By 2050, the government has pledged to eliminate emissions of long-lived greenhouse gases, and to reduce biogenic methane emissions by between 24-47%. This means energy pricing is changing fast! While this is good news for the environment, it requires business to make some major adjustments.
Let’s look at the impact of these changes and then the solutions that are available to you.
Decline in gas production drives an increase in price
New Zealand’s main gas field has been experiencing production issues since 2018. This year, their production is already down by 42%.
This significant shortfall is having a heavy toll on electricity generation. By 2030, gas production is expected to be half of what it is now.
Gas consumption by sector in New Zealand, 2020
Natural Gas Production Down and Energy Pricing Up
Natural Gas or LPG fired boilers have lower emissions than their coal-fired counterparts. But we have seen oil and gas exploration companies already hand in their exploration permits because of New Zealand’s policy changes.
Because of this, access to gas is becoming far more restricted. When production declines but the demand is still high, prices inevitably rise.
Forecast Gas Production as Reported to MBIE 2020
This has led to an increase in using coal as a substitute. In the South Island, for example, where there is no natural gas, many boilers remain coal fired. Having said that, some are attached to reticulated LPG networks in Christchurch, Queenstown and Dunedin.
But by 2022, a ban on new low and medium temperature coal-fired boilers will also be enforced, with a proposal to phase out any remaining coal boilers by 2037.
This will severely undercut the feasibility of these coal-fired burners in the near future.
How can industries respond to changing energy pricing?
52% of sustainable businesses have an energy strategy
You need two action plans:
Short-term plan: optimise what you have to get the best bang for your buck now.
Long-term plan: understand your options, decide which route you’ll take, and plan how to get there.
The good news is Total Utilities can help you now and well into the future. Plus, we’ll regularly review and track your progress.
Short term energy pricing plan: optimise what you have
For our large commercial and industrial gas customers, we are now seeing an increase of around 180% in cost as they come off contracts signed three years ago. Despite the increase, gas is still a cheaper source of fuel than electricity. But it is fast catching up. As gas supplies further decline, gas prices will only continue to increase.
The chart below shows the upward trend in total costs from raw gas pricing and the ETS scheme over the last three years:
Total Utilities Retail Price Index of gas plus ETS costs – 2018-2021
We are helping clients by tracking the trends of retail gas prices and negotiating cost-effective gas contracts. We also help you save money by optimising what you have for the remaining lifespan of your current heating systems.
Long term energy pricing plan: switch to sustainability
Working closely with the specialists at New Zealand Energy Systems, we help you decarbonise and eventually replace your boiler. We do this by understanding the energy source, the technical options for replacement, and what triggers price changes.
Moving from fossil fuels to electricity, or to another renewable energy source will reduce emissions and help New Zealand achieve its goal of being Net Zero by 2050. In some cases, existing coal-fired boilers with decades of life remaining can be converted to burning biomass instead of coal.
However, in some regions, such as Canterbury, the supply of woody biomass residues falls short of the energy demand for process heat. Total Utilities considers these variables and complexities in your long-term plan.
With increased energy pricing on the cards, now’s the time that you get significantly more bang for your buck when you invest in energy and carbon reduction projects.
Here for you now and into the future
The team at Total Utilities can help you achieve energy efficiencies for the remaining lifespan of your current systems. We do this by conducting a low-cost study into your energy consumption and identify ways you can save money.
Over the long-term, a switch to carbon reduction energy sources makes sense for the environment and your bottom line. That’s why, when you’re ready, the team at Total Utilities can guide you through the switch to solar and other renewable energy sources.
Contact us today to turn cost-effective, environmentally friendly strategies into action.
After over 20 years leading us, Richard Gardiner is handing over the reins to Jonathan Gardiner on 31st March 2021.
Today we want to formally thank Richard, look back on how far Total Utilities has come under his watch, and welcome Jonathan as our new MD.
Richard Gardiner, Founder of Total Utilities
The story starts in 1983 when Richard was transferred by GEC Turbine Generators from Rugby in England to Johannesburg. He worked in South Africa for a decade, initially at GEC before moving to the BOC Gases Group. He studied for his MBA at the School of Business Leadership at The University of South Africa prior to emigrating to New Zealand in 1993.
Before forming Total Utilities, Richard was Managing Director of Renold NZ and Ajax Fasteners. But by 1999 he was ‘over’ the corporate world.
“Deep down I had always wanted to row my own boat,” Richard says of his decision to step out on his own. And so began Total Utilities.
Total Utilities started as a specialist energy procurement business where Richard negotiated competitive energy contracts for commercial clients. In 2001, Richard’s wife, Linda came on board followed by their son Jonathan in 2004. Total Utilities was truly a family business from the get-go.
“What I like doing is building something new,” Richard says. Thanks to his international sales, power generation equipment and gas industry experience, he brought a new approach to utility procurement for New Zealand businesses. This coincided with the deregulation of the electricity industry following the Max Bradford reforms.
Our very first client was Maxwell Dry Cleaning in October 1999. Richard looks back on our humble beginnings with fond memories. In 2019 we celebrated our 20th birthday.
Total Utilities grew slowly but surely in the early years. In 2007, Chris Hargreaves joined us, a school friend of Jonathan’s!
Now, Total Utilities has a team of thirteen, six of whom have been here for over a decade and nine for over five years. Richard is particularly proud of holding on to his talented staff and the strong team culture that he’s helped build. Over the years our skillset has expanded and continues to do so. We’re not only gas and electricity industry experts but renewable energy, cloud computing and carbon reduction specialists too. Richard says that although we’re not the biggest players in the market, like New Zealand as a whole, we consistently punch above our weight. As such, our large client base in the public and private sectors nationally, includes both major corporates and much smaller businesses.
The world has changed a lot since 1999, not least with the rapid growth of new technologies, including cloud computing. Richard is proud that Total Utilities has always embraced new technologies and ways of thinking about energy. “Cloud computing made a hell of a difference during Covid which meant that successive lockdowns haven’t impacted us that much in the overall scheme of things. The world has changed and the decision to go tech future-proofed us.”
Jonathan Gardiner, Managing Director of Total Utilities since March 2021
But don’t worry, Richard isn’t about to retire. He will continue to work in a business development and sales role at Total Utilities, and he remains a director and shareholder. This means he can still do what he loves. You get business continuity, and we don’t lose out on his valuable expertise.
Stepping back will give Richard more time to focus on his hobbies which include genealogy, reading, and supporting his beloved Ipswich football team and the NZ Warriors. He is a keen environmentalist too, and regularly volunteers at nature reserves in the Far North to do his bit to protect our environment from harmful invasive species.
Richard is excited to give: “Jonathan elbow room to put his stamp on things.” Richard says Jonathan and the talented group in their late thirties are the engine room of Total Utilities and the time feels right to pass the decision-making to the next generation.
Jonathan is looking forward to taking on the Managing Director role from 1st April 2021 onwards. He is particularly excited about ensuring Total Utilities is technology-led and expanding our skillset and offerings.
What will this look like in practice? Well, you can take it from us that we won’t be sitting on our hands!
Total Utilities is committed to sustainability; taking advantage of the latest technology to drive energy efficiencies and better visibility of consumption; advocating for reliable, affordable energy pricing for businesses across sectors; while helping New Zealand reduce our collective carbon footprint and make the switch to renewable energy.
We are delighted to announce that as of February 2021 we are Toitū carbonzero certified. This means our commitment to taking positive action on climate change has been officially recognised.
We walk the sustainability talk by managing and reducing our greenhouse gas emissions, wherever we can, and neutralising our unavoidable emissions.
Who is Toitū and what is Toitū Envirocare Carbonzero?
Enviro-Mark Solutions is now Toitū Envirocare. Toitū means “to sustain continually”. It asks us to work together continuously to care for our planet, people and communities. Toitū connects actions with outcomes and asks us to hold fast to the land, to our pride and to all living things.
Toitū carbonzero certifications “meet and exceed the requirements of ISO standards and ensure consistent and comprehensive reporting, benchmarking and management under international best practice”.
Total Utilities’ Carbonzero facts and targets
Our company emissions are quite small at 20.57 tCO2e, but we know we can do better.
That’s why we have set an ambitious, yet achievable, annual target of reducing our baseline emissions of 10% per year over the next three (financial) years.
Most of our emissions come from land transport – 80% is petrol and diesel use – and the remaining is domestic air travel and electricity (see graph below). The obvious next step is to be smarter around our travel choices, yet still deliver excellent service and competitive pricing.
Total Utilities’ Carbon Reduction Goals
Total Utilities will do the following to reduce our emissions.
Prioritising online meetings over travelling to meetings – where possible and practical.
Grouping client visits where possible if travelling a distance, this includes national travel and domestic flights.
Using recycled packaging and choosing courier services that have sustainability programmes in place.
Caring for people and the planet
Rather than buying carbon offsets, we have decided to support renewables-based projects that benefit at-risk communities. This means that along with contributing to renewable energy initiatives, we are also doing our bit to create jobs and improve the overall health and wellbeing of these communities.
We all benefit from sustainable action
We are thrilled that we can join a growing collective of hundreds of organisations who are leading the way to a low carbon future.
But it doesn’t stop there. At Total Utilities we have the skills and the experience to support more New Zealand businesses to measure, manage and reduce their carbon emissions and energy consumption. When you switch to renewable energy sources and manage your energy consumption, you not only reduce your transport and power bills, but you can limit your environmental impact too.
Our hope is that in being open about our sustainability targets and our progress, we will inspire you to make positive changes to the way you use and consume energy for a thriving Aotearoa.
New Zealand Aluminium Smelters has struck a new deal with Meridian Energy which means the smelter will remain open until at least Decemeber 2024. We don’t yet know the prices that Rio Tinto has agreed with Meridian, but Forsyth Barr estimates that Rio will be paying a contract price of 3.5c/kWh. Compare that with large energy users across the country, who are paying over 11c/kWh.
Last week, the news pushed already elevated ASX energy futures higher. Customers leaving contracts on or around a raw energy price of 8.5c/kWh struck 3 years ago are now facing, on average, raw contract pricing of 13-14c/kWh — an increase of 65% or more.
Is pricing sustainable for large users?
ASX Energy Futures climb higher and higher
In July 2020, when the market was expecting a full exit from Tiwai by the end of 2021, pricing fell significantly. South Island consumers were especially fortunate — Total Utilities helped customers negotiate raw energy pricing around 6c/kWh. North Island pricing also fell from around 12c/kWh to 9c/kWh.
New Zealand’s large commercial businesses are paying a premium for the smelters continued electricity supply in the current electricity market. And it’s not just electricity pricing that has increased, but gas too, with prices moving from around $5.50/GJ to over $9/GJ in the last three years.
Transmission pricing hasn’t changed. Yet. But it is almost certain that Tiwai will see transmission costs reduce, while the rest of the country is left to pick up the upgrade bill when Manapouri gets connected to the Clutha Upper Waitaki network.
Additional energy and gas costs cannot just be absorbed by consumers, particularly in the primary and food production/storage sectors where energy-intensive operations exist. The cost of living will continue to inflate, while income increases will struggle to keep up.
Overcapacity of generation must be built between now and 2030, while an increase in gas-fired peaking plants is needed to ensure a secure supply.
Future path requires significant investment in new wind and solar generation
In the current market, there is no incentive for an oversupply of energy production. Instead, due to basic supply and demand principles, constrained generation allows producers to make tremendous profits.
In large part, the Government has ignored the 2019 report and instead focused on the proposed pumped hydro scheme at Lake Onslow. This multi-billion-dollar project won’t be commissioned in the short-term and is located well away from high energy demand areas. The government would gain faster traction if they subsidised microgeneration and battery storage.
Gas production is still a major and immediate concern, with New Zealand’s largest gas more or less 35% down on expected volumes. Remedial work and new drilling projects are unlikely to start until early 2022, so it’ll be some time before gas supplies return to “normal” levels.
Generators have various projects to increase renewables-based generation. These will not likely come into service until after 2024, though. A lack of clear market strategy means timing and development have been poorly managed. The “just” transition to renewables is underway, but who exactly is it “just” for?
A window into the future
On 31st January, 2021 He Pou a Rangi/Climate Change Commission released a 2021 draft advice for consultation report. This report delivers more focused advice that the government would be wise to follow to stand a chance of reaching our country’s zero emissions target.
The energy prices that businesses are paying now is a result of uncertainty and not having enough renewables-based generation to meet dry year demand when gas supplies are constrained. This is not sustainable.
From page 81 of the report: “Future electricity prices are uncertain due to a range of factors, such as the weather, gas availability, future infrastructure requirements and pricing structures.”
The report clearly shows that we need more energy generation, that we should accelerate and incentivise the move to electric vehicles, that we need to make the transition affordable and attractive to businesses and families, and that natural gas plays a role in helping us get there. And it asks if we should do what we can to retain and retrain the incredible talent that exists in the natural gas sector instead of losing them to offshore contracts.
Building more wind and solar generators is money and time well spent, as this will increase energy supply, and translate to lower energy prices. That’s why new renewables-based generation needs to be built and fast, otherwise energy pricing will only remain high and increase further as we decarbonise the economy.
As page 112 of the report so clearly puts it, “For consumers and industry to invest and convert to electrification, they need to have confidence that electricity will be available, affordable and reliable.”
What can you do?
The harsh reality is that the cost of energy is going up. Without significant new generation being commissioned and the ongoing gas supply issues, costs are unlikely to fall again in the next four years.
That’s why we recommend you review your pricing and go to market early, as prices are front end loaded. You could potentially get a better price well in advance of your contract end date and lock it in. Alternatively, having a second round is always an option closer to contract-end.
We’ve given a considered view of where pricing is heading in this blog, but it could be conservative. In any case, budget for a serious increase in costs.
If you want to mitigate rising costs, the best thing you can do is reduce the amount of energy you consume from the grid. You can achieve this by understanding what you consume and optimising your consumption and generating your energy onsite (through solar panels or similar renewable sources).
With increased energy pricing on the cards, now’s the time that you get significantly more bang for your buck when you invest in energy and carbon reduction projects. That’s why the team at Total Utilities are here to help you achieve energy efficiencies and, when you’re ready, guide you through the switch to solar and other renewable sources.
The deployment of grid‐connected photovoltaic (solar PV) systems continues to grow at an impressive rate. In 2018, there was a 30% increase in systems implemented and it continues to move forward.
Most of this growth involves residential systems, which have an 80% share of the connected capacity in NZ.
Where’s the growth in commercial solar pv systems? Why are the industrial and commercial sectors lagging behind?
The following article was written by Perry Hutchinson, who holds a Master of Engineering Studies in Renewable Energy Systems and has 30+ years of experience designing and implementing industrial electrical systems.
One benefit drives decisions about solar PV for industrial/commercial use…
Commercial Solar Power System Cost
The New Zealand Smart Grid Forum identified that although residential consumers consider a range of potential benefits ‐ such as energy independence, environmental impact and a desire to participate in the technology ‐ sound economics is what drives industrial and commercial consumers.
So the challenge in photovoltaic design is to present solar as a viable business investment in New Zealand, even though we lack the government subsidies and generous feed‐in tariffs enjoyed in many other countries.
What is a feed‐in tariff?
Feed‐in tariffs (FIT) offer you a defined payment for the energy you feed into the grid from your solar PV system. In New Zealand, this can be as low as $0.04/kWh.
When generous feed‐in tariffs are available, the key constraint to system size is essentially the available space for the PV array; for viable projects, the bigger you build it, the greater the return.
However, having low feed‐in tariffs changes the whole approach to system design. There is a tipping point where increased size (and increased investment) actually results in diminishing returns.
Forget feed‐in tariffs. Focus on offsetting electricity costs
The viability of a PV system (photovoltaic system) with low feed‐in tariffs depends on offsetting electricity cost. And offsetting electricity cost depends on discovering the optimal level of self‐consumption.
There is a tipping point for self‐consumption with on‐grid PV systems. This is the maximum size of the system where we still achieve 100% self‐consumption. Building the system larger than this results in some of the PV generation being fed back to the grid and therefore, self‐consumption starts to fall.
Generation Profile for commercial solar power systems
But with the generation profile changing ‐ not only seasonally, but also daily and hourly ‐ what is this optimal level of self‐consumption? A system size maximised for 100% self‐ consumption in summer will fall short of that in winter. Conversely, a system size maximised for winter will over‐generate in the summer (and lower self‐consumption as surplus is fed back to the grid).
Load Profile for commercial solar power systems
In addition to this, load profile must also be considered. What if the load is biased towards the morning or biased towards the afternoon? This could impact the optimal direction you orient the array (the azimuth). For example, a more westerly orientation may be better for load profiles with an afternoon bias.
Tariff Structures for commercial solar power systems
Tariff structures could have a similar effect. We have worked with clients with quite complex tariff structures that could influence array configuration. For example, high morning tariffs could mean a more easterly orientation is better.
Obviously, each situation is unique and requires something more than an “out of the box” solution due to the complex interplay between these constantly changing variables – the solar resource, load profile and tariff structure.
Our approach to getting Solar Power right
Traditionally, a project’s net present value (NPV) is used to evaluate and prioritise projects. NPV takes into account the time value of net cashflows over the life of a project by applying a discount rate.
But rather than treating this as an “endpoint” calculation, at Pacific Energy we use NPV to optimise the PV design.
We model a system on an hourly basis over a year using NIWA weather data, the tariff structure and load profile from the time‐of‐use meter as the key inputs. The model then finds the optimal combination of size, tilt and azimuth that maximises the NPV of the project over its 25‐year life.
The maximised NPV reflects the optimal level of self‐consumption for the system which in our experience can be anywhere between 85 – 95% on an annual basis. This provides the starting point for more detailed design to be undertaken.
For solar projects, Total Utilities partners with Pacific Energy whose focus is on bringing sustainable energy projects to life.
By combining sharp economic analysis with a deep understanding of industrial power systems, they design and specify viable and pragmatic solutions that optimise energy use and reduce carbon footprint. They are experts in system analysis and provide unbiased, independent advice for investment decisions.
