This is a guest post from reader Brendon Harre and first appeared here a few weeks ago.
*Note: Brendon has updated this article based on feedback and the new version can be found here.
The coronavirus is devastating for public health and economic well-being. Yet among the tide of bad news there is an interesting fact that indicates a potentially positive future for New Zealand.
The following quote about New Zealand’s trade surplus.
“NZ is believed to have run a $1.3b trade surplus in March as exports, including agricultural exports, held up impressively, and imports, probably mostly of non-essential items and oil, fell”
This quote was found in the Stuff article titled – Why I am optimistic we can get through Covid-19 without becoming paupers.
The implication of this quote is if our political and business leaders can imagine a different future, then homegrown electricity could replace imported liquid fossil fuels. And then the trade surplus that New Zealand achieved in lock-down could become permanent.
There is obvious great economic well-being, environmental and climate-change reasons for replacing fossil fuels with electricity. But quite apart from these factors the simple long-term national account benefits are 1. Obvious 2. Undeniable 3. Enormous.
In a way it is insanity that New Zealand has not moved earlier on this opportunity. NZ Inc has been very conservative and unimaginative in its outlook. As a country we are well known to be ‘knockers’ of new ideas. Perhaps this pandemic will shake up the nation’s psyche?
Importing oil rather than using our own energy supplies is only part of the missed ‘electrification’ opportunity.
New Zealand imports cars at a world beating per capita rate (especially Canterbury where the author is from). Motor vehicle accidents in New Zealand results in high ACC and insurance premiums -a significant amount going overseas to re-insurers. Motor vehicle death and injuries cause healthcare and social impacts that are an even higher cost. Automobiles release health ruining particulates into the environment… Overall fossil fuel and automobile dependency is a huge cost to NZ Inc.
Gerrard Liddell a Dunedin mathematician explores the real cost of road transport in this piece here. Gerrard says, “the examination of our transport system is not about punishing motorists, of whom I am one, but being able to drive with a clear conscience, knowing that we motorists are paying our way.”
How could New Zealand electrify the economy?
The first task is ensuring security of electricity supply at a low per unit price. New Zealand has a problem that its electricity system only stores five or six weeks of electricity in its hydro lakes (in comparison Norway has over a year). This means periodically when there is insufficient rainfall these lakes run dry, causing electricity output to drop, prices to rise and carbon producing gas peaking plants to come onstream. The uncertainty caused by this ‘dry year’ risk causes New Zealand’s electricity prices to be higher than they could be.
The Interim Climate Change Committee and Transpower have looked at this dry year risk. Their recommendations are that pumped hydro to be further investigated as a potential solution. Transpower indicating that this solution needs a decisive decision to prepare the country for the ‘ramp’ of electricity demand in the coming decades to 2050.
The economics of pumped hydro is examined in a paper titled – A Credit Injection to the Electricity Grid Would Boost New Zealand’s Economy.
The next task would be to use that plentiful supply of low-cost renewable electricity to transform transportation in New Zealand.
Something like the Green Party $9 billion rail proposal that intends to deliver a significant intercity rail investment over ten years to roll out fast, electric passenger services connecting key provincial centres with Auckland, Wellington and Christchurch.
Over time this would see fast electric trains for passenger and freight connecting:
- Auckland to Hamilton, Tauranga and eventually Whangarei
- Wellington with Masterton, Palmerston North and eventually Whanganui
- Christchurch with Rangiora in the North, Ashburton in the south and eventually Timaru.
The proposal being delivered in two stages.
- A major programme of work to electrify the rail lines between these centres
- Targeted improvements to the existing track to allow travel speeds to increase up to 110km/h.
- Building new higher-speed track to support “tilt-trains” capable of achieving speeds of 160km/h
- By-passes to create faster, more direct routes (e.g. around Whangamarino wetland north of Hamilton).
Julie Anne Genter the Green Party transport spokesperson and the Associate Transport Minister explains this opportunity in the This Climate Business podcast titled On Bikes, Trains and Automobiles.
I would suggest in stage one that New Zealand use electric battery trains as pictured at the top of this article to extend services in advance of electrification of the rail lines. These trains have a range of 120 km in battery mode (note I have previously written about New Zealand’s history of electric trains and trams here)
The third task is New Zealand needs to get much better at integrating housing with mass transit and other multi-modal transport options. All of our major urban centres need mass transit spatial plans. And our big capital works government departments NZTA and Kainga Ora – Homes and Communities need to come together to produce great new urban developments.
One of the consequences of economic downturn resulting from the pandemic is Infometrics Chief Forecaster Gareth Kiernan expects residential building to drop from 38,000 homes a year to 18,400 by mid 2022 and is calling for a repeat of the Great Depression government-led house building programme.
There should be cooperation with local authorities, the business community and buildings should be future proofed for energy efficiency, climate change and seismic risk.
Business chambers and forestry leaders across the country are calling on the Government to adopt a ‘wood-first’ policy. The policy would mean homegrown engineered timber products would be the preferred building material for publicly funded residential, commercial and public buildings.
Building scientist Jason Quinn has laid out five ways government can stimulate the economy by setting effective performance standards for housing and public buildings. These measures would also improve public health and help New Zealand reach its zero carbon targets. Jason Quin believes New Zealand can learn from overseas successes and lift outcomes without hiking the cost to build.
A group of us described an integrated housing and transport project for Christchurch which we called MaRTI. There would be other opportunities in Greater Christchurch. Integrating housing with transport would also allow New Zealand to tackle its housing and human rights crisis. Auckland, Hamilton, Tauranga, Napier-Hastings, Dunedin etc also have fantastic opportunities to build housing around mass transit.
The fourth task is the transport implications of electrifying New Zealand is not just about mass transit. Norway for instance has used its low-cost reliable hydropower supply to drive a greater uptake in electric car use. Popular social movements have encouraged Norwegians to have the world’s highest per capita electric vehicle ownership rate.
New Zealand should also be pushing harder to electrify its vehicle fleets (cars, buses, light commercial and heavy commercial if possible).
Financing the electrification transition is not a barrier even if Covid-19 causes a major economic downturn.
The funding for government electrifying New Zealand initiatives can come from accessing Reserve Bank credit which could be used to stimulate the real economy. This is explained by a recent Interest.co.nz article titled – Raf Manji urges the RBNZ not to make the mistake of previous overseas QE programmes by focusing entirely on supporting the financial markets and in a video here. Reserve Bank credit could be extended until inflation becomes more concerning than the costs of the coronavirus economic downturn. Dr Geoff Bertram a Senior Associate in the Institute for Governance and Policy Studies at Victoria University also discusses the issues surrounding Reserve Bank credit here.
On so many different levels now is the time for New Zealand to invest in electrification. Let’s do it!
I would encourage readers to also check out Dr Chris Harris’s insightful comment about the history of economic thought regarding New Zealand replacing liquid fossil fuels with electricity. Back in 1980 for instance, the economist Eric M Ojala pointed out that the cost of petroleum imports equalled the earnings of the entire New Zealand meat industry. Chris is an urban historian and has made several useful contributions to the national debate about the past and future direction of urbanism in New Zealand. Such as, An urbanist looks at what went wrong in Auckland and how we might fix it and Lost City: Forgotten Plans for an Alternative Auckland.