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Opening address of

'Solar 2005' - the Australian and New Zealand Solar Energy

Society conference at the University of Otago, Dunedin,

delivered 8.45am, 28 November 2005.

Thank you for the

invitation to open your conference, and welcome to those of

you who have travelled from overseas to be with us. I hope

you enjoy your time in New Zealand.

In the thirty years

that I've been working to advance sustainable energy, it

would seem there has never been a more propitious time to

get the solar future seriously underway.

Oil prices have

doubled in 18 months. Our oil dependence is showing up in

the current account deficit and in the inflation rate.

During the last few months I've been meeting with groups of

100 or so people around the country and showing The End of

Suburbia. Citizens, unlike governments, are taking it

seriously and are deep in discussion about what we should

do.

New Zealand has passed peak gas. Our gas reserves

peaked in 2001 and Maui is in rapid decline. New finds are

likely but uncertain and will almost certainly be much

smaller and much more expensive.

Energy demand is growing

at an alarming rate, fuelled by rapid and, in my view,

unsustainable economic growth, but outstripping even that.

The growth is especially fast in transport fuel, the hardest

of all to supply in a post-oil economy.

Electricity prices

are rising in real terms and wind farms are becoming a

highly visible flagship for renewable energy.

Awareness of

climate change is growing and there is less debate about its

reality, as New Zealand suffers severe weather events

consistent with a climate-changing future.

The economic

costs of not responding to climate change have been

quantified as our projected surplus of carbon credits has

turned into a projected deficit because of high growth in

energy emissions, low forest plantings and conversion of

forested land to dairying.

There is strong local

opposition to proposals like the Happy Valley coal mine,

which would destroy pristine biodiversity, the Marsden Point

coal-fired power station, whose greenhouse gases cannot even

legally be considered in the planning process now, and the

400 kV power lines in the Waikato which would perpetuate the

centralised electricity generation model.

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It would seem we

have everything going for us.

But, despite all these

indicators, the combination of fight back and

head-in-the-sand is still preventing progress. Renewables

are growing fast in absolute terms, but reducing as a

percentage of total energy use. Energy efficiency has hardly

progressed beyond the 'business as usual' scenario. We are

going backwards in the phase out of fossil fuels.

While

Treasury no longer holds to its forecast in the 2004 Budget

that oil prices would return to $19/bbl by the end of last

year and stay there indefinitely, they still see much of the

recent rise as temporary and caused by short term

perturbations like Katrina and the Iraq invasion. I cannot

find any government decision-making that has been seriously

changed as a result of awareness of Peak Oil.

One new

gas-fired power station is being built, and another planned,

for which there is no assured gas supply. The Government has

underwritten the first, passing the risk to taxpayers rather

than electricity consumers.

Proposals for LNG import

would, if they proceed, choke off renewables and efficiency

investments for many years as promotion of wasteful uses of

gas becomes necessary to justify the large initial

investment. We've had 30 years of energy policy being driven

by a glut of gas and contracts that obliged us to use it or

lose it. We don't need another Maui gas contract all over

again.

Coal mining and use is on the increase and there is

a strong push from industry to ignore climate change issues

and burn more coal. Proposals have been floated to make

transport fuels from coal with no apparent consideration of

carbon emissions.

New transport legislation and

institutional arrangements, developed by the previous

government and the Green Party, have brought public

transport, cycle ways, rail and traffic demand management

into the planning frame, and I'm hugely optimistic about

where this will eventually lead, but the bulk of money still

goes on big new roads. There is strong lobby group for still

more roading which is blind to the likely effects of oil

prices and depletion.

Perhaps most worrying of all is the

fight back that is underway on climate change policy.

Amory Lovins used to say that it is always either too

soon, or too late, to invest in energy efficiency. He meant

that as long as there is surplus supply capacity it was too

soon, and as soon as there wasn't, it was too late to avoid

building new supply. Some commentators have taken the same

approach to climate policy. For years they head-butted the

science, saying there is not enough proof to change the way

we do things, or it was so far in the future we didn't need

to do anything yet.

Now I've heard the first comments

starting - that climate change is so far advanced that it is

too late to stop it and we should instead adapt to the new

situation rather than try to curb emissions. The ignorance

that betrays is dangerous. It suggests there is some new

stable state into which climate change will propel us and we

can just adjust to it. The reality is that there is no new

stable state as long as greenhouse gas emissions keep

rising. Stabilising then reducing emissions is just the

first step to stabilising climate in some new state,

provided we don't trigger runaway feedback effects, some of

which seem to have already started.

Other arguments

advanced are even more self-serving. New Zealand is too

small to matter - never mind that our greenhouse emissions

per capita are high by world standards and far above those

of China, which comes in for so much criticism. In absolute

terms they are small so some argue that we should derive a

competitive advantage from free riding on the rest of the

Kyoto countries.

There has been much approval among media

commentators of the so-called 'alternative' approach to

Kyoto put forward by the United States, Australia, Japan,

China, India and South Korea, who propose to use technology

to solve the problem. Most of our media are too uninformed

to know, or too lazy to find out, that Kyoto was always -

and remains - about using better technology to reduce

emissions. There is nothing proposed in this 'alternative'

that could not be done under the Kyoto agreement as it

stands. What they are really saying is that they refuse to

accept a mandatory target. All care, no responsibility. If

the technology doesn't work out, it's no skin off our

nose.

The current review of New Zealand climate change

policy is both an opportunity and a threat. Some of the

settings obviously do need to be changed. New forest

plantings have virtually dried up and conversion of forest

to dairying has accelerated. While I believe this is the

result of market prices rather than government management of

the carbon sink credits, it is clear that we need a market

incentive to plant and retain more forest if we are to

counter the current low prices for forest products compared

with dairy products.

Biomass fuels are our biggest

strategic advantage in reducing net emissions and we need to

move now towards a wood-based energy system. I remain

unconvinced that simply handing the credits to the owners of

the existing forests will achieve this, but we do need to

use the return to New Zealand from any Kyoto forests we

still have, to incentivise retaining them and planting more.

The best mechanism to achieve Peter Read's vision of

balancing land uses should be under active discussion.

The

review appears to have begun under the previous government

as an effort to find the best policies to turn the projected

Kyoto deficit into a surplus - or at least to neutralise it.

There are worrying signs that it is now driven by

post-election commitments to Winston Peters and Peter Dunne,

both determined to abolish the proposed carbon tax, and

Dunne even seeking our withdrawal from Kyoto itself.

A

carbon tax has been proposed by successive ministers since

the early nineties when Simon Upton failed to get support

from his Cabinet. It was signalled as policy under the

previous government, when there was a clear parliamentary

majority in favour, but delayed till now, when there may not

be, although that is not yet established.

The current mix

of regulation and the market in the energy sector is not

working well and also needs review. But if we are to retain

any market elements, and I strongly believe we should, then

any economist will tell you it is essential to get the

pricing right. Users of fossil fuels currently pay nothing

for the environmental damage caused by their emissions, so

compete unfairly with investments in renewables and

efficiency, which have no emissions. The carbon tax is

designed to level this playing field.

It is valid to

examine at this stage whether the carbon tax is the best way

to give this economic signal. Many things have changed since

the Green Party advocated it in 1992 and costed it in terms

of both revenue and prices. Rising oil prices are now giving

a strong signal to motorists to economise on the use of

transport fuel and an extra two to four cents-a-litre would

be hardly felt against the noise of fluctuating crude

prices. Major energy-intensive industry has been offered

negotiated greenhouse agreements that achieve world best

practice in that industry and exempt it from tax. However

that process will stall without a carbon tax and there will

be no further incentive to upgrade plant.

The three areas

where a carbon tax is capable of influencing investment

decisions, which are much more important than day-to-day

decisions, are electricity generation, process heat and

freight transport. Here a pricing mechanism is essential to

ensure that all the costs of choosing coal are internalised,

so that wind, wood, efficiency investments and co-generation

can compete fairly. There are signs that planning for

increased use of coal has proceeded because industry has

been convinced they would be able to knock out the carbon

tax with heavy lobbying. That appears to be working. Diesel

is a much larger component of the price of trucking than it

is of rail. While rebuilding our rail system is the primary

tool to ensure freight goes by the most efficient mode, true

cost pricing would also help.

Opponents of true cost

pricing label the carbon tax as punitive, and a drag on the

economy. They ignore the fact that the money does not go

into a black hole, but is recycled into the economy. I

believe we need to make it far more explicit that taxing

carbon enables us to reduce other taxes. Ecological tax

reform will create the incentives to reduce our use of

environmentally damaging goods and services and have more to

spend on benign ones. Public opinion will be with us if we

link eco-taxes to tax reductions for everyone.

Thanks to

Kyoto, the costs of carbon emissions can now be seen to be

in real dollars - a projected deficit of half-a-billion real

dollars - rather than 'just' environmental costs, which are

so easily ignored. But it is still valid to discuss whether

a carbon tax is the best instrument to internalise the costs

of carbon. I wish this was the review we were having. There

are some who argue an emissions trading system - either just

among energy users or also including methane emitters, or

also including carbon sinks, would be more economically

efficient. That would mimic internally the instrument used

internationally under Kyoto, and as with Kyoto there would

be major concerns about how the initial units for trading

would be allocated. But it is a debate we should have.

Instead I hear no acknowledgement that if the carbon tax

goes, we must replace it with another economic instrument.

I have dwelt on pricing at some length because I know

many of you who are trying to operate in this current unfair

market know how important it is. But there are other

obstacles we must overcome as well. The main one, in my

view, is the public perception of energy efficiency and

renewable energy.

Energy efficiency is seen as boring.

I've seen so many boring presentations - earnest,

fact-filled, admonishing, but nothing to fire the

imagination. No-one gets excited about wrapping their water

cylinder. They may do it, but it's not what they get out of

bed for. Energy conservation has an even worse press. It is

seen as 'going without', a miserable existence of cold baths

and candles. That has not been helped by government

announcements in the last term that new security of supply

arrangements - for which read costly, rarely used

fossil-fired plant - aimed to ensure there would never again

have to be a public conservation campaign. Never again

should we have to tell you to turn your computer screen off

at night! This is despite the duty the Act imposes on the

minister to promote energy conservation, as well as energy

efficiency and renewables.

Renewable energy has a better

image, but is still seen as fringe and expensive. Wind has

captured the public imagination and over 80 percent of New

Zealanders want to see wind as the next power station fuel.

But energy analysts spend all their time telling us it won't

be enough, it needs storage, it's ugly, it's noisy, it kills

birds, none of which needs to be true. Firewood is

invisible, because so much of it is not traded, or traded

locally and unreported. Yet the recent HEEP figures show

that more than half our households have a solid fuel burner

and these are mainly wood.

Public reaction to my own

house has been instructive. The 1kW wind turbine is what

excites people, though it makes the smallest contribution to

our energy use. PV panels also look interesting and fit the

model of the consumer society where if you want energy

efficiency there has to be a gizmo you buy. The wood stove

is less admired though it provides at least five times the

energy the turbine does - cooking, top-up space heating and

top-up water heating. The passive solar house design

inspires no great interest, even though it is the major

contributor to comfort and cost saving, with almost

instantaneous payback. Insulation is out of sight, out of

mind. Living very comfortably within 2kWh/day by

understanding where to cut waste is seen as rather

bizarre.

Motor vehicle sales are also instructive. The

industry reports an increase in the demand for smaller more

efficient cars when petrol and diesel prices peaked, but

this has dropped away as prices have eased a little.

Proposals first from the Green Party then from the Business

Council for Sustainable Development for a feebate system to

encourage import of more efficient vehicles was greeted with

anger by those who claim they get a better ride in a V8 and

fervently believe their right to this should be subsidised

by the climate. There is a lot of interest in hybrids,

clever but complex and expensive technology, but not a lot

in the impressive fuel efficiency that can now be achieved,

along with safety and space, in an ordinary five-seater

small car like the Jazz.

We have to turn these attitudes

around.

We need to make energy efficiency a selling point

for all buildings. Home energy labelling will help. We can

use the new perception of Peak Oil to drive home the message

that cars we import today will have to be run for years in

the future on increasingly expensive fuel.

Can I remark at

this point on the dearth of papers about transport at this

conference? It is the hardest, the most neglected, but by

far the most important challenge in the transition to a

sustainable energy future. Electricity is the easy

bit.

I'd like to finish by telling you a little about my

plans for the next three years.

Under the post-election

agreement between the Greens and Labour the new Minister of

Energy has effectively delegated me the job of working

directly with officials in EECA and elsewhere to enhance the

operation of the Energy Efficiency and Conservation Act. The

Greens are not part of Cabinet or the Executive, as dictated

by the Government's support parties, so Cabinet decisions

will be through the Minister of Energy, but on a day-to-day

basis I will be doing the work.

The Government recognises

that energy will be a crunch issue in this term and plans to

give it special attention. I have always believed that

energy efficiency, energy conservation and renewables are a

major component of the work needed to turn around our

climate changing emissions and prepare for Peak Oil. The two

keys to that are getting the pricing right and building

public confidence in, and excitement about, a sustainable

energy future.

A new, flagship project will be to build

capacity in the solar water heating industry in order to get

half-a-million square metres of collector installed on roofs

over the next five years. The purpose is not just the energy

savings to be gained from those installations. My mailbox

over the last few years has made it very clear that there is

strong support from the public for solar water heating; they

cannot understand why it is not compulsory for new homes,

and routine on prisons, hospitals and other large buildings.

They want to buy one for themselves, but find the price just

a bit too high at present.

If we want to create some

excitement around sustainable energy, with a technology that

is proven and cost effective, I believe solar water heating

can do it. It accepts that people want something visible and

purchased to show they are making an effort to be

sustainable. So it panders in one sense to consumerism. But

at the same time, it demonstrates that you don't have to

generate additional electricity to be ahead - technologies

that save it or substitute for it are just as good. So it

may prepare the ground for grid-connected PV when that

becomes economic.

My current view is that to build

capacity we need to build the confidence of firms to invest

in expansion and I doubt that incremental support will do

that. I have asked officials to come back to me with an

analysis of a different approach - a bulk government tender

to supply and install this greatly increased quantity over

five years, with a place for all market players who can use

this opportunity to plan, expand, meet quality requirements,

ensure there are adequate trained installers, and bring

their price down with economies of scale.

As the units are

on-sold to the public with the resulting price saving, it

presents an opportunity for education in the host of energy

efficiency improvements they could also make to their homes

and their behaviour.

Along with this I want to see

efficiency standards for vehicles and for more appliances;

more urgency in the finalisation of the household building

standard; and a step-up in retrofitting home insulation and

damp proofing.

This focus on the household is deliberate.

If we want to change a culture we can do it best where

people live. The family is still the foundation of culture.

I cannot believe that people who accept this new view of

sustainable energy in their homes will fail to carry it over

into their businesses. Even in business, while the bottom

line apparently drives everything, in fact it does not.

There are so many business opportunities to reduce energy

bills through efficiency investments that are ignored. Even

business has a prevailing culture and it is that culture

that regards energy efficiency and renewables as boring,

marginal or unreliable that needs to change. Along with our

efforts to demonstrate it is cost-effective and profitable,

we must also demonstrate that it is modern, fashionable, and

fun.

Best wishes for the conference. I'm looking forward

to hearing

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