Progress report.
The Centre for Sustainable Finance (CSF) is leading a cross-sector programme, collaborating with industry, government, and finance partners, to design and advance novel financing solutions that unlock private capital for New Zealand’s energy transition.
Energy-related emissions account for almost 40% of New Zealand’s greenhouse gas emissions (GHGs), with transport, manufacturing and construction making up the bulk of this. As a result of the renewables led grid, electricity generation contributes less than 10% of energy-related emissions, and less than 4% of emissions overall. This points to the biggest decarbonisation opportunity within the energy system being the shifting of non-electric energy-use within transport, manufacturing, construction, as well as other activities, onto electricity, or biomass alternatives.
Whilst the renewability of the electricity grid enables New Zealand’s energy system to perform relatively well on environmental sustainability (albeit it should be noted that the energy system as a whole is still fossil fuel dominated), the other two energy trilemma pillars, energy security and energy equity, are under strain. A significant contributing factor is gas availability, where depleting reserves are declining at a rate quicker than previously expected. This impacts those that use gas directly (both for energy and non-energy purposes) as well as the electricity system. The value attached to how environmentally sustainable an energy system is reduces significantly whilst energy equity and energy security are under stress. Rebalancing this trilemma is a prerequisite for further advancement on decarbonisation.
Our work focuses on the barriers to increased deployment of private capital into energy transition, and the solutions available to overcome these. It is positioned in the context of the New Zealand energy system, and the enabling of clean, abundant and affordable energy for all. Our research and engagement highlights that there is no single barrier to increased capital deployment; rather, projects are hindered by a combination of factors including policy uncertainty, weak or uncertain project economics, high capex requirements, limited scale, poor access to information, and the current macroeconomic conditions. We believe that this points to the need for system-level solutions, supported by coherent, stable, bipartisan policy settings.
This paper positions our work to date within the New Zealand energy system. This enables us to undertake a prioritisation process to identify priority options from a long list of system level finance solutions for consideration. All solutions currently being considered have the potential to overcome some or all of the barriers identified, alleviate some of the challenges the energy system faces, and support progression towards clean, abundant, affordable energy.
