Foreword

TIMES-NZ 3.0 is a collaborative project between the BusinessNZ Energy Council (BEC) and the Energy Efficiency and Conservation Authority (EECA). This iteration marks the third for the project, focusing on a product useful to both business and government spheres. It incorporates two new scenarios, Steady and Shift, which were shaped by energy sector stakeholders to reflect uncertainties such as technology change, climate policy, and the declining role of gas reserves.

Executive summary

The report explores New Zealand’s energy system evolution using the TIMES-NZ 3.0 model, based on the International Energy Agency’s framework. The model incorporates feedback from 40 stakeholders regarding uncertainties in economic structure, technology costs, climate policy, and gas availability. Key insights reveal that total energy demand falls in both scenarios: by 10% in the Steady scenario and 22% in the Shift scenario by 2050. This decline is driven by electrification and increased energy efficiency. In the Shift scenario, a greater share of demand (53%) can cost-effectively electrify, leading to significantly lower fossil fuel requirements.

What is TIMES-NZ?

The model captures production, transformation, distribution, and storage of energy using a bottom-up database. It identifies the least-cost configuration of energy sources and technologies required to meet future demand. It considers upstream components, including fuel import costs, gas supply, and transmission networks, to provide a system-level configuration that minimises total costs across all factors simultaneously. The focus is on finding the lowest cost solution to meet energy demand for any given future.

Scenarios

The research defines two contrasting futures. The Steady scenario assumes a slower pace of change in the economy and energy sector, with a focus on primary production. The Shift scenario reflects stronger drivers of change, including rapid adoption of renewables, advanced manufacturing, and data centres. These scenarios are not intended as forecasts or upper and lower bounds, but as diverging paths to inform infrastructure planning and energy decisions.

Results

Energy demand declines in both scenarios despite growth in service requirements. Emissions outcomes vary significantly; Shift scenario emissions are less than half those of Steady by 2050. Road transport electrification is identified as the single largest driver of these reductions. Annual energy emissions fall by 37.9% in Steady and 70.6% in Shift by 2050. These differences are driven by higher carbon prices and lower technology costs in the Shift scenario.

The total discounted cost of meeting energy demand from 2023 to 2050 is approximately $1.3 trillion. The Shift scenario’s costs are roughly $42.7 billion lower than Steady, attributed to lower clean technology costs and greater efficiency. In terms of electricity, renewables are expected to reach a 93% share in Steady and 98% in Shift by 2050. However, fossil-fuel generation remains the most effective marginal solution for peak support and grid firming, even with higher carbon prices.

Regarding natural gas, domestic supply is projected to fall sharply. The Steady scenario includes an LNG import terminal functional from 2027, with LNG becoming cost-effective after 2032 at a marginal cost of $25/GJ. In the Shift scenario, diesel and biogas provide the necessary firming functions. The model indicates that industrial heat applications, such as meat and dairy processing, can be cost-effectively electrified or converted to biomass. In Shift, up to 50 PJ of biomass and nearly 40 PJ of biogas could be used annually by 2050.

Demand flexibility and batteries: sensitivity tests

Sensitivity testing highlights that demand flexibility and battery technologies provide between $5.4 billion and $20.8 billion in value to the energy system. These technologies are particularly vital in the Shift scenario due to higher electrification rates. Without these options, electrification beyond a certain point becomes economically unviable. The modelling shows that distributed batteries eventually become the preferred investment over grid-scale variants to support growing peak demand without incurring extra transmission costs.

Appendix 1: underlying data and assumptions

The model was rebuilt using updated energy supply and demand data from sources including the Ministry of Transport, MBIE, Transpower, and Scion. These datasets cover base year demand, regional shares, technology costs, and biomass supply projections. The scenarios were constructed after discussions with around 40 stakeholders, including government agencies and energy companies.

Appendix 2: scenario parameters

Economic structure assumptions for the industrial sector vary by scenario. For example, dairy herd growth is assumed to reach 5.92 million in Steady but fall to 3.7 million in Shift by 2050. Major gas users, such as Methanex and the Ballance urea plant, are assumed to exit the market by 2027 and 2033 respectively due to gas field closures and rising costs. Carbon prices are projected to reach $52/tonne in Steady and $260/tonne in Shift by 2050. Travel mode shifting in Shift assumes passenger vehicle kilometres decrease by 1% annually.