As Aotearoa New Zealand navigates the need to slash fossil fuel usage, a burning question is: how should businesses back renewable energy and therefore meaningfully contribute to climate action?
Some businesses may be surprised to learn that while Aotearoa’s electricity is ~85% renewable, around 70% of our total energy consumption is met by burning gas, oil and coal, mainly for transport, heat and electricity production. So, how do businesses burn less fossil fuel? There are three main options:
We're going to focus on ‘supporting renewable energy’, which is a more nuanced topic than you might think. Currently, the climate-friendly way for most New Zealand businesses to back renewable energy is through electricity, specifically:
At this moment, I need to briefly mention three other commonly discussed renewable energy options: green hydrogen (hydrogen made from renewable electricity), biogas/biomethane and woody biomass. Globally, green hydrogen is in its early stages and, in New Zealand, biogas/biomethane are in their infancy. Currently, woody biomass is primarily used in the wood, pulp, and paper sectors, where harvest residues are readily available1.
Experts and scientists are cautious about the scope of these fuels in the clean energy transition due to issues such as: green hydrogen’s inefficiency compared to direct electrification of heat and most land transport2, the challenging economics of large-scale biogas/biomethane production in New Zealand2, and elevated CO2 emissions over decades created by burning woody biomass produced from whole trees3,4. In EVA’s view, woody biomass production should be limited to harvest residues, and priority given to its use as energy storage to address electricity shortages.
Returning to electricity, solutions readily available to businesses are:
Businesses can combine these solutions, such as having on-site generation, a corporate PPA and an electricity supply agreement. Combining a PPA with a supply agreement is called PPA ‘sleeving’. For all solutions, businesses retain a relationship with an electricity retailer.
Each of these solutions helps to build and support a highly renewable electricity system. According to the Climate Change Commission, to meet our climate targets, Aotearoa needs around 300 MW of new wind or 550 MW of new solar between now and 2030, every year (that’s around 2.5% of current annual electricity demand, every year).
Here is a broad brush assessment of each solution’s potential economic and environmental impact in New Zealand:
As a general rule, the on-site solutions have the highest potential for commercial and climate impact. They’re followed by off-site PPAs from new projects, an excellent solution for businesses where on-site solutions aren't feasible or can’t meet their full electricity needs. Corporate PPAs have greater impact because direct negotiations with a developer will typically achieve a lower price than an indirect PPA. They also have the advantage of directly supporting projects via a business’s balance sheet (rather than a retailer’s), enabling more renewables to get built. Solutions that rely only on energy certificates will typically have the lowest impact. Businesses should seek expert advice because real-world impact is complex and varies case-by-case.
This post is EVA’s current thinking, which we hope opens up more discussion about the impact businesses can have on Aotearoa’s clean energy transition.
This blog post is a summary of articles first posted on Total Utilities (Part 1 and Part 2. Following feedback on Part 2, the impact scores for PPAs were increased slightly. EVA's ranking of on-site renewables followed by off-site PPAs from new renewables aligns to the UKGBC's Net Zero Carbon Buildings Framework.