BusinessNZ Energy Council


Trilemma crucial to energy sector success

Sep 18, 2019 | News

A ‘canary in a mine’ is a metaphor for an advanced warning of risk.

It originates from when miners carried canaries into mines to test for methane or carbon monoxide. The canary would die before gas reached levels unsafe to humans.

Fortunately, in today’s world, we don’t have to sacrifice a canary to know when risk is at hand.

In the energy system there are significant risks, but thanks to a comprehensive tool that ranks countries on their ability to provide sustainable, affordable and secure energy, we get a hint as to what actions are needed to mitigate any danger and to seize any opportunity they present.

Performing well in the trilemma is critical if we are to meet the challenge of leveraging our natural resources to optimise our economic, social and cultural prosperity.

The World Energy Council’s Energy Trilemma Index ranks 128 countries on how well they are achieving a balance between energy security, energy equity (accessibility and affordability)  and environmental sustainability.

The Trilemma is the energy system’s canary. It measures overall performance in achieving a sustainable mix of policies and the balance score highlights how well a country manages the trade-offs.

This year, New Zealand ranked 10th in the world.

Impressively, New Zealand is the only non-EU country to consistently rank in the global top 10 for balancing sustainability, affordability and security in energy.

New Zealand’s ranking over the past few years has been driven by a growing proportion of generation from renewables, as well as managed emissions in the context of economic and population growth.

Interestingly, New Zealand has never ranked in the top 10 in any of the dimensions alone. However, due to a sustainable balance of the three dimensions it has remained in the top 10 since 2015.

New Zealand exhibits strength in all three metrics of the Trilemma but should build on these strengths to become a world standard-bearer.

In fact, there has never been a greater need for New Zealand’s government to design policies with the Trilemma in mind, as we peer into an increasingly complex energy future.

What is needed?

Achieving a balance in the three main pillars of the energy Trilemma requires the co-operation of government and private partners, financial institutions and the energy sector.

Together, these players must create a policy environment that encourages investment and minimises risk in a market that is seeing increasing competition and complexity.

Policy and investment decision-making have always been complex and are even more so today. The prospect of increasing complexity in energy markets suggest caution is needed in designing policy frameworks while new business opportunities are emerging.

Several independent studies have shown New Zealand’s renewable electricity is a key advantage in driving emissions reduction through electrification of transport and process heat.

This leaves us well positioned for transitioning to a low carbon future.

About 85 per cent of New Zealand’s electricity comes from renewable sources – the third-largest share of renewable electricity in the OECD.

Building on this, the Government has ambitious decarbonisation goals that are embedded in a commitment to a just transition including a Bill with a target of net zero greenhouse gas emissions (except biogenic methane) by 2050, and a new independent commission to oversee carbon budgeting.

The bill is expected to pass in early 2020. Before then, the Government will also introduce a Bill to strengthen the emissions trading scheme.

The governments’ long-term vision should not be clouded by poor modelling and a lack of careful consideration. Bipartisanship also has a role to play in achieving balanced policies.

The Business Energy Council is developing a national ‘deep dive’ of the Energy Trilemma which we hope will provide the framework for the Government’s five-yearly assessment of balanced energy policies.

With the drive to transition our economy to a low emissions future, this framework will be able to highlight areas that need attention.

When combined with the soon to be released BEC2060 energy scenario narratives, we will have a rich source of information which will help us shape and guide the policy and investment choices and trade-offs we face.

John Carnegie is executive director of BusinessNZ Energy Council

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