Supercharging decarbonisation & transforming energy system

  • Hon Dr Megan Woods
  • Hon James Shaw

The drive to decarbonise industry and further accelerate preparations for a sustainable, more resilient future will get a boost from the Climate Emergency Response Fund in Budget 2022 by supercharging efforts to encourage the switch to cleaner energy options and transform the energy system.

“Today is a momentous day which shows we can secure New Zealand’s long-term energy future with an ambitious package of measures to help slash emissions, and ensure we seize the economic opportunities that come with the transition to a low-emissions world,” Megan Woods said.

“Rising global energy prices we cannot control show we must wean ourselves off expensive fossil fuels, scale up our ambition to decarbonise industry, and future proof our energy system, to ensure that a cheaper, more secure energy supply becomes the norm.

“Emissions from our energy and industry sectors make up 27 percent of our total emissions. That’s why we are committing to significantly expanding the Government Investment in Decarbonising Industry Fund or GIDI, which sees the Government partner with major process heat energy users, helping them cut costs as well as emissions.

“Our clean and green reputation is an international draw card, but many businesses still use fossil fuels. Ensuring our businesses are run on, and produce products made with renewables will be critical to maintain our leading business edge.

“We’re investing around $650 million over four years to massively increase the size of the funding available to the GIDI programme, which means we can expand the number and type of projects that receive money, including high impact decarbonisation projects of national significance.

“There will also be targeted investment at a regional level for projects that optimise low emission fuel use, funding for electricity transmission and distribution infrastructure upgrades to support fuel-switching, and the early adoption of high decarbonisation energy technologies. It’s a huge win for our businesses who are looking at innovation to stay ahead of the curve.

“The original $69 million GIDI fund has been a huge success having helped fund 53 major industrial decarbonisation projects – all contracted for completion by April 2024 and over their lifetime are estimated to save 7.46 million tonnes of CO2, equivalent to taking 134,800 cars off the road.

Climate Change Minister James Shaw said the transition to clean, green energy alternatives is a key part of the Emissions Reduction Plan, also announced today, and fundamental to New Zealand’s journey to net zero.

“The funding announced today builds on substantial investment over the last four years to help businesses move over to cleaner, more affordable, more efficient energy choices. Businesses all over Aotearoa are finding that in so doing, they are able to not only cut emissions, but also improve their profitability.

“There are tremendous gains to be made in cutting emissions associated with our energy sector. Once again, there is a golden opportunity to do that in a way that makes people’s lives better with lower bills and warmer homes. A new national energy strategy will help ensure that our transition to a zero-carbon economy benefits everyone,” James Shaw said.

Budget 2022 also includes support for an energy efficient equipment scheme that will help businesses to buy and install high efficiency electrical equipment used for industrial and commercial processes, including specifically electric motors and electric heat pumps.

Another component will help commercial buildings replace fossil fuel use for space and water heating, and be more energy efficient.

“We know there’s a growing list of businesses that are keen to hurry up and decarbonise their products and services, but that cash-flow can be a barrier. This will encourage businesses, including small businesses, farms and factories, to purchase equipment with the highest efficiency rather than the less efficient, cheaper alternatives,” Megan Woods said.

“The expanded programme is estimated to deliver projects that will make up around one sixth or 17 percent of our total emissions reductions required between 2022 and 2025, and around one third or 35 percent of our emissions reductions required between 2025 and 2030, so it is doing some heavy lifting for our climate goals,” Megan Woods said.

Budget 2022 will also invest in developing major strategies to achieve the Government’s vision for a net-zero economy in 2050, where energy is accessible and affordable, secure and reliable, and supports New Zealanders’ wellbeing.

Almost $18 million over three years will support the transition to a low carbon economy through the development of an energy strategy, a regulatory framework for offshore renewable energy, and a roadmap for development and use of hydrogen.

“In plotting the next steps to slash emissions in the energy sector we need to do more to address strategic challenges, and signal pathways away from fossil fuels. We are looking to a National Energy Strategy to provide some of the sought after certainty industry and consumers have been asking us for, on our journey to net zero 2050,” Megan Woods said.

In addition approximately $5 million over two years will provide funding to develop measures that support a reliable and affordable electricity supply while accelerating the move to a highly renewable electricity system, and to explore the potential for public sector procurement of renewable electricity via long term power purchase agreements, or PPAs.

“These long term PPA contracts could fundamentally change the electricity landscape, by leveraging the buying power of Government to help unleash new renewable generation.

“Removing fossil fuels will require the transformation of every sector of our economy but we must be ambitious so we can reap the unprecedented economic benefits, including green jobs, that the latest clean technology brings,” Megan Woods said.

Note for editors

  • Just over $650 million has been allocated to decarbonising industry over the four-year Budget 2022 period (2022/23 to 2025/26), plus a pre-commitment of $25 million across 2022/23 and 2023/24 agreed prior to Budget 2022, with the remainder (approximately $330 million) allocated over 2026/27 and beyond.
  • In addition, almost $18 million to fund the development of:
    • An energy strategy,
    • A regulatory framework for offshore renewable energy, and
    • A roadmap for development and use of hydrogen.
  • In addition, approximately $5 million to:
    • Develop and implement electricity market measures that support reliable and affordable electricity supply while accelerating the transition to a highly renewable electricity system.
    • Explore and facilitate public sector procurement of renewable electricity via long term power purchase agreements.

Phasing and allocation of funding to decarbonise industry

Over seven years approximately $1 billion, to be spent:

    • ~$600m towards an expanded process heat fund, which has the potential to include (subject to further programme design):
      • Nationally available contestable funding (similar to the current GIDI fund model)
      • Streamlined process for smaller projects
      • Partnerships with our biggest emitters
      • Enabling infrastructure and supply of low emission fuels to support decarbonisation, such as network upgrades
      • Regionally targeted decarbonisation based on plans through the Regional Energy Transition Accelerator (RETA)
      • Technology diffusion
    • ~ $40m for commercial space and water heating decarbonisation
      • Switching fossil fuel space and water heating to renewable energy and to be more energy efficient in the commercial sector
    • ~$330m towards assisting businesses, including small and medium businesses, to upgrade to more energy efficient equipment
    • These are estimates which are based on current technologies and barriers. The Energy Efficiency & Conservation Authority’s policy is to invest where the money will get the best return. This can change over time.

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