My hierarchy of needs for energy
The fuel crisis caused by the Middle East conflict has caused me to think a lot about how we should consider our energy needs in future.
The worst case scenario for the disruption to our energy supply was catastrophic. It wasn’t not enough petrol for cars. It was our industrial and agricultural industries grinding to a halt due to lack of diesel. It was potential food shortages due to lack of fertilisers. The worst case scenario was much more severe than anything else we have faced.
So the first priority for energy should be supply. If New Zealand doesn’t have enough energy to support our businesses and households, we face economic disaster. This isn’t just electricity, but energy. The first focus of energy policy must be ensuring adequate supply. We must ensure supply remains ahead of demand.
The second priority should be domestic resilience. We were and are dangerously exposed to what Iran and the Houthis do in foreign sea lanes. We need to increase domestic production of both energy and electricity. Where we do have to import it, we need greater storage facilities, and where possible more refining done domestically. China has 12 to 24 months of energy supplies in storage. We have a few weeks. This means more power stations, more gas and even more coal (as a backup). Also battery storage.
The third priority should be price. Before this crisis, I would have had price as first or second. But now it is more important we have surplus supply and greater domestic production and storage – even if it costs more. However price is still important. Consumers have to be able to afford electricity and fuel. Businesses that have higher energy costs will pass them on in higher prices.
The fourth priority should be environmental impact. We should have an ETS which covers the external costs of greater greenhouse gas emissions, as that encourages more renewable electricity etc. However it can’t stand in the way of supply and domestic resilience. It is better to dig up coal in New Zealand, than import it from China. 45% of our energy is from renewable sources, which is a lot higher than 15% globally. But purity is not more important the supply and resilience.