Energy Strategy Lessons from New Zealand

New Zealand (NZ) is on a two year journey to develop a national energy strategy to guide their transition to a zero-carbon economy. I believe there is a lot we can learn from NZ as they build a plan to decarbonize. I will summarize what I think are the key points of the NZ approach in this article, and I encourage everyone who is involved in the Alberta energy transition, especially policy makers, to study and learn from what NZ is doing. In a previous article I provided my perspective on the implementation challenges Canada's federal Clean Electricity Regulations will create and I offer this article as an example of what I believe is a better approach to developing a robust and pragmatic national energy policy.

There are three things about NZ's approach that I like:

• They are developing policies before taking actions
• They are investing time defining the problems and identifying constraints
• They are taking time to do it right

Policy First, Actions Second

NZ is taking a two phased approach to defining the direction for their energy system. The first phase is to explore possibilities and the second phase is to set direction based on the outcomes of phase 1.

This two phased approach will enable NZ to develop policy based on a thorough analysis and understanding of the problems they are trying to solve, constraints they will face, and trade-offs they will have to make when designing actions to meet their objectives. In order to ensure clarity of purpose, their Terms of Reference document clearly articulates the four key objectives are:

1. Energy affordability and energy equity for consumers
2. Our energy system transitions at the pace and scale required to support a net-zero 2050
3. Energy supply is secure and reliable, including as we adapt to the effects of climate change and in the face of global shocks
4. Our energy system supports economic development and productivity growth aligned with the transition.

The focus on reliability, security, and affordability is critical. These aspects have been absent from much of North American energy policy development and have been treated as assumptions instead of explicit objectives, in what has become a myopic focus on zero-emitting resources in North America. NZ's approach will help ensure that reliability, security, and affordability are not overlooked as they develop their energy strategy and associated actions and legislation to implement it.

We saw a similar approach with electricity policy and legislation development in Alberta in the early 2000s when the Alberta Department of Energy developed the 2003 Transmission Development Policy and the 2005 Electricity Policy Framework. These policy documents were developed as a first step and they clearly articulated the objectives for transmission development and electricity market outcomes in Alberta and provided the foundation for that statue and legislation that followed.

The Canadian Federal Government would be well served by employing a similar approach to develop a national electricity policy before drafting laws and regulations.

Define the Problems and Constraints

NZ's approach is straightforward - they will first spend time defining the problems they are trying to solve and understanding the constraints they are facing and THEN design solutions. Sounds simple, right? Well, unfortunately, as we are seeing time and again with governments, the problem definition step is often skipped and policy makers jump straight to solutions based on assumptions or biases about the problems that need to be solved without consultation with experts who are most knowledgeable about the subject.

NZ's first phase, Exploring what's possible, will allow time for fulsome discussion and analysis of not only the problems they are trying to solve, but also the context they are operating in and the limitations of the systems they are trying to evolve. Only after this assessment will they start discussing trade-offs and solutions to meet the objectives.

Given the complex nature of power systems, jumping to solutions is not only inefficient, it can also be dangerous as the unintended outcomes can be very costly significant negative consequences. The approach NZ is taking will help policy makers develop a good understanding of the complexities they are dealing with as they develop policies and solutions.

As we've seen with the Canadian Clean Electricity Regulations, when policy makers don't take time to properly consult with experts on the limitations and opportunities of our power systems and jump straight to drafting regulations, we waste more time trying to revise draft laws into something implementable than if a proper problem identification and consultation process had been conducted in the first place. This is not only extremely inefficient, it also delays the decarbonization process and frustrates investors when we should be trying to collectively move as quickly as possible given the long development timeframes for new power system infrastructure.

Allow Sufficient Time

Energy policy underpins not only the economic health and well-being of a nation, it also affects the physical health and well-being of its citizens. Changes to complex power systems that are not well designed can lead to significant adverse and costly outcomes that can take years to correct. It is imperative that policy makers take time to be thoughtful and planful with any changes they propose to power systems.

NZ is taking a pragmatic and calm approach to developing a net zero strategy. What they ARE doing is acknowledging the need for change and the urgency of the problem, while taking a structured and measured approach to developing their plans. What they ARE NOT doing is pulling the fire alarm, declaring emergencies, and jumping to solutions based on assumptions and ideology. We should observe and learn.

Climate change is affecting and will continue to affect all life on earth and we must evolve our power systems to emit less, supply more, and be more resilient to the weather extremes we will increasingly be facing. However, power systems are incredibly complex systems that have been developed over more than a century and we cannot reasonably expect to fundamentally change them in one year, or even ten years. Evolving our power systems will take time and we must be patient and thoughtful about how we implement changes.

We need to take time to understand the problems we are trying to solve and the limitations we are working with to inform solutions that are reliable, secure, sustainable, and affordable. As Einstein brilliantly said, "If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions." Policy makers and politicians that skip this step in their desire for action are, unfortunately, creating even more problems and delaying much need action.

When I was a field engineer, we had a saying to describe the rush to solutions without sufficient analysis that just resulted in having to go back and properly diagnose the problem later on: "there's never time to do it right, but there's always time to do it again ". We've seen this play out many times with hastily developed policies in the past.

NZ understands this and is allowing two years to develop their energy strategy:

There has been some criticism that their two year timeline is too long because the climate change issues are so urgent, but to me this only reinforces the wisdom of their measured approach. There is an old adage in motorsports that you have to "slow down to speed up", and NZ is doing exactly this with their energy strategy development.

To be clear, NZ is not perfect, and I'm sure there are many criticisms of NZ's approach. However, I believe Canada can learn some valuable lessons from the way NZ is approaching the development of their national energy strategy to evolve their economy to net zero.