Transport and Process Heat decarbonisation benefits to significantly outweigh costs

10 February 2021

Transpower today published its Electrification Roadmap, its latest analysis on actions that could be taken to accelerate the electrification of Aotearoa New Zealand’s transport and process heat sectors to reduce emissions while delivering significant economic benefits.

“It’s clear that emissions from transport and process heat must be tackled and that we now have the economic and technical means to do so,” said Transpower Chief Executive, Alison Andrew. “It is now equally clear that we also have the policy options to get the job done and that the economic benefits can significantly outweigh the costs of doing so.”

The Roadmap builds on Transpower’s Whakamana i Te Mauri Hiko – Empowering our Energy Future programme. Last year, Transpower set out the required investment in new generation and transmission consistent with meeting emissions reduction commitments through electrification. The findings were that, not only is this possible, but doing so stands to make the energy system more secure and cost effective.

Today’s report draws together the work of many experts. It identifies policy options to electrify transport and process heat and the costs and benefits of doing so. The report finds that electrification and increased renewable generation can reduce New Zealand’s annual emissions by around 4.7Mt CO2-e while generating annual net benefits to the economy of around $500 million from 2030 building to around 9.6 Mt CO2-e and $1.4 billion a year by 2035.

In transport where the largest gains are to be made, the Total Cost of Ownership is already lower for many electric vehicles. By 2025 it is forecast to be lower for nearly all electric options. Current high up-front costs are the largest barrier to EV uptake with purchase price parity not expected until the middle of the decade delaying mass adoption until 2030. The opportunity for New Zealand is, through policy and market settings, to incentivise mass EV uptake now and bring forward mass EV adoption by five years, to around 2025. Doing so would enable the wholesale transformation of our transport system towards the end of this decade.

In addition to the Clean Car Import Standard, policy options to achieve this include purchase incentives like a feebate, setting a sunset date for the import of petrol and diesel vehicles, investing in charging infrastructure and introducing smart electricity system integration standards.  

The report also outlines policy options to decarbonise the process heat sector where high up-front costs are again a major barrier to action. For low temperature applications such as space and water heating, heat-pumps can be as much as 70 per cheaper to run than for fossil fuel alternatives. What’s needed is policies to overcome high upfront costs.

For medium temperature processes, such as dairy processing the challenge is more complex, even though conversion can be cost effective from an ETS price of $50/t.  Policy options exist to overcome up-front cost barriers and to build sector capacity to provide audits, energy efficiency measures, and to install heat pumps and either electrode or biomass boilers. Complementary policy options to the ETS include expanding contestable funding programmes, developing national and regional biomass supply chains and accelerating training and audit capacity so all commercial-scale boilers have a clear transition plan and timetable, and the skilled workforce to get the job done.

“Not only are we confident that the electricity sector is capable of meeting increased demand, done in the right way, accelerated electrification has the potential to deliver a more affordable, secure and flexible system compared to business as usual.

“And when we looked at the policy options, and subtracted the costs from the benefits of electrification, we found that, across the economy, we have the opportunity to be hundreds of millions of dollars better off by 2030, and for that to grow from then on.” added Andrew.

 

Read more about the Roadmap and access summary brochures on transport and process heat here