The Case for Investment in Energy Efficiency and
Renewable Energy as a Means of Mitigating the
Impacts of the Current Economic Recession
Report Prepared for
Energy Efficiency and Conservation Authority
March 2009
"And we understand, roughly speaking, what technologies are needed.
Some of them will be very quick—like insulating houses, promoting energy efficiency—
and that will put unemployed construction workers back into work now, this year."1
Executive Summary
The above quote by Sir Nicholas Stern neatly summarises this paper. We argue that
investment in renewable energy and energy efficiency can make a very useful
contribution to anti-recession economic policy. This is because the right kinds of
investment help to maintain or stimulate aggregate demand in the short term, while still
delivering net national economic benefits in the medium to long term. Quick action can
also help to lower the high levels of uncertainty around job security and business
profitability that permeate the early phase of a recession.
With regard to the various initiatives that have already been proposed by EECA the
following meet the criteria of good stimulatory policy:
Energy Efficiency






Clean Heat
Commercial Buildings
Crown Loans
Energy Audits
Energy-Wise Home Grants
Residential Subsidies
Renewable Energy



Wood Energy Programme
Renewable Electricity
Transport Biofuels
The employment effect of government funded or subsidised investment programmes
during an economic recession is an important factor to weigh alongside the usual costs
and benefits. High unemployment, low income, reduced effective demand and spare
production capacity are the characteristics of an economy in recession. A key
consideration of any programme should be the extent to which it utilises available
skilled and unskilled labour. Many of EECA’s energy efficiency and renewable energy
programmes meet this consideration.
1
Sir Nicholas Stern:
http://www.mckinseyquarterly.com/Energy_Resources_Materials/Environment/Connecting_clim
ate_change_and_economic_recovery_2303
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Executive Summary ................................................................................................... 1
1. Preface ................................................................................................................. 3
2. Recession Mitigation Policy Requirements ........................................................... 3
3. Infrastructure ........................................................................................................ 4
3.1 Scope .............................................................................................................. 4
3.2 Measuring Short Term Flow-on Effects............................................................ 5
3.3 Measuring Long Term Effects .......................................................................... 7
4. Energy Efficiency .................................................................................................. 8
4.1 Energy Efficiency and Recession Mitigation .................................................... 8
4.2 The Case for Energy Efficiency in the Longer Term ......................................... 9
4.3 Energy Efficiency and Aggregate Demand .................................................... 11
5. Renewable Energy ............................................................................................. 12
5.1 The Case for Renewable Energy in the Longer Term .................................... 12
5.2 Renewable Energy and Aggregate Demand .................................................. 14
6. Policy Design ...................................................................................................... 17
6.1 Criteria........................................................................................................... 17
6.2 Understanding Decision Making .................................................................... 18
6.3 Information .................................................................................................... 18
6.4 Externalities ................................................................................................... 19
6.4 Type of Intervention (energy efficiency) ......................................................... 20
Appendix A: New Zealand Wind Energy Projects .................................................... 23
Appendix B: Cogeneration in Forestry Processing ................................................... 24
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1. Preface
Indicators point to New Zealand, along with many other economies, being in recession.
Like other governments, the New Zealand government is seeking ways in which the
duration and impact of the recession can be minimised. There are many international
and domestic factors behind the recession, and a range of macroeconomic and
microeconomic interventions can relieve pressure on the economy. New Zealand’s
response is broadly consistent with overseas developments. 2
Underlying this paper is the premise that the current recession has caused or will
cause surplus capacity in various sectors and industries and an increase in the number
of jobless people.
In the long term the level of employment in an economy is not determined by how
much investment occurs in renewable energy or energy efficiency, nor by how much is
invested in roads, health or factories, or whether government raises welfare benefits.
What is affected is the level of real wages and income per capita. Policies need to
focus on improving productivity and increasing the capacity of the economy to produce
the goods and services its people desire.
In the short term, however, when there are unemployed resources, some policies will
be better at increasing resource use and thereby pulling the economy out of recession
than others. This paper aims to identify whether energy efficiency and renewable
energy can contribute to the government’s recently announced economic stimulation
package.
2. Recession Mitigation Policy Requirements
What are the requirements for good stimulatory policies in the current economic
environment? There are three:
1. Policies should maintain or increase aggregate demand in the short term. The
recession can easily turn into a downward spiral. A lack of credit or poor
balance sheet reduces demand for goods and services. Firms respond by
curtailing production and laying off staff. Demand falls even more and so on.
Stimulating aggregate demand is vital to preventing this downward spiral.
Interventions need to have the highest possible upstream and downstream jobs
and income creation effects.
2. Policies should be economically sensible over longer term, by addressing a
market failure and delivering good (social) benefit-cost ratios so that
government can repay its borrowing without raising tax rates. If policies also
lower costs, including energy costs to businesses and households so much the
better.
2
Suggested stimulatory measures include investment in transport infrastructure such as roads
and railways, building more state housing, spending on health and education, tax reductions for
families and/or businesses, higher welfare benefits, bailing out businesses at risk of collapse or
retrenchment, lower interest rates, more guarantees to the financial sector, reduced working
hours and raising barriers against imports. We do not evaluate these here.
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3. Interventions should help to reduce uncertainty. This does not mean just
lowering risk. It means reducing the fears of workers about whether or not they
will have a job next week or about the prospects of finding a new job, and the
fears of businesses about profitability and about whether they can obtain
access to credit or uninterrupted input supplies, including energy supplies.
Reducing uncertainty is largely about prompt and credible actions that address
perceptions in the first phase of a potentially significant downturn. Announced
investments in energy efficiency and renewable energy are key policies in this regard,
particularly for those industries where energy is a significant share production costs –
for example in pulp and paper, iron and steel, etc.
Achieving a longer term dividend or economic growth requires the focus of policy to
shift from government current spending to government investment, from focusing on
spending control to investment optimisation and investment performance. The current
situation does not justify a Keynesian spend-up.
For instance with regard to state housing, building more state houses will certainly help
to maintain aggregate demand and, given the surplus capacity that exists in the
construction industry and in some parts of manufacturing, government would not be
bidding up prices against itself. The long term benefits of better state housing are also
notable; a healthier population, better performance at school, less domestic violence
and so on. Arguably though, in the context of the criteria above, a quicker return could
be obtained not so much from more state housing as from better housing of all kinds –
state and private, regardless of tenure. What is a better house? It is drier and warmer
(delivers more social or health benefits) than the typical old New Zealand house, and
one that saves residents money without compromising their comfort. The question
should be in which parts of the housing system can we have the best stimulatory effect
for a given investment?
As is no doubt evident this leads us to the foci of this paper – investment in energy
efficiency and renewable energy. Energy efficiency and renewable energy can be
attractive options for infrastructure investment that complements other fiscal responses
to recession if they meet the short term, cost-effective, and risk mitigating criteria
outlined above. Before pursuing that area though, we briefly return to topic of
infrastructure.
3. Infrastructure
3.1 Scope
The definition of infrastructure seems to widen each time it gets mentioned, but in
economics it usually encompasses transport, energy, water, and telecommunications
systems. Each of these areas, or at least specific subsets of these areas is an a priori
candidate for an effective anti-recession measure.
In a general sense water is probably the weakest candidate as it is not a desperate
nation-wide issue. With telecommunications infrastructure being largely in the hands of
the private sector, it is not immediately clear how government spending (or other
intervention) in this industry could best be effected in the short term. Embedded
privately owned networks are not ideal candidates for short term responses. At best,
government can encourage the acceleration of planned upgrades.
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For energy transmission and distributions systems the prognosis is better – these are
largely owned by central or local government. Economic upgrade opportunities are
largely understood and existing plans for specific capacity upgrades exist. These plans
can be accelerated.
Roading (and possibly rail) and energy infrastructure are both nation-wide issues, have
solid long term paybacks at the margin in terms of economic growth, and are amenable
to relatively quick government action that boosts aggregate demand. Government can
induce changes in the timing, nature, and scale of investment.
Transport and energy are interlinked. The National Energy Efficiency and Conservation
Strategy included a number of initiatives around transport such as improvements to
traffic management and roading networks, and pricing fuels and networks to reflect all
costs and externalities.
The type of transport infrastructure that is desired depends partly on the modal mix,
which in turn depends partly on relative energy prices and energy efficiencies, but also
on demand side attributes. For example, an energy efficient transport system will
include the following:





Substitution from petrol and diesel towards hybrids and biofuels.
Development of low energy intensity modes.
Travel demand management.
Substitution from petrol and diesel towards electric vehicles.
Substitution from private transport to public transport, especially towards non-oil
public transport.
While the requirements for good stimulatory policies highlight short term results, if
given a choice between investment options in alternative modes with similar short term
returns and stimulatory benefits, we should prefer options that develop a long term
infrastructure that will serve the economy better in terms of lower operating costs,
improved service, greater fuel efficiency and so on. For example, insulating houses will
reduce both health and energy costs in the future.
3.2 Measuring Short Term Flow-on Effects
Table 1 shows the economic flow-on effects of three industries that have a major
involvement in infrastructure investment. The effects are presented in the form of
multipliers, an economic term used to emphasise the upstream and downstream
impacts of an original intervention. For example, a $100m dollars of output from the
Construction industry will generate another $174m of gross output. For every person it
employs another 1.76 jobs are created elsewhere. How does this work?
Conceptually a multiplier is a qualitative tool for providing information about the nature
of the impact of an expenditure injection in an economy. The direct impact is enhanced
or "multiplied" to the extent that an increase in production in one industry requires or is
associated with increased production in other industries, and to the extent that
industries supplying consumer goods and services increase their production in
response to increased consumer demand.
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Table 1
Economic Activity Multipliers3
Gross output
Value added
Household income
Employment
Employment-output ratio
(FTE/$m, 2005/06 prices)
VA-output ratio
Fabricated Metal
Products
Type I
Type II
1.91
2.36
2.11
2.74
1.84
2.25
1.83
2.30
Machinery &
Equipment
Type I
Type II
1.78
2.24
1.85
2.45
1.67
2.04
1.77
2.24
Construction
Type I
2.29
2.71
2.65
2.30
5.1
5.2
5.2
0.35
0.38
0.29
Type II
2.74
3.47
3.24
2.76
That is, each dollar spent on the output of one industry leads to output increases in
other industries. For example for The Construction industry needs to order materials
such as timber and cement from suppliers. The supplying industries such as cement
production require inputs themselves – such as energy, pay wages and salaries, and
so on. The effect on these supplying industries is known as the upstream or indirect
production effect and is commonly measured by a number called a Type I multiplier
which is defined as the ratio of the direct plus indirect effects, to the direct effect.
The supplying industries also pay wages and salaries, which are used to purchase
household consumption goods. This effect is generally known as the downstream or
induced consumption effect. Again the effect may be measured by a multiplier. The
total or Type II multiplier is defined as the direct, plus indirect production, plus induced
consumption effects, all divided by the direct effect.
Multipliers are typically calculated for different measures of economic activity such as:
 gross output
 value-added
 household income
 employment
However, multipliers need to be cautiously interpreted and carefully applied. When
applied to gross output they can lead to double counting. For example the value of
timber supplied to Construction is counted as part of the gross output of the Wood
Processing industry and the Construction industry. If one’s aim is to measure overall
business activity this double counting may be useful, but from the perspective of
economic contribution it is value-added, or contribution to gross domestic product
(GDP) which is of interest.
There are also a number of implicit assumptions that need to be borne in mind while
assessing the short-term flow-on effects of an initial investment or programme:
3

The consumption effect from the distribution of profits to households is ignored.

Similarly for consumption financed from social welfare benefits.

Average relationships are assumed to hold at the margin.
Source: Butcher Partners.
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
Prices are assumed fixed. If a factor is in limited supply producers may change
inputs, thereby altering their production structure and hence the associated
economic multipliers.
The last two points are especially important in an economy where labour and capital
utilisation is near 100%. In such a situation expansion of one industry stimulated by
government policy merely pulls resources out of other productive uses, reducing total
economic efficiency and can in fact be inflationary under normal circumstances. This,
however, is not the case when the economy is in recession as there exists both
involuntary unemployment and overall excess production capacity.
Currently of course the New Zealand economy is in recession and is likely to
experience relatively slow growth for the next 2-3 years4 - ceteris paribus.
Nevertheless, we should not ignore one of the criteria for successful intervention
mentioned above; namely that interventions should make good economic sense in the
medium term. This criterion cannot be assessed with multipliers alone. Rather a multiindustry general equilibrium model is required, as outlined below.
3.3 Measuring Long Term Effects
Long term cost and benefits are usually assessed in a standard partial equilibrium costbenefit analysis. This is fine if the benefits and costs are largely confined to the parties
involved, but not if decisions have macroeconomic impacts. For example an
individual’s decision not to purchase home insulation might be considered to be a
strictly private decision, but if the decision is made in the context of energy prices that
do not include a price on carbon, or if the health benefits that accrue from a warmer
house are not fully captured by the individual, the national interest might not coincide
with private interests.
A general equilibrium model incorporates all of the key inter-dependencies in the
economy, such as flows of goods from one industry to another, plus the passing on of
higher input costs in one industry into prices and thence the costs of other industries.
The ESSAM model used by Infometrics has the following key features:





53 industries
Substitution between inputs into production - labour, capital, materials, energy.
Substitution between 4 energy types: coal, oil, gas and electricity.
Substitution between goods and services used by households.
Social accounting matrix (SAM) for complete tracking of financial flows between
households, government, business and the rest of the world.
Further information is given in Infometrics et al (2007).5
The model’ strength is in understanding the effects of changes in allocative efficiency
on the economy. Using the above example, this means that it can answer questions
NZIER’s Consensus Forecasts March 2009 shows expected GDP growth of -0.9%, -0.6%, and
2.7% for the years ended March 2009 to March 2011.
4
5
Infometrics, EcoSense and Martin Jenkins (2007): Sustainable Homes National Value Case,
report prepared for Beacon Pathway Ltd.
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such as: what is the gain to the nation from putting more resources into home
insulation so as to lower the resources required in health care?
4. Energy Efficiency
In this section we examine energy efficiency in the context of its power to stimulate
aggregate demand in the short term, and its ability to provide a longer term economic
payback. Multipliers (as described above) and general equilibrium modelling
respectively constitute the assessment frameworks.
4.1 Energy Efficiency and Recession Mitigation
It is important to have a clear understanding of energy efficiency. The popular
definition that it is ‘energy savings’ does not adequately capture the benefits arising
from interventions. Neither does the aggregate GDP/Energy intensity index, as
structural and activity effects must be assessed and normalised to actually deduce
energy efficiency. Energy efficiency investments improve both service benefits from
energy using technology and reduce the derived demand for energy. The Energy
Efficiency and Conservation Act 2000 recognises this is its definition of energy
efficiency:
“ ... a change to energy use that results in an increase in net benefits per unit of
energy.”
Economic recession does not mean the role of energy efficiency will diminish. Faced
with rising energy prices, energy users look to more sustainable energy sources, not
only to stabilize costs, but also to maintain a dependable supply of energy into the
future. Most consumers will look for advice and assistance to help them reduce their
energy costs. Sales of insulation materials, for example, have the potential to rise
sharply as people try to cut their heating costs and reduce their carbon footprint. The
Economist (31 May 2007) noted that house insulation improvements represent the
lowest cost way, and can be a “negative cost” way, of achieving lower carbon
emissions.
An emphasis on energy efficiency notwithstanding, there is a case for re-aligning the
EECA programme mix to meeting the recession’s immediate challenges. In general,
most EECA programmes are known to have a number of flow-on effects on the
economy. These programmes help create new jobs and income and develop
technology. We address this below.
Investment in energy efficiency is essential for a healthy and vibrant economy, and that
investment will inevitably lead to an increase in demand for skilled workers in energy
industries. It is one of the most important drivers of economic development in a
modern economy. Uninterrupted energy provision services assume an even greater
role in an economy caught up in economic recession. The USA will pursue a vigorous
energy efficiency infrastructural programmes.6
In the past, due to its public good nature, energy-related services were mostly supplied
by the state and the involvement of the private sector was limited. Since the 1990s, the
industry has undergone substantial reforms and liberalisation in many countries,
6
President Obama's Speech to Congress, 4 February 2009.
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including New Zealand. As a result, the private sector’s role in the growth and
development of this industry has increased. Privatisation has led to the emergence of
global players in energy services, which has complicated the way in which the energy
industry can help to pull the economy out of the current recession.
4.2 The Case for Energy Efficiency in the Longer Term
In 2007/08, Infometrics undertook a major general equilibrium analysis for Beacon
Pathway Ltd of various energy saving and water saving initiatives and policies. In the
section below we draw heavily on this research in relation to energy efficiency.7 Table
2 summarises the results.
Table 2
National Cases for Investment in Energy Efficiency
National resource efficiency
ratio
Retrofit ceiling insulation
Heat pumps
Pellet burners
Compact fluorescent lighting
Hot water – heat pump
Hot water – instant gas
1.1
1.5
1.2
∞
0.1
>10
Private IRR over
20 years
8.0%
20.6%
12.1%
∞
6.3%
79.8%
The ‘national resource use efficiency ratio’ measures the gain in real private
consumption in a typical year after the investment has occurred and is delivering
results, divided by the loss in private consumption that occurs (again in a typical year)
from having more of the nation’s capital stock invested in housing. There is no
discounting in this calculation.
The general equilibrium modelling picks up direct costs and benefits as well as indirect
costs and benefits. For example the effects that investment in energy efficiency might
have on industry productivity and international competitiveness are picked up by the
model. However, the modelling does not allow for the following:

The effect of any improvements in the green image of New Zealand in export
markets.

The export of new technologies.

Possible spillover effects of the creation of new skills and expertise.
While these benefits are often claimed they are not easy to substantiate as the counterfactual is difficult to specify. For example if resources are invested in improving the
performance of heat pumps, might fewer resources be allocated to biotechnology? We
leave these issues on the table as their solution is too ambitious for this paper.
Referring back to Table 2, initiatives such as Compact Fluorescent Lighting have a
ratio of infinity as CFL bulbs involve no additional capital cost over an incandescent
light bulb with the same light output, measured over a given number of light-hours.
Effectively this means that CFL presents a “free lunch”. Note, however, that this is not
an argument for taking incandescent bulbs off the market. There are situations where
7
Infometrics et al op cit.
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incandescent bulbs are preferable to CFL bulbs for other reasons, so making the
former unavailable would reduce consumer utility.
With regard to instant gas hot water systems the capital cost premium is low relative to
a traditional electric cylinder system, whereas the benefits in terms of total energy
savings are high, leading to a very high resource efficiency ratio. An analysis by CRA
(2004)8, comes to a less rosy conclusion. The main reasons for this seem to be that
that CRA analysis has a higher incremental appliance cost (perhaps because the
figures are older), assumes that at the margin electricity is generated by renewables,
and has a lower price on carbon. In addition the Infometrics analysis applies only to
households who are already connected to and using gas, assumes that appliances are
replaced only as they wear out, and does not allow for any increase in water use that
might be prompted by instant gas systems. Further, in general equilibrium modelling,
changes in producer surplus, which feature in the CRA analysis, are irrelevant to
national welfare. Overall, a wide-spread shift to direct gas use may be of questionable
national benefit, but this does not preclude many very good opportunities in particular
circumstances.
Heat pump hot water systems produce about the same level of savings to the
consumer as instant gas systems. From the perspective of national resource
efficiency, however, there is only a small gain to the replacement of traditional electric
systems with heat pump hot water systems as they are much more expensive than
standard electric systems. This outweighs their higher performance.
More efficient space heating and retrofit insulation produce net long term benefits,
though all rely on health benefits to deliver most of the gain rather than on reductions in
energy use. To some extent these are mutually exclusive. Obtaining health benefits
from better space heating usually means raising the average home temperatures and
lowering humidity, particularly in older homes in the colder parts of New Zealand. Thus
some ‘take-back’ in energy savings is almost unavoidable. Nevertheless, this does not
undermine the case for retrofit insulation as consumers still benefit. It is just that the
benefit is manifested in healthier people and more comfortable homes. And this is
critical – this work is about increased end user service benefits and flow-on benefits in
the economy, not just the direct energy saving.
Other researchers who have looked at retrofit insulation estimate benefit-cost ratios of
between 1.79 and 4.110, from direct energy cost savings and non-energy co-benefits in
terms of health and welfare improvements.
Having looked at longer term benefits, we now look at the role of energy efficiency in to
recession proofing.
8
Charles River Associates (2004): Increasing the Direct Use of Natural Gas in New Zealand,
report prepared for EECA.
9
Energy efficiency and Conservation Authority (2009): Draft: Home Energy Rating Scheme :
Cost Benefit Analysis (Scenario 6).
Chapman, R., P. Howden-Chapman & D. O’Dea (2005): A cost-benefit evaluation of housing
insulation: results from the New Zealand Housing, Insulation and Health study, Wellington
School of Medicine and Health Sciences, University of Otago.
10
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4.3 Energy Efficiency and Aggregate Demand
What are the employment and income generating effects of investment in energy
efficiency in the long term?
We can probably ignore CFL bulbs as the employment generated by manufacturing
light bulbs is unlikely to differ substantially by type of bulb. Pursuing this argument,
whatever employment is generated by the various measures listed in Table 2, most of it
will come from installation of appliances and insulation rather than from manufacture of
appliances. Most appliances are manufactured overseas, but a number of New
Zealand companies manufacture insulation.
In Infometrics et al (2007) it was estimated that retrofitting ceiling and floor insulation
would cost about $2500 per dwelling. How large an effort could be mounted in a short
time is difficult to say, but assuming 20,000 houses per annum are retrofitted, the value
of investment would be $50m. From the data in Table 1 this would directly generate
about 260 FTE jobs in Construction and related industries. The Type II multiplier raises
the effect to around 630 jobs. The total value added generated would be around $50m.
EECA has already investigated a number of initiatives in a standard cost-benefit
analysis framework. These are summarised below along with our assessment of the
extent of their ability to contribute to good stimulatory policy. To rate as ‘High’
initiatives need to have strong effects on aggregate demand and also a rating of 1.0 or
more in Table 2. As is evident, all initiatives relating to insulation and space heating
score highly.
Table 3
EECA Energy Efficiency Initiatives
Name
Description
Clean Heat
Efficient space heating in homes
Commercial
Buildings
Efficient space heating in
buildings
3.6
Crown Loans
Loans from govt for
infrastructure efficiency
upgrades
Grants targeting high replication
innovative technologies for
specific energy intensive sectors
like tourism and plastics
industry?
Grants to encourage industry to
analyse their own energy saving
opportunities
2.1
Energy Wise Home Grants - for
insulation and clean heat
Incentives to accelerate
scrapping of old inefficient
fridges
Development of voluntary Home
Energy Rating Scheme to
provide robust info to
homeowners /tenants on energy
1.4
EIB –Energy
Intensive
Business
Energy
Audits
EWHG
Fridge
Retirement
HERS
11
B/C
ratio
2.3
3.4
5.7
1.7
2.1
Ranking as good anti-recession
policy
High; work for heater suppliers
and installers.
High; work for skilled auditors
and technicians upgrading plant
–similar to insulation case.
High; work for skilled auditors
and technicians upgrading plant
–similar to insulation case.
Medium; creates jobs for
auditors and technicians
upgrading plant –similar to
insulation case. Grants may not
be best mechanism.
Medium-high; creates jobs for
auditors and technicians
upgrading plant –similar to
insulation case.
High for insulation; employs
building trades .
Medium; some demand for new
fridges.
Medium; stimulates demand for
insulation.
Infometrics
Products
Residential
Subsidies
VFEL
characteristics of house
Mandatory and voluntary
Standards and labelling inform
consumers and improve
appliance and equipment
efficiency
Grants for interest component of
insulation & clean heat for
middle income households
Vehicle Fuel Efficiency Labelling
4.2
Low; aligned standards keep
poor quality products from
undermining NZ industry.
2.0
High for insulation.
82.1
None.
5. Renewable Energy
Renewable energy covers a wide range of energy types, but over the immediate future
the emphasis is firmly on wind and geothermal generation for electricity. The single
biggest current source of terrestrial renewable energy in the world is biomass, but its
role in current energy use is small, albeit growing. In the short term the use of biomass
for direct heat and cogeneration is likely to be greater than for liquid bio-fuels
Solar power and tidal/wave power are not on the immediate horizon, and are certainly
not prime candidates for government stimulatory policy in recession.
5.1 The Case for Renewable Energy in the Longer Term
Over the longer term key points favouring renewable energy and particularly wind
energy include.11







High levels of availability assist actual energy production and thus energy security,
rather than just adding to installed capacity.
Lower average electricity spot prices as always dispatched.
Free input with no competing uses.
No direct CO2 emissions.
Short development time frame.
More distributed generation.
Scalable.
The above points make a strong case for wind generation, and indeed are why many
projects are in the pipeline. This very strength, however, makes wind energy (and
other types of renewable energy) different from the energy efficiency initiatives
discussed above, when viewed from the perspective of government action to stimulate
the economy in the short term – a point to which we return below.
Within the ambit of this project we have not been bale to undertake a thorough general
equilibrium analysis of the long term benefits of more renewables-based electricity
generation compared to a ‘business as usual’ scenario of more combined cycle gas
(CCG) generation or perhaps more coal generation.
11
See New Zealand Wind Energy Association (2009): The Contribution of Wind Energy to
Economic Growth and Security of New Zealand’s Electricity Supply.
12
Infometrics
However, some general equilibrium modelling in connection with another project12
shows that substituting 70 PJ of CCG generation with renewables generation that is
25% more expensive per unit of energy (allowing for more expensive tidal, wave and
solar power etc) over the next 50 years, produces a net gain in real private
consumption of about 0.1%, with emissions falling by around 3%, relative to a baseline
scenario. The assumed price of carbon was US$100/tonne. A lower carbon price
would of course reduce the benefits of renewable energy.
In a forthcoming report Scion, with general equilibrium analysis by Infometrics, looks at
generating ethanol or biodiesel from purposely grown pine forest.13 The report shows
that the long term case for biofuels from pine depends very much on the price of oil and
the price of carbon, which are extremely uncertain. The following table summarises the
results.
Table 4
Change in Private Consumption
from 0.8m ha of Forestry to Ethanol
1
2
3
4
Oil Price
US$/bbl
Carbon Price
US$/tonne
200
100
300
200
100
100
100
150
Change in
Private
Consumption
0.16%
0.09%
0.22%
0.37%
Change in
CO2e
Emissions
-3.9%
-4.2%
-3.6%
-4.1%
The changes in private consumption are slightly higher than that mentioned above for
renewables generation, but of the same order of magnitude. Similarly for the change in
CO2 emissions.
Solar photovoltaic systems are another type of renewable energy. They are expensive;
around $12,000-$15,000 per kW, which is many times the cost of other forms of
renewable electricity generation (see below). This means that solar photovoltaic
systems also do not meet the second criterion for anti-recession policy, albeit that they
may meet the first criterion. This is not to dismiss research in this area as worthless;
that is a different issue.
Many other biofuel technologies are being investigated in New Zealand, including
producing biofuels from algae, whey, tallow, jatropha, canola, and waste oil.
Unfortunately we do not know enough about the economics of these possibilities to
evaluate them against the criteria of good stimulatory policy. None are currently on
EECA’s list.
There may also be strategic benefits to renewable energy such as being less reliant on
imported energy. However, it is beyond the scope of this paper to compare the value
of less exposure to supply disruptions and price volatility against the value of what in
most cases will be more expensive energy. Similarly, for the conjecture that renewable
energy may have the potential to become a key source for innovation, technology
transfer overseas, and growth.
12
Infometrics (2009): Long Term Emission Scenarios for New Zealand, prepared for National
Institute of Water and Atmospheric Research, forthcoming.
13
Scion (2009): Bioenergy Options for New Zealand: Analysis of large scale bioenergy from
forestry, forthcoming.
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Overall then as a long term initiative, investment in renewable electricity generation is
an efficient use of the nation’s resources, albeit that it does not deliver significant long
term macroeconomic gains. Pine-based biofuels present a good case under the right
conditions. We look now at the first criterion for stimulatory policy – the ability to raise
or maintain aggregate demand and utilise idle economic resources in a recession.
5.2 Renewable Energy and Aggregate Demand
Renewable energy provides a number of employment, economic, environmental and
strategic benefits. Many current renewable energy projects in New Zealand are small
scale and capable of producing immediate employment.
Internationally, some studies claim that there are greater employment opportunities
from renewable energy technologies than from fossil fuel supply options,14 but we
cannot assess that here. In any case while this may be true in the short term, it is not
necessarily advantageous to the economy in the long term. Maximising employment is
not a route to economic prosperity. While unemployment indicates an inefficient use of
the economy’s resources, it also inefficient to employ two people when the job can be
done by one person. If maximising employment improved economic welfare, we could
keep people employed by continually destroying our capital assets and rebuilding
them. In the long term we should look to renewable energy that saves labour.
In a similar vein the German Government's energy and climate programme sets
ambitious goals for the further expansion of renewable energy in all uses – electricity,
heat and fuels. Large employment gains are cited. See for example Kratzat et al
(2008).15 Again though, while in a labour market with high unemployment net job
creation may be possible, it will not happen or happen at high economic cost, if policies
such as arbitrary renewable energy targets are not properly evaluated.16
Figure 1 shows the estimated supply curves of various electricity generation sources.
The cost curve shows that, in the medium terms, renewable sources of electricity
generation are cost competitive with fossil fuel-based sources, suggesting a limited role
for government. We revisit this in Section 6.
Appendix A lists a number of wind energy projects in New Zealand that are currently at
various stages of planning and development. This demonstrates that there are many
known viable wind energy projects, construction of which can help to maintain
aggregate demand in the current recession.
For example the Waitahora valley Wind Farm project in Manawatu promises to deliver
a 101 jobs for each of the three years of the construction period. The concomitant
increase in household income is $14m.
14
See for example Pollin, R., H. Garrett-Peltier, J. Heintz, & H. Scharber (2008): Green
Recovery: A Programme to Create Good Jobs and Start Building a Low-Carbon Economy,
Centre for American Progress.
15
Kratzat.M., D. Edler, M. Ottmuller & U. Lehr (2008): Short- and Long-term Impacts of the
Expansion of Renewable Energy on the German Labour Market: Gross Employment 2007 – A
first estimate.
16
Green interventions may be more economically efficient in developing countries with high
unemployment. See for example UNEP/ILO/IOE/ITUC (2008): Green Jobs: Towards Decent
Work in a Sustainable, Low-Carbon World.
14
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Overall, wind generation has strong employment and value-added creation effects. To
reiterate though, our interest is primarily in short term effects. For them to materialise
in this particular short term (namely 2009-2010) though, planned renewable energy
developments need to be accelerated. We look at this in Section 6.
None of the above is intended to imply a preference for wind over geothermal
generation. The Te Mihi geothermal plant will lower electricity production costs by
$60m over 25 years compared with alternative generation. Construction provides 400
jobs and injects $50m into local economy.17
Figure 1:Typical Costs for New Electricity Generation18
Biomass does not feature explicitly in Figure 1, but there are a number of cogeneration
facilities in the forestry processing industry. A list is given in Appendix B, which shows
that they could, in theory, be better utilised. However, increasing the use of
cogeneration plant means that other energy plant would be used less – at least in the
short term. Thus there are no immediate aggregate demand creation effects.
Solar water heating (SWH) is another example of renewable energy. Between 12-25
FTE staff are required per 1000 installations to cover sales, administration and
17
Source: EECA.
18
MED (2007): New Zealand Energy Strategy to 2050, p38.
15
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installation of SWH systems.19 However, while there may be some aggregate demand
effects from this activity, our research for Beacon Pathway Ltd indicated a low benefitcost ratio for solar water heating. Consequently we do not include it in our list of
favoured initiatives for anti-recession policy.
With respect to bio-fuels from pine forest, the Forestry and Logging industry has a
direct labour requirement of 2.5 FTE per $1m of gross output (2005/06 prices).20
Scion’s lowest scenario envisages 0.8 million ha of forestry with an estimated output
value of $2.05 billion (prior to conversion to bio-energy), implying direct employment
creation of over 5000 jobs engaged in land clearance, tree planting and on-going
silviculture. Even if forest intended for biofuels requires less silviculture than regular
forest, the job creation effect is substantial.
Analogous to Table 1, the Forestry industry has a Type II employment multiplier of
4.66, implying total job creation exceeding 23,000 FTE. In practice though, planting 0.8
million ha in one year is implausible and there may be regions where labour is scarce
in spite of higher national unemployment. Planting 30,000 ha per annum is more
plausible, implying job creation of around 900 FTE per annum.
Thus even though the longer term case for pine-based biofuels is mildly positive, the
short term benefits are clear. Given other benefits associated with forestry such as the
prevention of erosion, and the option for at least some of it to be milled for timber and
pulp, planting trees should be a key part of the package of stimulatory policies.
As with energy efficiency, EECA has already investigated a number of initiatives in a
standard cost-benefit analysis framework. Those pertaining to renewable energy are
summarised below along with our assessment of the extent of their ability to contribute
to good stimulatory policy.
Wind, geothermal, and bio-energy (including bio-fuels for transport) rate highly. As
noted previously, solar hot water heating does not meet the criteria, while the case for
distributed generation has not been assessed in general equilibrium context.
Table 5
EECA Renewable Energy Initiatives
Name
Description
Distributed
Generation
Grants stimulate development
of small/med scale local
generation options
Developing markets and
infrastructure for commercial
wood fuels industry
Supporting wind farms &
geothermal industry and
proposals at consent
poor B-C ratio
Policy liaison with Med, MoT
and industry
Wood Energy
Programme
Renewable
Electricity
Solar Hot Water
Transport
Biofuels
B/C
ratio
1.4
?
Likely ranking as good anti
recession policy
Low; market failure unclear.
Medium
1.7
High
1.0
?
None.
Low; for policy liaison. High for
forest establishment
19
McChesney, I. (2005): Solar Water Heating Installation: An Assessment of Current Status and
Future Capacity.
20
Source: Butcher Partners
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Renewable energy is driven primarily by medium to long terms drivers. While
construction of plant has a short term demand creation effect, this too is limited by the
high import content, high capital intensity and requirement for more specialist skills
when compared to energy efficiency initiatives like home retrofit insulation.
6. Policy Design
The preceding sections demonstrate that certain energy efficiency and renewable
energy initiatives satisfy the criteria of good stimulatory policy in an economic
recession. A similar view is taken by Barbier (2009)21 who, along with advocating
retrofit insulation and renewable energy (wind, solar and ‘next generation’ bio-fuels)
also recommends improved mass transit systems for people and freight, and smarter
electrical grids.
How then should EECA design or prioritise its programmes to meet the challenge of
mitigating the impacts of economic recession. How can EECA’s programmes be made
more relevant so that they achieve not only their core objectives (over the medium to
longer term but also create or sustain employment in the short term?
6.1 Criteria
From the general case for stimulatory investment and policy direction presented in
Section 2 we can define a set of criteria for assessing the capability of interventions to
more effectively stimulate demand, and thereby jobs. Recession mitigation potential is
maximised by interventions which:
1. Create quick employment or protect jobs, including the upstream and
downstream flow-on effects. A subset of this criterion includes selecting
programme areas that fit with available labour market characteristics such as
existing skills availability and training options.
2. Quick returns and ready implementation. Whatever type of intervention is
pursued for a stimulatory package, it is particularly important that policies can
be rolled out quickly.
3. Create new economic and socially useful assets and durable goods and
services, or significantly improve existing asset performance.
4. Do not self-offset their direct growth – that is develop new jobs rather than
displace existing jobs.
5. Do not inflate wages or costs, by avoiding infrastructure systems that are
already at capacity.
6. If possible, incentivise further investment, consumption and economic growth.
Many of EECA’s energy efficiency and renewable energy programmes meet these
criteria.
21
Barbier, E. (2009): A Global Green New Deal, report prepared for the Economics and Trade
Branch, Division of Technology, Industry and economics, United Nations Environmental
Programme.
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6.2 Understanding Decision Making
Notwithstanding the contribution that energy and renewable energy can make to antirecession policy, many energy efficiency initiatives (less so for renewable energy)
deliver private benefits. Why is it then that they are often not pursued? Within the
maxim of ‘free choice’ is there a role for government to assist private decision making
in the national interest, and indeed in people’s own direct interests?
For policy intervention to be successful it is important that one has a clear
understanding of the nature of the problem. In this regard it is useful to consider direct
and indirect impacts separately. Direct impacts occur when people’s decisions seem to
be at odds with their own best interests (for example they use expensive and inefficient
heating options, do not insulate their houses adequately, etc). Indirect impacts occur
when the benefits or costs of the actions of individuals accrue to third parties or to
society in general (for example the impact of smoke from open fires).
When dealing with direct impacts, the key policy question is: what is preventing people
from acting in their own best interests? Generally people are not irrational, though they
may not seem to be practical. There may be disincentives or factors obstructing
individuals from acting in what we think is their own best interests? Alternatively, we
might be ignoring other factors that might be influencing their decisions? These could
be less tangible factors such as time, convenience and comfort that could offset the
adoption of more energy efficient appliances. For example, irrespective of cost, the
inconvenience and disruption associated with house alterations will discourage the
installation of retrofit insulation. Likewise there might be some unfavourable sideeffects associated with certain products: the noise of certain appliances such as pellet
burners and heat pumps.
Another major issue is the sunk cost of previous decisions and existing structures.
Although there might be little difference in the price between more or less efficient
appliances, the gains in efficiency are unlikely to be sufficient to encourage the early
replacement of existing functioning appliances.
6.3 Information
One key area where there is potential for genuine market failure is with respect to
information. A cluttered information market can lead to poor choices that generate a
long term cost to the nation. People may also make poor decisions due to a lack of
awareness of the benefits of energy efficiency. The critical issue here, from a policy
perspective, is what is preventing people accessing the relevant information? One
would expect suppliers of genuinely beneficial products to be very willing to advertise
the merits of such products. If information is a barrier, it has to be in cases where it is
not in the interests of parties to provide full disclosure.
An example might be house sales where it is not in the financial interest of the seller to
be forthcoming about shortcomings associated with the house. To some extent the
responsibilities of due diligence do lie with purchasers, but information about insulation
quality, heating costs, etc are not necessarily readily available to purchasers. This is a
situation where some form of information disclosure requirement (eg power bills) would
improve purchase and renting decisions and provide house owners with the right
incentives to invest adequately in maintaining/improving living conditions.
With regard to the business sector the issue is not dissimilar. Is information clear and
sufficient? Can a business be confident that an energy-saving investment will work in
its own particular business circumstances? Credible sources of information from
organisations such as EECA would help.
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Even with full information, some people may yet place a lower priority on energy
efficiency than others. This might reflect preferences or income inadequacy. With
regard to the latter, housing quality is a ‘normal’ good; people will tend to spend more
on housing quality as incomes increase. The policy implication here is that measures
that improve national wealth will typically, but not always have positive benefits on
housing quality. In one sense this implies that housing quality will generally improve
over time as national wealth improves. It also suggests that income support can act as
a partial substitute for policies to improve home energy efficiency.
6.4 Externalities
When individual preferences are at odds with social preferences, policy makers are
interested in the externality imposed on society and what might be influencing the sum
of individual behaviour to be at odds with social preferences. Retrofit insulation is an
interesting example. With a warmer and drier home individuals benefit from feeling
healthier, but the significant gains go to the government via lower health costs and to
businesses that have lower overheads due to fewer days lost due to sickness. This
seems to be a classic case where some policy intervention is warranted.
Renewable energy presents a different intervention case to energy efficiency. While
the government may own generation companies, it does not (usually) decide on what
type of generation capacity is built and when, nor does it actively invest in bio-fuels,
electric vehicles, solar power and so on.
Many types of interventions have been proposed. Examples include mandatory
renewables targets in electricity generation and liquid fuels supply, a ban on new
thermal generation, feed-in tariffs, explicit subsidies for biofuels or solar energy, and
modal share targets in transport. Such interventions have almost always been
proposed without any analysis of the market failure or negative externality that is
ostensibly being addressed, let alone what the optimal form of intervention might be. If
the market failure is GHG emissions, then the onus should be on advocates of the
above to demonstrate why a price on carbon is either inadequate or inefficient. If the
issue is energy security, then the cost of volatile supply should be assessed against the
cost of assisting particular types of energy that would not otherwise be viable.
Nevertheless there is widespread agreement amongst economists that there are two
key initiatives that government should implement to support renewable energy:

Move quickly to put a price on carbon, including on thermal generation and oil
products with no free allocation of emission rights or equivalent assistance. Quickly,
because the recession is with us now, and without free allocation to ensure that
generators are not in a position to cross-subsidise thermal generation. (As it stands
the ETS does not provide free allocation to thermal generators, nor to oil
companies, although the New Zealand Refining Company has a Negotiated
Greenhouse Agreement relating to its own emissions).

Ensure that consent processes are not unreasonably delayed. The latest changes
to the RMA may well contribute to this goal.

Ensure that local councils attach appropriate weight to the benefits of renewable
energy (in particular national benefits) during resource consent proceedings. This
issue is not likely to be directly addressed as part of the RMA reforms, but could be
assisted through central government guidance.
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In the context of those two initiatives, the renewable energy area that has the greatest
potential to boost aggregate demand and curtail rising unemployment is the
development of wind generation and the planting of trees for eventual use for bioenergy, encompassing direct heat, cogeneration and transport bio-fuel applications.
6.4 Type of Intervention (energy efficiency)
Who should intervene and how? Decisions on who intervenes are usually linked to the
nature and level of the externality or spill-over involved. With regard to retrofit
insulation for example, the benefit accrues largely at the national level via a reduction
in the national health bill. This suggests that the intervention should be organised and
funded at the national level, although implementation might be more efficient at the
local level.
A household suffering unemployment or other forms of reduced income would benefit
from adopting low cost energy efficiency and conservation measures to reduce their
energy bills, but it would be difficult to push them to invest large sums of money on,
say, efficient heating systems to stimulate the economy. It may well be appropriate,
however, to subsidise this investment in return for the economic stimulus benefit,
national health outcomes, and environmental benefits.
In general, government has numerous options for intervention through the exercise of
its various policy, regulatory and leadership roles can work to create an environment
conducive to more energy efficient homes and buildings. It can:

Lead and communicate the case for change, and provide information to
inform consumer choices and explain the case for change.

Develop and implement appropriate policy frameworks and associated
regulations to ensure that consumers face the full environmental and other
costs and benefits of their decisions (like a carbon charge).

Effect change through its direct ownership of approximately 80,000
household units, commercial and specialist facilities.

Regulate to mandate the installation or use of particular cost effective
technologies.
In practice, successful policy and its implementation usually requires a mix of the
above, rather than reliance on a single intervention.
We now briefly describe the merits of two of EECA’s programmes with a view to
highlighting energy efficiency potential contributions in meeting economic recession
challenges.
Retrofit Ceiling insulation
Homes built before 1979 do not benefit from the same standards of thermal performance as
those built today. This is because the Building Code, a regulation made under the Building Act
that specifies the performance standards required of building work including for thermal
resistance did not exist prior to 1979 and was recently reviewed and strengthened in 2007.
Given that the majority of the nations housing stock were built prior to 2007 and 1979, there are
significant potential gains from retrofitting ceiling insulation in older homes.
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In understanding the case for public interventions, it is useful to consider why many home
owners do not take it upon themselves to retrofit ceiling insulation in older homes, given the
amenity and economic advantages of doing so. Each of the following is significant, and a
possible reason for further public policy intervention:
 The economic benefits are longer term and are often outweighed by short term imperatives.
 Many home owners may be unaware of the potential benefits and the ease retrofitting
ceiling insulation.
 Around 1/3rd of the population live in rented homes, and landlords may not see any
economic or amenity benefits to themselves in retrofitting ceiling insulation.
Introduction of a carbon charge to cover one of the environmental costs of energy production
would increase the price of energy from non-renewable sources and by so doing create a
stronger economic incentive for homeowners and occupiers to retrofit ceiling insulation in
existing homes.
In doing so, there would also be an important role for government to communicate the necessity
and rationale for the change, and the actions and choices available to home owners (including
the retrofitting of ceiling insulation) that they can make to offset the increased costs of energy.
Government could also consider introducing star rating schemes to convey the efficiency of
homes (a variant of HERS) so as to build awareness about the benefits of ceiling insulation. The
provision of such information might create additional demand for insulated homes, and result in
the value of insulation being factored into house prices and rents.
There are also more targeted interventions that government can consider to reinforce the
necessity for change. If we were to segment the target population into two groups – owner
occupiers and landlords, then the following mix of interventions are worth considering:
Owner occupiers – suspensory loans or subsidies to create a sharper and short term incentive
for home owners to retrofit ceiling insulation – and to enable low and medium income earners to
adjust to increased energy costs; amend Section 112 of the Building Act to require retrofitting of
ceiling insulation at the time renovations are carried out existing buildings to the performance
standard of the current Building Code. This is a practical means of requiring the retrofitting of
existing homes at a time when the costs of doing so are likely to be lowest. A similar approach
is taken to the installation of disabled access and fire safety features in commercial buildings.
Landlords – government owns significant housing stock and so can undertake to retrofit ceiling
insulation in all of the homes that it owns. In doing so, there are a number of benefits for
government – investment value as it raises the value of its housing stock; reduces costs of living
for low income people and this takes pressure off welfare as well as health.
For non-government landlords, tax benefits are already present. Another option that could be
considered is through introduction of minimum baseline standards through amendments to the
Residential Tenancies Act 1986 (RTA).
Space Heating
Although heat pumps and pellet burners offer economic benefits to home owners over the long
term when compared to alternative means of space heating, the up front costs of conversion
may outweigh the longer term benefits for some households. It is also possible that some home
owners are not aware of the benefits of converting to these more efficient forms of space
heating.
Exposing energy companies (and their customers) to the full environmental costs of their energy
production and consumption, through implementation of a carbon charge would result in
increased costs of energy that would provide added incentive for home owners to switch to
more efficient means of space heating.
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In doing so, central government would need to communicate the case for change and provide
information to homeowners on actions they can take to offset the impacts of change (such as
installation of more efficient means of heating). There would also potentially be a role for central
government in providing financial or other assistance for home owners, especially low to
medium income earners to adjust to more efficient means of heating that might involve
additional short term costs.
At more specific levels, central government could:
 Provide suspensory loans or subsidies (possibly on an income targeted basis) specifically
for the purposes of helping meet or mange some of the short term costs of switching to
more efficient forms of space heating;
 Install heat pumps and pellet burners in Housing New Zealand Corporation managed
residential properties;
 Regulate minimum efficiency levels for space heaters.
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Appendix A: New Zealand Wind Energy Projects22
Project
District / Regional Economic Benefit
Construction
Operation
Scale
(MW)
6
Region
Central Wind
(Moawhango)
130
Manawatu
60 to 150 FTE over 2 year
construction period
Mt Cass/Doctors
(Canterbury)
69
Canterbury
$51.6m
149 job-years
Waitahora Valley
(Puketoi)
177
Manawatu
Waverley Wind
Farm
135
Taranaki
$21 million (including $14 million of
household income) over the 3 year
construction period which is
equivalent to ~1.3% of 2005-06
District economic activity
304 job-years (101 jobs over the 3
year construction period)
$105 million
101.25 job-years
Weld Cone wind
farm
1.5
Marlborough
No information in AEE
Mill Creek Project
aka Ohariu Valley
/ Makara Coast Kaiwera Downs
(Gore) wind farm
71
Wellington
No information in AEE
240
Southland
$167.1m
186 FTE/year
Project Hayes
(Lammermoor
wind farm)
Hauauru ma raki
wind Farm (218
turbines)
The Waikato
Wind Farm
Turitea Wind
Farm PN
630
Otago
540
Waikato
360
Manawatu
Lake Mahinerangi
Wind Farm
200
Otago
Te Uku Wind
Farm
Titiokura Saddle
Stage 1 - Te
Pohue
84
Waikato
100-150 FTE
2 FTE (on site)
48
Hawke's Bay
not quantified
2 FTE (on site)
Mt Stuart, Milton
Otago
$4 million
60 to 150 FTE over 2 year
construction period
7 FTE
$27m/year
18 jobyears/year
$3.4 million /
year, including
$1.6 million /
year of
household
income
32 FTE
3-4 FTE/year
No information in
AEE
$10m/year
7-8 FTE/yr (onsite only)
18 FTE
$159 m (including $101m
household income)
399 FTE (or 1,1994 job-years)
$9m/year
88 FTE/year
$150 million and $180 million
(direct)
(the direct and indirect expenditure
is estimated to be $420 million to
$504 million)
250 jobs (including approximately
100 jobs on site)
80 jobs
$70M / year
Indirect economic benefits could
potentially create an additional 140
additional jobs and result in an
additional $122M per annum spent
within the region
$4.3 - $5.5
million / year
(direct and
indirect
expenditures)
up to 8 FTE (onsite)
Source: EECA, from the Applicants’ Assessment of Environment Effects attached to the
Resource Consent Applications.
22
23
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Appendix B: Cogeneration in Forestry Processing23
Pan Pac, Napier – rated at 13 MW but actually generating 5.5 MW on average over last 8
months. This equates to about 48 GWH/year.
CHH, Kawerau – have steam turbine capacity for 27 MW but due to lack of steam have
been generating 13.5 MW. This equates to 118 GWh/year.
CHH, Kinleith – generation capacity is 25MW (it has a total capacity of 28MW or 41 MVA
and 275 GWh/year, however about 11% of this is from natural gas so the actual woodbased electricity is 245 GWh/y ear or 25MW).
Red Stag, Waipa – the steam turbine capacity is about 3.5 MW but they average closer to 3
MW. This equates to about 26 GWh/year.
Blue Mountain, Tapanui – Their steam turbine is rated at 1.6 MW but they average closer to
1.1. MW. The turbine is used only as a means to dump heat and so is operated for about
20% of the time. This equates to a total electricity generation of about 1.9 GWh.
23
Source: EECA
24
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