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Purpose and key findings

This environmental account presents the estimated asset values of water and other renewable resources in New Zealand that are used to generate electricity. An asset value is the market price of an asset if it was sold. A renewable resource, or renewable, is a resource that after being used, can return to previous stock levels by natural processes of growth.

Water is an important source of energy that contributes to New Zealand’s energy supply and economy. It is the main renewable resource in New Zealand and generates income for hydroelectricity operators.

In New Zealand, the entire electricity and gas supply industry accounted for $6 billion, or 2.5 percent, of gross domestic product (GDP) in 2015. In 2015, 6,710 filled jobs were in the electricity supply industry – 2,350 in electricity generation and transmission, and 4,360 in electricity distribution and on-selling and electricity market operation. Thirty-eight hydro-generation plants in New Zealand had an operating capacity of 10 megawatts or greater. Of these, 19 were in the North Island, seven of which were in the Waikato region. In the South Island, generating plants were concentrated in the Canterbury, Otago, and Southland regions.

New Zealand is making more use of its natural resources for generating electricity. This use is called ‘renewable electricity generation’ or electricity generation that uses water, geothermal (steam), wind, sun, wood, or biogas. This report provides estimates of the asset values of all renewable resources used for electricity generation.

About environmental accounting

Environmental accounting is the measurement of environmental assets in monetary terms. It focuses on the value of an environmental resource and the changes in that value over time. One aim of environmental-asset accounting is to assess whether patterns of economic activity are depleting or degrading our resources.

Information from an environmental-asset account can be used to manage the resource. The valuation of a natural resource, such as water, can be combined with valuations of other physical or financial assets (eg machinery or equity and investment fund shares) to provide estimates of national wealth.

Use and non-use values

Where available, an asset value can be combined with those for alternative uses of a resource to indicate whether the resource is being used efficiently. Figure 1 shows how the total economic value of an environmental asset consists of its use and non-use values. Resource rents (revenue generated from a resource less all costs incurred in its extraction) and asset values measure the direct-use value of environmental assets. Direct-use values are easy to measure because market values are available. Non-use values are harder to measure.

A natural resource may retain an option value for future production, even if its current use value is close to zero (eg coal could have a future value as cost-effective carbon-capture technologies are being developed).

Figure 1

Diagram, Total value of environmental assets.  

Economic benefits compared with environmental impacts

The economic benefits of hydroelectricity can be compared with its environmental impacts to highlight what is being traded off in return. Where available, the asset value of water can be combined with information on river flow to fully understand whether the economic benefits outweigh the effects on the environment. Changes in the value of water may also be affected by climate change. While the economic benefits of using water can be viewed in the national context, environmental and cultural impacts are more evident by region.

Evaluating trade-offs for developing renewable energy resources

Developing renewable energy resources often involves trading off one aspect (or opportunity) for another. For example, hydroelectricity generation does not directly result in carbon dioxide emissions; it is also a means of transitioning towards a low-carbon economy. On the other hand, damming river systems can result in the loss of wildlife habitat and natural character, which compromises ecological function and amenity values (Parliamentary Commissioner for the Environment, 2012).

Similar trade-offs also apply when other renewable energy resources are developed. For example, a common barrier to wind farms is the perception that turbines are incompatible with the amenity and landscape values of the surrounding area (Parliamentary Commissioner for the Environment, 2006). When considering trade-offs, decisions must balance the values from undeveloped rivers and landscapes against the benefits provided by renewable energy. 

Key findings

In the year ended March 2015:

  • The asset value of all renewables used to generate electricity was $13.8 billion.
  • The asset value of water resources used to generate hydroelectricity was $9.8 billion.
  • Returns to electricity operators from the use of all renewables (resource rent) was $829 million.
  • Returns to hydroelectricity operators from the use of water (resource rent) was $586 million. 
  • Hydroelectric generation accounted for 56 percent of New Zealand’s electricity generation (23,728 of 42,362 gigawatt hours).
  • Electricity generated from renewables accounted for 79 percent of total electricity generation.
  • After hydroelectricity, the second-largest source of renewable electricity generation was geothermal, at 17 percent of total net generation (7,091 of 42,362 gigawatt hours). 

From 2007 to 2015 (March years):

  • The proportion of resource rent generated from renewables compared to total resource rent increased steadily from 68 percent in 2007 to 79 percent in 2015. 
  • This increase was mainly due to geothermal, which increased from 3,210 gigawatt hours to 7,091 gigawatt hours (8 percent to 17 percent of net generation) over the period.
  • The resource rent from geothermal increased from $76 million in 2007 to $175 million in 2015 – a growth rate of 11 percent a year.
  • The resource rent from wind was $14 million in 2007, up to $53 million (6.4 percent of resource rent from renewables) in 2015. Previous estimates in the Energy monetary stock account 1987–2001 did not include wind-generated electricity as it was then considered insignificant.
  • Total net generation remained reasonably steady, at an average of 42,487 gigawatt hours a year, increasing only 1 percent over the period.
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