Member log in

BUDGET 2014: Energy wastage offers tempting target

Every year, about $18 billion is spent on energy and the Energy Efficiency and Conservation Authority (EECA) estimates 20% of this is wasted.

That’s some $3.6 billion and if the economy were a business, accountants and efficiency experts would be targeting it for reduction.

While recent media attention has focused on cheap loans for domestic solar initiatives, the economic value of this is far from certain. Any government action should be focused on something with a greater certainty of payback. 

The EECA estimates businesses and the government consume around 70% of total energy. This highlights the large energy efficiency potential, mostly within the largest 200 energy-using organisations.

This also provides an opportunity for the government. First, the barriers need to be addressed - the lack of information, lack of organisational capability and lack of available funding, even for fast payback projects.

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 small-to-medium enterprises, the government could also look at ways provide assistance to them to cut their energy use. 

Renewable energy is another area where the government should consider action (as long as the economic value adds up).

In 2012, renewable energy made up 37% of 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 European Union, which is 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 wholesale price of electricity.

Electricity demand in New Zealand is flat but the ever-strengthening economy will put pressure on this sector. When you consider that 20% of energy is wasted, any assistance on economically viable, renewable energy will pay strong dividends in both the near and far future.

Alastair Boult is national director, government advisory, at Grant Thornton New Zealand

Comments and questions

The top 200 energy using organisations aren't capable of organising themselves to make good energy decisions? Really??

A pile of renewable electricity projects are on hold due to low demand/prices. Some were particularly stupid (Mokihinui dam). In addition the Tiwai point smelter, subsidised with $30M of taxpayers funds and $200M+ p.a by overcharging residential consumers (refer to Electricity Authority material) presumably will exit soon.

Hard to see why taxpayers should be throwing money into the pits advocated by the author.

The largest power users' typically compete in export of import substitution markets, They have been highly incentivised for decades to get as much product output per energy cost input. To believe an official from government or EECA could explain to them how to save 20% of energy input is incredulous. Sure EECA are good at explaining various technical options; but those rarely stack up to be commercially viable. EECA should stick to what it knows best and that's addressing the market failure of information asymmetry in the mass market areas of appliance and motor vehicle efficiency.

I wouldn't trust EECA estimates as they do not have to operate in the real world where a 20-390% return on investment is needed.

Hydro has been killed by the greenies and grid connected wind and solar is heavily subsidised all over the world - in NZ the wind subsidies are hidden and solar is subsidised by consumers.

But, as the PCE has correctly pointed out, the objective is to reduce CO2 to stop the "dangerous man-made global warming" that hasn't happened for 17 years and is based on worthless - probably fraudulent - computer models. It is the biggest fraud n the history of the world and it has kept many people below the poverty line.

In spite of all that energy efficiency has steadily increased since the first steam engine that was 0.5% efficient. All driven by economics, not government interference. The increase in efficiency has increased energy use overall.

Low cost energy has lifted us out of poverty and lets us live better than kings do 300 years ago. Why kill the goose?