MED's new New Zealand's Energy Outlook

The Ministry of Economic Development have recently released their 2009 Energy Outlook and they have done a good job.



They have, sensibly, released a reference scenario which is a deliberately static analysis. This scenario uses the best trend information to extrapolate out a future scenario. It does not purport to be a forecast because it is not dynamic. However, it is every bit as useful as a forecast because it is the dynamic elements that forecasters rarely get right.



The MED then does a number of sensitivity scenarios around the reference, which helps give a feel for how things could go. These sensitivity scenarios are more useful than a necessarily opinionated dynamic forecast.



On the whole I think MED has done a good job of taking current trends and projecting them forward, especially as the economic recession has introduced a lot of uncertainty in how various aspects of the economy and energy demand might progress in future. They may have erred, slightly, to the politically acceptable in some areas where they had scope to flex the range of their forecasts. On the whole though, given that their reference scenario is also a statement on where current government policy will take us (all other things remaining static), been refreshingly honest.



My primary bugbear is with the categorisation of transport, although to be fair to MED they are using the accepted conventions. For some strange reason the world continues to view transport as an energy category in its own right. This is a pesonal gripe of mine. To me this would be like presenting the electrical losses of the national grid as an energy category in its own right. It implies that transport is an objective in its own right rather than being a derived demand based on residential, commercial or industrial imperatives.



The major misleading problem this casues in when we look at the energy usage categorisation around residential, commercial and industrial. Treating transport as a separate category makes residential enrgy use look like a small proportion of total demand, but most of the transport demand (the largest energy category) is residential demand. It also significantly increases the commercial category.



Generally, though, good job MED. The full report is available at http://www.med.govt.nz/templates/MultipageDocumentTOC____41969.aspx

Energy Economics

The debate around meeting energy demand is always a controversial subject as there is always some form of trade-off between local effects, consuming scarce resources and economic growth. Many people hope for perfect solutions where there are no local effects, no consumption of scarce resources and plenty of energy. Many are so hopeful of such a nirvana that, believing the barriers to such outcomes are purely economic, they make suggestions that can look sensible. Most of the time, however, the barriers aren't purely economic but are physical. While some might say that if a project doesn't meet economic standards then this is just a cost that has to be worn for social or environmental benefits. However, there is 'energy economics' that must also be satisfied or else we will simply consume more to meet the energy demand than we otherwise would have done.

In other words, we should generally use the most energy efficient ways to make energy available for human use to lessen primary energy consumption. The fact is that everything uses energy to make to a greater or lesser extent. Even things that 'make' energy are made with energy; some of them use a lot of energy to make. A minimum requirement for the bulk supply of any countries energy needs is that (over the lifetime of each project) the energy supplied should exceed the energy consumed to create the supply. Overall preference should also be given to those supplies that 'payback' the fastest. That is to say the energy supply that most quickly repays the energy it took to build.

In the real world projects must make economic sense more broadly but clearly the 'energy economics' case must be met. The problem with many suggestions around particularly small scale and distributed generation is that the energy paybacks tend to be quite poor. This is why energy can get very complicated.

There are economies of scale in energy production. This economy of scale generally applies on a pure energy basis as well. In other words large energy production facilities use less energy to build per unit of output than smaller facilities. And, some technologies are less energy intense than others. Photovoltaics, for example, are very energy intensive to make and so is the support technology it takes to make PV cells practically useful. While it's true that PV panels use free energy to make electricity this is not necessarily true of their production.

It can seem sensible that a large gas turbine is more polluting than the equivalent number of PV panels but the reality is not that simple. The PV panels required to produce the same as a large gas turbine take an enormous amount of energy to make (which is why they are still relatively expensive). As the energy to make the PV panels is generally produced overseas (with the accompanying emissions) then the PV panels look good. On a total lifecycle basis, however, including the total energy to manufacture, utilise and dispose/recycle the case for PV panels is far less clear.

I'm not trying to say that PV panels might have their place or that they do not stack up. What I am saying is that the issue is rarely as simple as if first looks. When it comes to producing energy there is always a piper to be paid.