New Zealand benefits from a power mix with a relatively high share of renewables of 82% in 2019. The country has set the target of 90% renewable electricity generation by 202515 and 100% renewable electricity by 2035.12 A Paris Agreement compatible pathway requires New Zealand to be near 100% renewable power by 2030 and phasing out coal in the current decade and natural gas by 2031 to 2034 latest.
New Zealand would need to diversify its renewable energy mix in the power sector amid concerns about relying on hydro power as hydro generation declines during El Niño events. Coal and gas were used to meet the recent shortfalls of hydro generation in 2019 and 2021.10 Geothermal, wind, solar and storage technologies along with energy efficiency measures should be scaled up to meet hydro power shortfalls and replace fossil fuels. Current plans focus on wind, geothermal and gas-fired peaking plants.8 New Zealand is also investigating a pumped hydro storage project to manage dry years when lake levels are low, to replace the current backup for energy production largely coming from coal power plants.23
Towards a fully decarbonised power sector
To align with a 1.5°C compatible pathway, New Zealand would need to reduce its power emissions intensity by 94% from 2019 levels by 2030 reaching 10 gCO₂/kWh by 2030 and 0 or below by 2040.
While negative emissions technologies such as BECCS require upfront investments, a later phase out of fossil fuel will result in a higher reliance on negative emissions technology.
Several scenarios show the phase out of unabated fossil fuels, displaced by renewable energy without the need for BECCS or fossil fuels with CCS. Considering New Zealand’s current high levels of renewable energy in the power sector, renewables with storage offers a more likely alternative path to decarbonise the power sector.
20 Ministry of Business Innovation & Employment. Unlocking our energy productivity and renewable potential : New Zealand energy efficiency and conservation strategy 2017-2022. (2017).
30 Including the residual methane emissions left from the separate methane target for 2050.
31 According to national projections, LULUCF emissions could reach -26 to -31 MtCO₂e by 2040. See the Government 2020 for LULUCF projection estimates.30
32 While global cost-effective pathways assessed by the IPCC Special Report 1.5°C provide useful guidance for an upper-limit of emissions trajectories for developed countries, they underestimate the feasible space for such countries to reach net zero earlier. The current generation of models tend to depend strongly on land-use sinks outside of currently developed countries and include fossil fuel use well beyond the time at which these could be phased out, compared to what is understood from bottom-up approaches. The scientific teams which provide these global pathways constantly improve the technologies represented in their models – and novel CDR technologies are now being included in new studies focused on deep mitigation scenarios meeting the Paris Agreement. A wide assessment database of these new scenarios is not yet available; thus, we rely on available scenarios which focus particularly on BECCS as a net-negative emission technology. Accordingly, we do not yet consider land-sector emissions (LULUCF) and other CDR approaches which developed countries will need to implement in order to counterbalance their remaining emissions and reach net zero GHG are not considered here due to data availability.
36 According to national projections, LULUCF emissions could reach -36 to -41 MtCO₂e by 2040. See the Climate Action Tracker assessment on New Zealand (July 2020 update) for assumptions on LULUCF projections.
New Zealandʼs power sector emissions and carbon intensity
MtCO₂/yr
Unit
−4−2024681019902010203020502070
Historical emissions
High energy demand - Low CDR reliance
SSP1 Low CDR reliance
SSP1 High CDR reliance
100%RE
Low energy demand
1.5°C compatible power sector benchmarks
Carbon intensity, renewable generation share, and fossil fuel generation share from illustrative 1.5°C pathways for New Zealand
Indicator
2019
2030
2040
2050
Decarbonised power sector by
Carbon intensity of power
gCO₂/kWh
120
10
−30 to 0
−20 to 0
2032 to 2033
Relative to reference year in %
−94%
−125 to −100%
−118 to −103%
Indicator
2019
2030
2040
2050
Year of phase-out
Share of unabated coal
Percent
5
0
0
0
2025
Share of unabated gas
Percent
13
1 to 2
0
0
2031 to 2034
Share of renewable energy
Percent
82
98 to 99
100
100
Share of unabated fossil fuel
Percent
18
1 to 2
0
0
Investments
Demand shifting towards the power sector
The 1.5°C compatible pathways analysed here tend to show a strong increase in power generation and installed capacities across time. This is because end-use sectors (such as transport, buildings or industry) are increasingly electrified under 1.5°C compatible pathways, shifting energy demand to the power sector. Globally, the “high energy demand” pathway entails a particularly high degree of renewable energy-based electrification across the various sectors, and sees a considerable increase in renewable energy capacities over time. See the power section for capacities deployment under the various models.
New Zealandʼs renewable electricity investments
Billion USD / yr
20302040205020602
Yearly investment requirements in renewable energy
Across the set of 1.5°C pathways that we have analysed, annual investments in renewable energy excluding BECCS increase in New Zealand to be on the order of USD 0.5 to 2.4 billion by 2030 and 0.8 to 3 billion by 2040 depending on the scenario considered. The ‘high energy demand, low CDR reliance’ pathway shows a particularly high increase in renewable capacity investments, which could be driven by an increase of electrification of end-use sectors and growing energy demand. Other modelled pathways have relatively lower investments in renewables and rely to varying degrees on other technologies and measures such as energy efficiency and negative emissions technologies, of which the latter can require high up-front investments.