Climate change and the electricity grid

Around 80-85% of New Zealand’s electricity is generated from renewable sources, which means that most of the time when we’re using electricity at home it’s climate-friendly. But what about the other 15-20%? And what will increasing electrification – for example due to a growing number of electric vehicles – mean for our electricity grid?

To help us get to net-zero carbon emissions by 2050, New Zealand has a target to reach an average of 90% renewable electricity by 2025. The Emissions Reduction Plan also sets out a target of 50% of total final energy consumption to be from renewable sources by 2035 (‘total energy’ includes non-electrical energy such as petrol and diesel used for vehicles).

Achieving these targets will certainly require new electricity generation infrastructure. But by being smart about how and when we use electricity, we can do more with our renewable electricity capacity, and keep costs down.

The renewable electricity mix

In a typical year, New Zealand currently generates around 80-85% of its electricity from renewable energy sources including hydro, geothermal and wind. The other 15-20% is generated from burning fossil fuels such as coal, gas and oil.

Our capacity for wind, solar and geothermal generation is increasing as new power generation facilities are built. These energy sources will supply a greater share of our electricity mix by 2035, reducing our reliance on fossil fuels.

Electricity supply and demand

Because electricity is difficult to store, it is generated at the same time it is used. Supply of renewable electricity is affected by things like how much water is available to our hydro dams, how windy it is where our turbines are, or whether it’s day or night (for solar generation).

Electricity demand varies over time, with much less needed overnight, and much more needed during morning and evening periods (called peaks), when lots of different uses coincide. The higher these peak periods, the harder it is to meet demand with renewable supplies, and the more we need to rely on fossil-fuelled generators to supply the electricity we need.

If we could shift some of our electricity use from peak times to off-peak times, then the overall shape of demand would be flatter, and more of our electricity needs overall could be met by renewable energy sources.

The impact of EVs

Switching to an electric vehicle is a climate-friendly choice. EVs emit 80% less CO₂ than an equivalent petrol vehicle in New Zealand because of our mostly-renewable electricity system. For a New Zealand household without an EV, transport typically accounts for around 37% of your carbon footprint, so making the switch adds up to significant emissions savings.

Learn more about EVs(external link)

But with a growing number of EVs being plugged into our electricity grid, we need to be smart about when we’re charging them. An EV can typically increase household electricity use by around 20-30%¹, similar to hot water or space heating. Luckily, for most people it’s convenient to charge an EV overnight, when electricity is off-peak (and cheaper). If you have an EV or are considering purchasing one, a smart charger or home energy management system can help you keep your electricity use climate-friendly, and keep your costs down.

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1 Modelled from Ministry of Transport fleet data and average energy consumption for EVs; and New Zealand household electricity consumption data from MBIE and the Electricity Authority.

What about industry and businesses?

New Zealand’s emission-reduction goals rely on industry, transport and commercial sectors switching from fossil fuels to cleaner renewable energy sources. In 2020, just 28% of our total final energy consumption (TFEC) was from renewable sources. The Government's first Emissions Reduction Plan sets a target of 50% TFEC from renewable sources by 2035. For industry, businesses, hospitals and schools for example, this may mean a technology switch such as upgrading a coal boiler to a cleaner and more energy-efficient biomass (wood chip) powered boiler, and in a lot of cases it will mean a switch to electricity – and connecting to the grid.

Fortunately our peak demand patterns are generally favourable to more industrial/commercial electricity use. Electricity use currently peaks in the mornings and early evenings when most people are home getting ready for the day or returning home from work and turning on ovens, heating, lights etc. The peaks are higher in winter because of heating.

For industry, it’s often during the day and in the summer months when most electricity is required. Businesses that use a lot of electricity often also have demand-response arrangements with electricity suppliers, and can lower their electricity use, or switch to alternative energy sources, when demand on the grid is high.

Increased use of variable pricing will provide a strong incentive for businesses to shift electricity use to off-peak times where possible.

Smart energy use vs increasing energy generation

To meet increasing demand for electricity, we will have to generate more supply from renewable energy sources, and this work is already underway. There are several new wind farm projects in progress around the country, and plans to expand geothermal capacity in the central North Island. Investment in solar power is also increasing, for both large ‘grid-scale’ solar farms that feed into the system, and roof-mounted solar installations to help power individual businesses and households. 

But investment in new infrastructure is not the only answer. It is expensive, and development can take many years. The cost is ultimately passed on to consumers. It’s estimated that only around 40% of our household power bills are based on how much electricity you use. The remaining 60% is associated with ‘delivering’ electricity to the home, a cost that will increase for all kiwi homes with large grid infrastructure.

Another consideration is that wind and solar are also what’s known as ‘intermittent’ power sources. This means that electricity can only be generated from these sources when the wind is blowing and the sun is shining. As New Zealand’s reliance on wind and solar power increases, this will have an impact on the times of day when renewable electricity is plentiful.

By being smart about how and when we use electricity, we can make our renewable electricity resources go a lot further – now and into the future.