised. In 1996 New Zealand was around 87 percent self-sufficient in its primary energy needs, but only 39 percent self-sufficient in liquid fuels.

It is conventional to divide energy sources into those which are renewable and those which are not, though the distinction is not always clear-cut. For example, hydro-electricity is generated by running water passing over a turbine. The water is renewable, but the dam itself is not if it silts up.

Non-renewable energy

Oil, natural gas and coal are the main non-renewable energy sources in New Zealand. Oil provides around 32 percent of our total primary energy supply, gas around 27 percent and coal 7 percent. Together, these non-renewable sources of energy make up two-thirds of our energy supply (see Figure 3.3). New Zealand's coal resources are abundant, but our known oil and natural gas reserves are limited. Gas supplies are dominated by the Maui field, which accounted for around 64 percent of New Zealand's estimated total expected gas reserves in December 1995, and which produced 80 percent of net gas production in 1994. The Maui field is expected to reach the end of its economic life by around 2004-2006. Other reserves which have been discovered so far will allow production only at lower rates from then until around 2014. New Zealand's oil reserves are also found mainly in the Maui field.

Although nuclear energy has been used in some overseas countries, its use is not considered to be an option in New Zealand as many people have significant concerns about its long term environmental effects.

Renewable energy

Renewable energy sources now make up around 34 percent of our total primary energy supply. The vast majority of this is water which provides energy in two forms: the gravitational energy of flowing water and the volcanic heat of geothermal water. The flowing water provides 15 percent of our primary energy in the form of hydro-electricity, while the geothermal energy provides 14 percent of primary energy, mostly as electricity, but also domestic hot water in some areas.

Many other renewable energy sources are potentially available in New Zealand, though little use has been made of most to date. Those that are used, or may be used in New Zealand include:

  • the wind, whose energy can be harnessed by wind turbines and converted into electricity or used to pump water;
  • biofuels, either in the form of solids (firewood and dry plant matter), liquids (mainly the alcohols, methanol and ethanol, which are extracted from wood or from purpose-grown crops such as sugar beet), or gases (mainly methane obtained from rotting organic matter at landfills, farms and industrial sites, or from purpose-grown crops);
  • direct sunlight, whose energy is already used passively to warm homes during the day and dry out washing on clothelines, and can also be harnessed more effectively for home heating through solar water heating panels and to charge electric batteries through photovoltaic cells; and
  • waves, tides and ocean currents, whose energy can be harnessed by turbines similar to those of hydro power stations.


Of the approximately 7900MW of installed peak capacity in 1995 around 66 percent is hydro, 28 percent is thermal, 3 percent is geothermal, with the remainder being co-generation plant.

Most of New Zealand's electricity is generated by hydro stations. Hydro accounted for around 79 percent of electricity generation in 1996, although this varies from year to year depending on water inflows and electricity demand. Our hydro generation performance is all the more noteworthy as our dams at any one time hold only approximately 10 weeks storage; i.e. we fill and refill our storage lakes throughout the year.

New Zealand's thermal system is primarily dependent on gas to fuel the Huntly (1000MW) and New Plymouth (580MW) stations. In 1996 gas provided around 12 percent of our electricity, geothermal around 6 percent, and the remainder was made up of other forms of generation (e.g. coal fired power stations and co-generation) The Huntly station can run on either coal or gas (Ministry of Commerce 1997).

At present, most of our electricity capacity (94 percent) is in power stations owned by the two state-owned enterprises Electricity Corporation of New Zealand (ECNZ) and Contact Energy Limited. The remaining 6 percent is in small dams and thermal plants owned by local energy supply companies and large industries. In mid 1996, the ECNZ power stations included 27 hydro stations, three thermal (fuel-burning) stations, and one wind turbine (ECNZ, 1996). Contact Energy, which was established at the beginning of 1996, is a smaller company with just over 26 percent of the total electricity generating capacity. Its power stations include two large hydro stations, two geothermal stations and four thermal stations (Contact Energy, 1996).

At present, the total capacity of the ECNZ and Contact Energy power stations is sufficient to generate 38 million megawatt hours (MWh) per year, even in a '1-in-60' dry year. This is 26 percent more than the 30 million MWh consumed in 1995. The stations' peak hour capacity is nearly 7,900 MW, though actual peak demand has never topped 5,500 MW. (Redshaw and Dauber, 1996)

Figure 3.4: Energy consumption by sector in New Zealand

Between 1980 and 1995 consumption across all sectors (agriculture, industrial, commercial, residential and domestic transport) has increased, most significantly in domestic transport, industrial and agriculture.

Source: Ministry of Commerce

Energy Consumption in New Zealand

Each day New Zealand uses about 1.8 PJ of primary energy-or 506 MJ per person. This is about 35 times our daily food energy. However, not all this energy is actually consumed. In 1996, New Zealand's primary energy supply totalled about 665 PJ, of which only two thirds (some 427 PJ) made it to the consumer. A third was lost during extraction and use, mostly as waste heat. The remaining 66 percent was consumed as fuels and electricity.

Nearly half of this 'consumer' energy came from oil (46 percent) and a further quarter came from hydro and geothermal electricity (26 percent). The remainder came from coal (9 percent), gas (9 percent) and other renewable sources of energy, such as wood and geothermal water (10 percent). Some of this energy was used directly by us, but much of it was used indirectly because the energy was already 'embodied' in our manufactured products. Even an item as commonplace as a recycled aluminium can, for example, embodies 7.5 MJ (see Table 3.5). This is more than half the average person's daily calorie intake, and is the energy equivalent of lifting the can to your mouth more than 7 million times. The embodied energy in a modern car is equivalent to about three years of petrol consumption. A television set embodies far more energy in its various manufactured parts than it will ever consume in electricity.

Figure 3.5: Primary energy consumption per person (1924-1995)

From 1924 to 1954 around 0.07 terajoules of primary energy was consumed per person. Since then it has increased markedly to around 0.18 terajoules per person in 1995.

Figure 3.6: Energy use and economic growth in New Zealand 1974-95

Up until around 1983, energy consumption and economic growth (measured by Gross Domestic Product) changed at similar rates. Then, until around 1991, energy consumption increased faster than the Gross Domestic Product. Since 1991 the Gross Domestic Product has increased but energy consumption has remained relatively constant and is now decreasing.

Source: Statistics New Zealand; Ministry of Commerce

While energy consumption has increased in all sectors, the greatest growth between 1980 and 1995 was in the transport sector, whose share of total consumer energy rose from around 30 percent to 36 percent (see Figure 3.4). Agriculture's share also increased, from 6 percent to 10 percent. In contrast, industry's share declined slightly, from 36 percent to 33 percent, even though its total consumption was up. The residential and commercial sectors show the same trend. Overall New Zealand's energy consumption has increased markedly since the 1950s (see Figures 3.3 and 3.5), but the trend has not been entirely smooth. In the 1970s it was interrupted by the global price rise in oil. However, from the early 1980s to the early 1990s, it climbed more steeply than ever before. Although the population rose by only 17 percent between 1974 and 1995, energy consumption increased by 53 percent. In part, this was caused by the development and expansion of a number of energy-intensive industries as part of the Government's 'Think Big' strategy, such as aluminium smelting, steel-making, and the Taranaki-based petrochemical industries.

Although in other affluent countries energy intensity started to decrease from the late 1970s (as a result of rising oil prices and the increasing economic dominance of the services sector), in New Zealand this trend has only become apparent in recent years. In Canada, for instance, the decrease in energy intensity began in the years immediately following the first oil shock, whereas in New Zealand at that time due to other factors, energy intensity was boosted to an all-time high. Our energy consumption per person peaked a lot later, when GDP was falling (see Figures 3.5, 3.6).

Since 1991, the New Zealand economy (GDP) has grown, but energy consumption has remained relatively constant and energy intensity is now decreasing (see Figure 3.6). This reduction in energy intensity reflects several factors: a shift from energy intensive industries to less energy-intensive economic activity, technology uptake in a growing and increasingly competitive economy, a shift to fuel mixes which contain a relatively greater proportion of efficient fuels such as electricity; higher and increasing real energy prices, increased environmental awareness and policy measures to protect the environment, and increased uptake of energy efficiency. The Ministry of Commerce (1997) predicts that consumer energy intensity will continue to decrease at 1.5 percent per annum over the next 25 years for GDP growth of 3 percent per annum.

Energy Policy in New Zealand

Energy policy in New Zealand has undergone a radical change in recent years. Before restructuring, the Ministry of Energy controlled the nation's electricity, which was generated, transmitted, and sold to distributors by the Electricity Division of the Ministry. Other major forms of energy (i.e. coal and gas) were also government-owned or controlled (although there was, and remains, private ownership of some small coal fields). The Government had its own oil prospecting company and was part owner of a synthetic fuels manufacturing plant. Only our imported oil was fully in the hands of private enterprise. Under this system, energy prices were regulated by the Government whose main aim was to make energy affordable, both for social reasons and to stimulate economic growth.

Since the late 1980s the Government has taken various steps to distance itself from direct involvement in the energy sector. These measures include:

  • separating the policy role from the delivery of electricity by establishing a State Owned Enterprise which was later split into a generating company (the Electricity Corporation of New Zealand) and a national transmission company (Trans Power);
  • selling the Government's petroleum exploration company;
  • selling the Government's interest in gas and gas transmission;
  • deregulating the gas, petroleum and electricity markets; and
  • promoting a competitive electricity generation market by dividing the Electricity Corporation of New Zealand (ECNZ) into two competing State Owned Enterprises (ECNZ and Contact Energy Ltd), each of which generates and sells electricity at wholesale prices to power supply companies which then retail it to consumers.

Today, there is no Ministry of Energy, although there is still a Minister. The old Energy Ministry's research and advisory functions are now handled by the Ministry of Commerce. Planning in the energy industry is now left to the market, while local authorities, acting under the Resource Management Act 1991, are responsible for making sure that energy producers avoid, mitigate or remedy any environmental impacts of their activities. An internationally competitive royalties regime to encourage investment in oil and gas exploration has been put in place.

Although the Government is no longer involved in energy planning or production, its energy policy objectives are "to ensure the continued availability of energy services, at the lowest cost to the economy as a whole, consistent with sustainable development" and, within this, to "facilitate the development of cost-effective renewable energy consistent with the Government's energy policy framework."

Rather than take a directive role, the Government promotes these objectives by facilitating structures to promote well functioning commercial systems, removing legal or structural barriers to innovation, promoting and adopting efficient energy practices, and analysing the resource potential, cost, and feasibility of renewable energy. Because the Government is a significant purchaser of a broad range of goods and services, it also has the opportunity to promote energy efficiency by example.

A major recent initiative has been the development of a wholesale electricity market (i.e. a market in which electricity generators sell electricity in bulk to distributors such as local electricity supply companies). One of the main reasons for setting this up is to make electricity prices reflect the full costs (including environmental costs) of supply. For example, it costs more to generate electricity from thermal stations than from hydro stations. In the past, that difference was masked by charging a standard average price for electricity.

Under the new system, whenever hydro stations are unable to meet extra demand and thermal stations are called on, the price will go up accordingly. Unlike the previous system, this provides a clear incentive for electricity consumers to limit extra demand and to make more efficient use of electricity. Economic analyses commissioned from the research group BERL by the Officials Committee on Energy Policy (1994) estimated that the demand for extra electricity by the year 2010 would have been twice as great under the old system as under the new wholesale market system.

The wholesale market also gives electricity suppliers an incentive to seek cheaper ways of making electricity, and creates an opportunity for new low-cost suppliers to become established (including those generating electricity from such non-traditional sources as wind, biofuels and solar power).

Apart from market reform, the Government has also taken steps to improve the ways we use energy, such as the Ministry for the Environment's Cleaner Production Programme and a range of initiatives undertaken by the Energy Efficiency and Conservation Authority (EECA). EECA is a small government agency that was established in 1992. It reports directly to the Minister of Energy and its staff are charged with promoting the conservation of energy resources and encouraging the adoption of energy efficient practices and technology.

To date, EECA's achievements include: the development of the Energy Saver Fund; the revision of energy efficiency provisions within the Building Code; the development of minimum energy performance standards; the establishment of the Energy Wise Companies Campaign, whose 650 member companies are committed to improving their energy use practices; and the provision of information and technical advice on methods of saving energy.

Much of EECA's activity is shaped by the Government's ten point Energy Efficiency Strategy launched in 1994. The Strategy's three-year $8.45 million programme includes a range of practical measures to increase energy efficiency and encourage the development of non-traditional renewable energy sources. Highlights of the Strategy include:

  • the Energy Wise Companies Campaign;
  • specific programmes to promote the more efficient use of hot water, commercial lighting, and industrial motors and drives;
  • a "best practice" programme to provide information, motivation, and guidance to industrial energy consumers; and
  • demonstrating technologies that are energy efficient and use renewable energy resources in order to promote their commercialisation.

Future Energy use

Energy forecasts by the Ministry of Commerce predict that consumer energy is likely to grow by around 45 percent between 1995 and 2020 (Ministry of Commerce, 1997). This prediction assumes 3 percent GDP growth per year and new gas discoveries sufficient to provide around 90-100 PJ a year from 2010. Total consumer energy demand is expected to increase by 1.5 percent a year, with growth strongest in the transport sector at 1.8 percent a year. To meet this additional demand, there is little doubt that some new sources will be required.

Most energy prices are expected to rise, with electricity prices (which are currently very low by international standards) growing the fastest because of the declining gas supply and the rising cost of building new power stations. Fossil fuels for power generation, transport and heating will also become more expensive. Oil prices are expected to rise to $US 25 per barrel by 2005 but stabilise thereafter. Coal prices are expected to remain stable throughout the period.

Future use of conventional energy sources

If we are to meet our energy needs with conventional energy sources, the key options seem to be:

  • discovering and developing new oil and gas fields. Although many small gas fields have been found in the 25 years since Maui was discovered, some, such as Kupe, are currently too expensive to exploit. Moreover, the odds of finding another large field before 2004-2006 are getting smaller as the time horizon contracts. As the price of oil increases, this will provide greater incentive for further oil exploration;
  • importing more oil products. According to some energy analysts, over half the world's oil has already been consumed and, at current rates, 80 percent will have been consumed by the year 2020 (Laharrere, 1995; Campbell, 1996). The remaining 20 percent is in reserves that are more difficult to access. Oil reserves in the US and Europe are expected to be depleted in 15-20 years. Middle Eastern supplies will be plentiful for some decades, but at higher prices;
  • using more coal. Coal is abundant in New Zealand, but the largest deposits are of low grade lignite, while the higher grade bituminous and sub-bituminous coals used in coal-fired power stations are becoming increasingly expensive to mine;
  • building more dams. It has been estimated that an additional 9,120 MW could be obtained from New Zealand's waterways by developing new sites and expanding some existing dams (Eden Resources Ltd, 1993); or
  • building more geothermal stations. Geothermal resources are extensive and may contain 21-43,000 PJ of primary energy (Statistics New Zealand, 1994).

The Ministry of Commerce forecasts also predict that yearly electricity demand will grow from 106 PJ to 166 PJ between 1995 and 2020, a 1.8 percent increase per year. The Ministry expects that electricity suppliers will meet this demand by adding an extra 2,600 megawatts (MW) of generating capacity to the existing 7,900 MW, both through new power plants and improvements to existing ones.

Because most of the more economical sites for power stations have already been taken, new power stations will become increasingly costly to build. As a result, the cheapest options are likely to be developed first, namely, combined cycle and cogeneration plants (which use natural gas in combination with other fuels and processes), and also some geothermal development (see Table 3.3). Hydro and further geothermal development are likely to become affordable later, as wholesale electricity prices rise. Eventually the rising prices are expected to make large wind farms and new thermal stations economic.

Of course, cost alone is not the only factor influencing power station development. Other factors include capital turnover in the industrial and commercial sectors, strategic behaviour by other electricity generators, and environmental impacts. As a result, the actual order in which stations are built or improved may differ from the purely cost-based sequence shown here.

Table 3.3: Possible sequence of new power station development, based on cost.
Type of power plant Added power-generating capacity (MW) in each five-year period Total
1996-2000 2001-2005 2006-2010 2011-2015 2016-2020
Combined cycle natural gas plant at Stratford 400         400
Cogeneration natural gas plants (various) 160 115 75 50 50 450
Geothermal plants (various) 60   200 150   410
Hydro refurbishments and new hydro stations (various)   300 100 200   600
Wind farms (various)   20 50   130 200
Thermal power stations:       150 400 550
Oil-burning       150   150
Coal-burning         400 400
Total 620 435 425 550 580 2610

Source: Ministry of Commerce (1997)


Environmental impacts are particularly important. They set very real limits on the future development of conventional energy sources. While some combination of coal, imported oil, and large-scale geothermal and hydro development may seem economically feasible over the next few decades, their environmental impacts may no longer be acceptable or even sustainable. Environmental considerations could therefore favour wind farm development at the expense of some of the more conventional options.

Future use of renewable energy sources

At present New Zealand has 17 small hydro stations which generate 44 MW (EECA and CAE, 1996). The latest review of renewable energy opportunities in New Zealand has concluded that the biggest contribution is likely to come from small hydro schemes, biofuels , and wind power. Some 174 river sites are technically suitable for weirs or dams associated with small power stations (i.e. those with a capacity no greater than 10 MW). Over 100 of these are in the North Island. If all 174 were developed, they could provide a total of 930 MW of electricity. Wind power has greater potential. More than 2,000 MW of electricity could be generated by the wind, if all potential sites were developed (see Box 3.3).

However, the greatest potential for future energy production comes from biofuel (EECA and CAE, 1996). The most common biofuels at present are firewood and forestry waste which currently produce about 32 PJ per year (over 4 percent of our total primary energy). By 2010, this will have doubled to 58 PJ. This is useful, but modest compared to the enormous potential of special purpose fuel crops. If just 1 million hectares of pasture land were converted to plantations of fuel crops, the annual energy yield would be around 540 PJ-85 percent of the nation's current primary energy supply.

Other biofuels include gases emitted by organic wastes from landfills, sewage treatment works, the food-processing industries, and farms. These are expected to contribute only a small amount. Their total potential energy yield is around 6-7 PJ per year, but the costs and practical difficulties of collecting it mean that the useable amount is lower. Biogas is collected and used on-site by some large farms and food processing plants and at several landfills in Auckland, Hutt Valley, Porirua and Dunedin. Christchurch's sewage ponds generate about 3 MW of electricity. However, these are waste management programmes aiming at greater efficiency rather than significant energy projects (EECA and CAE, 1996).

Box 3.3: Reaping the wind

Lying across the path of the southern hemisphere's prevailing north-westerlies, New Zealand is constantly buffeted by strong winds and stiff sea breezes. This means we are ideally placed to harness wind power for electricity (EECA and CAE, 1996). At least a dozen parts of the country have the potential for wind farms and it is estimated that they could provide up to 30 percent of our current electricity consumptio-three times the the capacity of the Clyde Dam (see Figure 3.7). The sites range from the far north to the deep south, with several located close to large towns and cities (i.e. west Auckland, New Plymouth, Palmerston North, Wellington and Hutt City, Christchurch and Invercargill).

Wind power is often mistakenly assumed to be a fluctuating power source whose supply is unreliable. In fact, wind patterns are less variable than the rainfall that supplies our hydro-electricity. Wind speed follows predictable seasonal patterns which vary from year to year by about 10 percent, compared to 20 percent variability for rainfall. Furthermore, the wind speed actually tends to pick up at the times of greatest need. It blows more strongly in the afternoon, when electricity demand is high, in spring when South Island hydro dam levels are at their lowest, and during cold weather, when heating needs are greatest. However, rain water can be stored, whereas wind cannot.

Compared to most other sources of new electricity, wind power is relatively cheap (only some biofuels and small hydro schemes are cheaper). The set-up costs are low because it does not require vast landscape engineering and construction works and can range in scale from one wind turbine generator (WTG), or windmill, to hundreds (EECA and CAE, 1996). Predictions are that, by 2020 AD, wind power will meet 10 percent of New Zealand's total electricity demand, and possibly much more. In fact, the 'fast take-off' scenario shows this target being reached by 2004 (Henderson, 1996).

In 1993, ECNZ installed a single experimental wind turbine on a hill in Wellington and found that it generated 1,000 MWh per year-a world record for its size. Three years later, in June 1996, New Zealand's first wind farm began operating at Hau Nui in the eastern Wairarapa hills. The site is within 40 kilometres of the nearest large population centres, Palmerston North and Masterton, and is owned by Wairarapa Electricity. The seven German-built wind turbines have a combined capacity of up to 3.5 MW of electricity (equivalent to a very small hydro power plant). Development of the site, including roading, installation of the power lines, and the erection of the windmills, took just 14 weeks. A much larger 60 MW wind farm is planned to begin construction in 1998 at a site in the Tararua Ranges as a joint project between Central Power and Merrill International (EECA and CAE, 1996).

Like all energy sources, wind farms have environmental impacts, though these depend on the location. Bird strike can be a problem in some circumstances. Some people find the visual impact of rows of windmills in the middle of a coastal or pastoral landscape to be quite offputting. The noise may also be disturbing in the immediate proximity. The scenic impacts were an important consideration when a resource consent for a wind farm at Baring Head on the Wellington coast was recently declined on the grounds that this was not an appropriate use of the coastal environment.

On the other side of the balance sheet, the environmental benefits of wind power are clear enough. Wind turbines produce no greenhouse gases or other air pollutants. The wind itself is free and limitless. Only 1 percent of the land on which a wind farm is built is actually taken up by the turbines so the surrounding 99 percent can be used for low vegetation land uses such as pastoral farming (though forests are not an option). And unlike conventional energy sources, which depend on mines, wells, and dams, site impacts are reversible. The windmills can be removed without leaving major scars on the landscape, a depleted resource, or a damaged environment (EECA and CAE, 1996).

Figure 3.7: Areas with the potential for wind farms.

The following areas have the potential for wind farms:

  • Far North.
  • West Coast Auckland.
  • Coromandel/Kaimai Ranges.
  • Cape Egmont/Taranaki Coast.
  • Manawatu Gorge.
  • Wellington hills and coast.
  • Wairarapa hills and coast.
  • Marlborough Sounds hills.
  • Banks Peninsula.
  • Canterbury River gorges.
  • Inland Otago.
  • Foveaux Straight and SE hills.

Source: EECA and CAE (1996)

As for other forms of renewable energy, none are expected to be economic at least until 2005 A.D. Photovoltaics, for example, are currently too costly to install on most roofs. Wave power, tidal power, and ocean currents are currently all relatively expensive compared to conventional energy sources. Future electricity price increases or technological advances may change that but, for the moment, the only economic alternatives to big dams, geothermal stations and fossil fuels seem to be small dams, wind farms and firewood.

Environmental Impacts of Energy Use

Energy use has both direct and indirect impacts on the environment. The indirect impacts arise from the things that plentiful energy enables us to do, such as driving to or through sensitive ecosystems (creating vehicle and visitor impacts in forests and sand dunes), modifying landscapes, clearing forests and draining wetlands (made easier by heavy machinery), generating noise (from machinery and sound equipment), and generating hazardous wastes (from manufacturing processes). Other indirect impacts arise from the mining, manufacture and energy use that go into constructing power stations, turbines, generators and associated energy-extraction technology.

The direct environmental impacts of energy use arise from pollutants released in the extraction, storage, transport and use of fuels, and from the landscape and habitat changes caused by dams, power stations and power lines. In New Zealand these direct impacts include:

  • atmospheric pollution from burning fossil fuels, with possible contribution to climate change through the build-up of climate-warming greenhouse gases (e.g. carbon dioxide). This build-up continues, despite a Government target of returning net emission rates to 1990 levels (see Chapter 5 for further discussion);
  • local air pollution from fossil fuel emissions, including sulphur dioxide, carbon monoxide, nitrous oxide, particulate matter, volatile organic hydrocarbons, and other emissions, primarily from the transport sector (see Chapter 6). It is claimed that a coal-fired power station releases more radioactive material into the atmosphere than a nuclear power plant, because of the radioactive materials trapped in the coal (Redshaw and Dawber, 1996);
  • electromagnetic radiation from power lines and communications transmitters (see Chapter 6). Although overseas studies have not shown clear links between human health and radio frequency (RF) electromagnetic radiation, public concern is sufficiently high for the siting of pylons and transmitters to have become a significant environmental issue in some areas (Parliamentary Commissioner for the Environment, 1996).
  • water pollution by heavy metals from geothermal projects and oil spillage in coastal waters and stormwater. Geothermal stations can also raise surface water temperatures (see Chapter 7);
  • soil pollution associated with the storage and transport of fuels (see Chapter 8);
  • habitat destruction from the construction of hydro-electric power stations and the use of cooling water for thermal power stations (see Chapters 7 and 9); and
  • scenic and recreational impacts of hydro and geothermal development. Geothermal stations lower the pressure of geothermal systems, reducing geyser and mud pool activity and hydro development alters the recreational and scenic resources of rivers and lakes. The creation of storage lakes also alters the surrounding land, flooding forest or farmland.

Many of these impacts can also have negative effects on human and ecosystem health. Other renewable energy sources also have some environmental impacts, but the scale of the impacts tends to be relatively small and site specific. They include smells and air emissions (from biofuels), scenery loss (which may be substantial, e.g. from wind farms and tidal power stations), and habitat loss (wherever natural vegetation needs to be cleared or rivers and landscapes need to be modified to install or supply an alternative energy plant).

Managing the impacts of energy use

Our environmental management in New Zealand is now effects-based, not sector-based. It is concerned with what is happening rather than who is doing it, and the same policies apply to all sectors. Under the Resource Management Act 1991, local authorities are required to sustain the environment by ensuring that environmental impacts are avoided, remedied or mitigated. Where this cannot be assured, prospective energy ventures are unlikely to be approved. Where they are approved, the cost of making the project environmentally sustainable will often add to the overall expense. For example, the gas-fired Taranaki combined cycle power station at Stratford was only approved on condition that the owners mitigate any additional greenhouse gas emissions by planting trees to absorb the equivalent amount of carbon dioxide that the plant added to the national total (see Chapter 5, Box 5.11).

At the consumer end, a considerable amount of our daily energy consumption is wasteful or plain unnecessary. This applies to both businesses and domestic households. Electricity, for example, however generated, is a relatively expensive form of energy, in money and in natural resources. Minimising its use is therefore a good way of saving costs and the environment. Local power supply authorities are now offering energy efficiency advice and services, such as Transalta's recent offer to Hutt Valley consumers of a $160 energy savings package that includes cylinder wraps, low-flow shower heads, energy efficient lights and an energy audit to identify other energy-saving opportunities. There are many ways to cut energy costs around the home (see Box 3.4).

Some large industrial sites are now installing co-generation power plants to harness energy from their waste materials while others are trying to make savings in other ways, such as making greater use of insulation, natural light, or longlife fluorescent bulbs.

Box 3.4: Saving the family joules

New Zealand homes use about 13 percent of the total energy and 35 percent of the electricity consumed in the country (Dang, 1996). The biggest user of electricity in the home is undoubtedly water heating. Although electricity converts to heat with 100 percent efficiency, much of this then leaks away. For example, the heat losses from uninsulated hot water cylinders in New Zealand range from 5 MJ per day for a 135 litre A-grade cylinder (equivalent to the daily calorie intake of two people) to 24 MJ per day for a 450 litre D-grade cylinder (Eden Resources, 1993). Getting a thermal wrap for the cylinder and turning the hot water thermostat down to 55°C will cut water heat losses. Putting draught-proofing strips around doors and insulation in the ceilings will cut room heat losses.

Many household appliances vary widely in their energy efficiency. Different makes of freezer, dishwasher, washing machine, oven and hotplate vary by up to 50 percent, yet this is the last thing most of us think to ask about when we are purchasing new appliances. Electricity converts to light energy much less efficiently than it converts to heat. About 90 percent of the electricity burnt in a standard light bulb is lost as heat, not light. Lightbulbs have a limited life because of the necessary design tradeoffs between efficiency and lamp life. Most of the bulbs we use in our homes are designed for 230 volts, which means that they are more efficient, but have a shorter life, than long-life bulbs which are designed for 250 volts. Modern fluorescent lights are several times more efficient and last eight times longer than conventional bulbs. Unfortunately, they are also relatively expensive, making it impractical to switch over to them all at once. But in situations where the lights are in use for lengthy periods they do pay for themselves after several years-and have less impact on rivers and air.

Solar heating panels in the roof can provide hot water and room heating. Again, the initial expense is a deterrent, but solar heated homes use far less fuel or electricity than homes which rely on wood, coal or gas fires or electric heaters. These conventional heating sources will only be required as a supplementary heat source during cold weather. A far cheaper means of saving on room heating is to improve insulation with draught-proofing strips around doors and insulation in the ceilings.

Technical fixes are only part of the energy efficiency equation. Learning to lead a more energy-conscious lifestyle is also effective-and requires no installation costs, although there can be other costs involved in changing lifestyles (e.g. education). In fact, many modern energy uses are quite careless or frivolous. Behaviour changes that reduce the power bill include turning off lights televisions and computers when not needed, stopping draughts, shutting windows when the heater is on, putting on jerseys instead of turning on heaters, having briefer showers or fewer of them, and putting the plug in whenever the hot tap is running. Small things, but they add up.

Probably the greatest energy guzzler in most households is the car. For every 17 New Zealanders, there are 10 motor vehicles, counting commercial and private vehicles (Statistics NZ, 1996). The spaced out low-density arrangement of our cities and townships and the poor public transport means that we often live some distance from shops and workplaces and rely on motorised transport to get there. The trend in recent decades has been toward much less use of public transport and footpaths, and much greater use of private motor vehicles (see Chapter 6). Our relationship with our cars is a deep and passionate one.

In a 1993 survey of nearly 2,000 New Zealanders (with a 70 percent response rate and 3 percent error margin) 42 percent admitted that many of the short journeys they make by car could just as easily be walked, and indicated that they sometimes or often cut back on driving for environmental reasons (Gendall et al., 1994). However, an equal number felt that driving their own car is too convenient to give up for the sake of the environment and a clear majority (55-74 percent) opposed the use of permits, tolls or charges to cut down on unnecessary car use. These results echo those obtained in overseas studies. In a recent British survey, for example, nearly 60 percent of respondents felt strongly that trying to reduce their car use would disrupt their family life and work (New Scientist, 1995). Even an Australian survey of Rainbow Alliance (environmental) supporters revealed that 46 percent could not lead a decent life without the use of private motor vehicles, though 87-94 percent of the sample agreed that cars should be kept from city centres and that urban areas would be more pleasant if people drove less (Knight, 1992).

Still, even for those of us unable to break the car habit, efficiencies are possible. Regular engine tuning can save 4 percent in fuel costs, and driving more slowly on the open road can bring big savings (Douglas et al., 1992). The most fuel efficient speed for a modern car is about 60 kilometres per hour (kph). Yet, between 1984 and 1990, New Zealand drivers increased their average open road speed from 97 kph to 106 kph. Another way of becoming more fuel efficient is to purchase cars that have more fuel efficient engines. The fuel consumption of cars varies, but is currently around 8-9 litres per 100 kilometres for new cars. This is an improvement from the 11.6 litres consumed in 1979, and is predicted to reach 7.8 litres by the year 2000 (Douglas et al., 1992).