New Zealand can use its clean electricity strengths to decarbonise its energy system, says new IEA report

New Zealand can leverage its vast renewable energy resources to cut emissions across its economy and meet national climate goals while maintaining energy security, according to a new report by the International Energy Agency.

Since the IEA’s last review in 2017, New Zealand has set more ambitious targets for reducing greenhouse gas emissions, including bringing them down by 50% from 2005 levels by 2030 – and to net zero by 2050.  

“I commend New Zealand for the steps it has already taken to address climate change, including implementing emissions budgets and a comprehensive emissions reduction plan,” said IEA Executive Director Fatih Birol. “New Zealand now needs to focus on the next phase of its energy transition by leveraging its clean electricity strengths to decarbonise transport and industry.”  

The new IEA report finds that New Zealand has more work to do in setting pathways to meet its ambitious objectives, and that the long-term energy strategy that the government plans to release at the end of 2024 will be a key step.   

New Zealand already has a low-emissions power system, with over 80% of electricity coming from renewable sources. The report notes that this share could easily surpass 90% based on existing policies. However, the electricity system will need to adapt to the upcoming changes, notably the integration of greater shares of variable renewables, such as wind and solar.  

As the system is heavily reliant on hydropower, New Zealand will also need to prepare well for the possibility of lower-than-expected output during dry periods. The report recommends advancing reforms to the permitting system for new renewable projects, finalising an offshore wind regulatory framework, and providing timely clarity on the government-backed NZ Battery storage project for pumped hydro. 

Dr Birol said: “New Zealand has the potential to be a global pioneer on integrating very high shares of renewables while maintaining energy security. The NZ Battery project can demonstrate the role of pumped hydro storage in balancing a nearly 100% renewables-based grid. And government-backed investments to decarbonise industrial heat, for sectors like chemicals and pulp and paper, can also unlock important emissions reduction solutions for the world.”  

Today, the key challenge is decarbonising the transport and industrial sectors through clean electricity and supporting investments in technologies to achieve emissions cuts cost effectively. The report concludes that New Zealand needs to place a stronger focus on decarbonisation of transport – which is today almost entirely dependent on oil – both through electrification and biofuels.  

The report notes that New Zealand has made considerable progress in advancing energy efficiency programmes in recent years and urges the government to ensure a sustained focus and continued funding for such programmes in future budget cycles.