Rapid expansion of flexible electricity use and batteries could be crucial for a secure and affordable energy system, saving energy users between $5.4 and $20.8 billion through to 2050, according to scenario modelling from EECA and the BusinessNZ Energy Council.1
Batteries and other technologies that enable flexible electricity use (such as hot water cylinders that can lower their use for short periods or smart home appliances that can “talk” to the electricity network) will enable higher rates of renewable electricity generation and improve access to affordable electricity – saving money for energy users across the economy and enabling more people and businesses to switch from higher-cost imported fuels, particularly in road transport.
The findings come from TIMES-NZ 3.0, a comprehensive model of the whole energy system developed for New Zealand by EECA and the BusinessNZ Energy Council, and which is based on the internationally recognised TIMES modelling platform.
“The model finds that without these flexibility options, electrification beyond a certain point is simply not economically viable, and the efficiency benefits of electric technologies cannot be realised,” says EECA Chief Executive Dr Marcos Pelenur. “We see this play out particularly when it comes to unlocking electrification of cars and trucks, especially heavy trucks.”
“Batteries and other technologies that enable flexible electricity use (including smart home appliances that can shift demand on the electricity grid away from peak periods) become even more important as New Zealand moves to higher rates of renewable electricity generation.”
A detailed, updated model of the whole energy system
TIMES-NZ considers how supply and demand interact in our complex and interwoven energy system – and how changes in one area can have effects throughout the rest of the system.
The model is designed to deliver the lowest cost solution to meet demand for energy in any given future.
“The future shape of New Zealand’s energy system is uncertain, but businesses, households and policymakers need to make choices today. TIMES-NZ has been designed to help inform these decisions – and our modellers and analysts have put a huge amount of work into making this latest version more robust and accurate than ever before,” says Pelenur.
Two realistic futures for New Zealand
In response to industry needs, EECA developed two future energy scenarios using the model to explore how the country’s energy system could evolve over the coming decades and impacts on energy use.
EECA modelled two plausible, but different, energy futures. Importantly they are not upper and lower bounds for any individual energy variables, nor do they represent a specific set of potential government policies. They are also not forecasts – there are countless possible futures, reflecting the complexity and interdependence of New Zealand's energy system.
These were chosen after discussions with a wide group of around 40 stakeholders, including representatives from other government agencies, energy companies, energy users, universities and non-profit organisations about what variables would be most useful to explore to help inform energy decisions today. Namely, future energy demand from large users, the pace of technology change, climate policy and societal trends, and the future role of gas.
The Steady scenario represents moderate change with more primary production (including strongly growing dairy and beef exports), moderate cost reductions for clean technologies (wind, solar and batteries, and EVs), lower carbon prices, more private passenger vehicle use, and an LNG terminal.
The Shift scenario represents faster change with more growth in advanced manufacturing, data centres, and renewably powered industries, faster cost reductions for solar, wind, batteries, and EVs, higher carbon prices, lower private passenger vehicle use, and waste-reduction efforts generating more feedstock for biomass and biogas (wood waste and landfill gas).
Costings reveal impacts of efficiency, electrification and falling technology prices
Comparing the scenarios shows:
- Total energy demand falls in both scenarios, as electrification and greater energy efficiency leads to less energy being needed, even as demand for the end uses of energy grows (such as travel, business activity, staying warm). Demand for electricity also increases in both scenarios. In Steady, total energy demand falls 10% by 2050, and in Shift it falls 22%. In Shift, a greater share of energy demand (53%) can electrify, leading to higher electricity use and lower fossil fuel demand.
- Across the whole energy system, flexible electricity use can save energy users between $5.4 and $20.8 billion through to 2050. Batteries and other technologies that enable flexible electricity use (including smart home appliances that can shift demand on the electricity grid away from peak periods, such as winter evenings) become even more important in the Shift scenario, which has higher rates of renewable electricity generation.
- Road transport electrification is the single largest driver of related emissions reductions across the energy system in both scenarios. However, the scale and rate of emissions decline is strongly affected by how quickly New Zealand adopts clean technology, particularly electric cars and trucks. Declining domestic gas supply and an increase in renewable energy generation also drive emissions reductions in both scenarios. By 2050, the Shift scenario’s emissions are less than half that of Steady, driven by a range of factors, including lower costs for wind, solar and batteries, and EVs, and higher carbon prices.
- The total cost of meeting energy demand from 2023-2050 is roughly $1.3 trillion, or approximately $45 billion annually. For context, this is roughly 11% of annual GDP, which was $393 billion in 20232. However, costs in the Shift scenario are roughly $42.7 billion lower than in Steady across the whole model period (2023-2050), or $1.6 billion lower annually. This is because of lower clean technology costs, more available technology, and greater energy efficiency.
- In both scenarios, the renewable share of electricity generation grows over time, and contributes to lower energy system costs. This is to be expected, as gas and coal generation plants retire and new plants are dominated by lower-cost solar and wind generation, alongside geothermal and hydro. However, it remains challenging to move to a 100% renewable electricity system: In Steady, the renewable share of electricity generation reaches 93% by 2050, while in Shift it reaches 98%.
- Although domestic natural gas supply falls in both scenarios in line with government projections, the model finds that many existing uses of industrial heat, such as meat or dairy processing, can be cost-effectively electrified or converted to biomass or biogas. In the Shift scenario (where waste-minimisation rules result in more feedstock being available for biogas and biomass, e.g. organic waste from landfill and wood waste) the model finds that up to 50 PJ of biomass can be cost-effectively used for energy annually, and nearly 40 PJ of biogas. Combined, this represents approximately one third of chemical (solid, liquid and gas) fuel use in 2050 that can use alternative renewable fuels, compared to around 6% today.
To view the full report and explore the TIMES-NZ 3.0 model
* Although both scenarios are realistic, neither will exactly represent the future and neither represents any particular set of potential policies. Rather, the scenarios are based on groups of events which stakeholders viewed as likely to occur together and are designed to show how plausible groups of events could interact to shape the direction of the energy system.
- The value of flexible electricity use and battery results in TIMES-NZ are complementary to previous modelling work, such as EECA’s “The full potential of flexible electricity use in New Zealand”. This previous modelling found that flexibility and battery technologies could reduce national peak demand between 1.7 and 1.9 GW, leading to savings of around $3 billion. Comparing this $3bn estimate with those from the TIMES-NZ scenarios ($5.4bn and $20.8bn) indicates that the higher savings found in TIMES-NZ are due to the flow-on effects of unlocking more widespread electrification throughout the energy system.
- Values expressed in 2023 NZD, which is the same price base as used in TIMES-NZ 3.0. Annual GDP figures (March year) extracted from Stats NZ | Infoshare(external link)