A number of regions in New Zealand are working on developing ‘energy’ strategies.  Some are more tactical than strategic with a narrow of view of what ‘energy’ encompasses and how it interrelates to other issues.  The following are notes prepared prior to an energy workshop which on the face of it was focused on electricity supply and the encouragement of oil and gas development.  That is, a relatively narrow tactical response (focused on technical issues of electricity supply and Oil & Gas exploration using current financial analysis as a guide to future actions), as if the future is going to be some certain, controllable space.  Deep sigh.

1. Key Strategic Questions

The key questions for any strategic analysis are premised on the view that tomorrow will not be like tomorrow, and that doing what we do today may not be an option for tomorrow. To that end, we need to understand where we are, why we are here, what historical and future forces have acted, and may act, upon us, where we want to be, and how do we want to get there?

We also need to establish a framework and set of principles upon which we act. If we believe in a certain, predictable world, then hard engineering, hierarchy and modeled economic ‘efficiencies’ will tend to frame our direction and strategy. If we believe the future is inherently uncertain and uncontrollable, then we will focus more on principles of adaptive capacity building, resilience, decentralisation, diversity and positioning ourselves for a range of scenarios.

If we believe that the concentration and influence of power is a benign force, then we will focus even more on ‘efficiency’ cults and exclusive command & control centralised solutions because marginalisation of people and the environment is not even envisaged.

Figure 1: Where do we Stand when Developing Our Strategy

Any long-term strategy relating to energy ought to be focused on the Accept Uncertainty and Uncontrollability strategy space. The other space is more tactical, and completely inappropriate to an issue that by definition has to cover climate change uncertainties, as well as the uncertainties relating to future fossil fuel availability and price.

2. Key Strategic Issues – PESTLE Analysis & SWOT

Hawke’s Bay Regional Council (HBRC) have provided a comprehensive account of the current and potential future technical situation relating to energy. This is useful, but insufficient.

Strategic Analysis is more inherently qualitative and assumption-laden than quantitative, as are future uncertainties generally. Looking to the future requires thinking beyond the technical, to what could be happening and where we could be positioned (our Strengths, Weaknesses, Opportunities and Threats) with regard to:

• P – Past, current and future Political influences and trends (internationally, nationally & regionally);
• E – Past, current and future Economic influences and trends (i, n & r)
• S – Past, current and future Social influences and trends (i, n & r);
• T – Past, current and future Technological influences and trends (i, n & r);
• L – Past, current and future Legislative/Regulatory/International Protocols & Agreements influences and trends (i, n & r);
• E – Past, current and future Environmental influences and trends (i, n & r).

We need to consider all of these issues in order to address those specific questions raised in the first paragraph: where we are, why we are here, what historical and future forces have acted, and may act, upon us, where we want to be, and how do we want to get there?

It is too comprehensive to cover all of these issues in this short paper, but there are at least two major uncertainties that impact on our strategy – and neither of them is addressed in the technocratic paper presented by HBRC’s oil & gas ‘consultant’. It is also noted that neither of these appears to be a consideration of the HBRC meeting agenda of 20^th May 2015. It was as if this future context wasn’t a factor, and the future would be just like today.

They are the future uncertainties related to:

1. The pattern, timing & degree to which climate change will impact upon our region;
2. The pattern, timing & degree to which oil & gas availability and price will affect our region.

Both of those issues are often used in scenario analyses, including by corporations such as Shell and BP, with their own interests in mind of course.

It is not relevant whether any particular person agrees or not that climate change and oil & gas constraints may occur or to what extent. The point is that we simply cannot know. For the sake of argument, they may, or they may not. The point is to position ourselves as a region whatever the future combination.

3. Scenario Analysis – Setting the Scene

The two issues are arguably the major determinants in framing the discussion and thought around a future energy strategy for Hawke’s Bay. The technical issues, while important, reflect more a tactical approach to the issue of energy.

Using the simplest matrix (2 x 2), the two factors can possibly be summed up below. The interpretation is necessarily subjective, and others may differ as to the issues & options raised within each quadrant. They should be considered as incomplete and open to debate – not that they will or will not occur, but as to what would be the issues and strategy options if they did.

The scenario analysis matrix is presented in Appendix I. The scenarios are colour-coded as green, yellow, orange and red.

The green quadrant is the future where neither climate change nor oil & gas constraints will occur.

The yellow quadrant is where climate change will occur but oil & gas will be constrained in price and availability.

The orange quadrant is where both climate change and oil & gas constraints will occur.

The red quadrant is where climate change is constraining but oil & gas continue to be affordable and available.

The red quadrant is arguably the worst scenario because change will be very necessary, but there are powerful forces that will resist that change, and local, national and international government will have to recognise and front up to those forces.

Some potential issues and policy options are detailed in each quadrant. These options include:

• Promotion,
• Public Engagement,
• Operational Involvement through direct implementation, ownership or contracting services,
• Regulation, and
• Financial and other Economic Incentives.

There is another option, which is simply to leave it to the Market in faith that it will deal with each of the scenarios in turn. I personally think this is nothing short of a suicidal position to take, and there is more than enough evidence to reject that option out of hand.  It was disturbing, therefore, to hear the ‘consultant’ refer to the Net Present Values of current renewable technology as ‘uneconomic’, as if that was the sole determinant of strategy direction.

4. Positioning Ourselves Whatever the Future Scenario

A number of issues are highlighted in the scenario analysis. These are suggested as fundamental necessities for a sustainable energy future. These include:

• The need to shift in focus from non-renewables to renewables, to increase locally-produced energy supplies, and to particularly substitute for oil & gas where they currently dominate (e.g. transport fuels);
• The need to reduce demand and increase energy efficiencies across domestic, industrial, rural and urban landscapes;
• The need to recognise the multiple positive outcomes that will arise from integrated strategies – e.g. improvements in health, social morale, pollution and energy costs alongside the encouragement of economic values and economic options;
• The need to shift from centralised structures to decentralised structures, including methods that promote public engagement and devolution of governance both from national to regional, and from regional to local.
• The need to recognise power, its potential effects on the future wellbeing of our people and land, and the associated need for democratic government to address that concern;
• The need for local ownership of solutions rather than overseas quasi-colonial ownership;
• The need to treat the implementation of any energy strategy not as a separate ‘energy’ silo of management, but to link through internally to transport, land management, asset management, biosecurity, walking & cycling – and externally to other councils, central government and locally-owned Small & Medium Enterprises (SMEs), so that is owned and integral to all.

The figure below is a representation of the options we face as to our general direction. The decentralised/locally-owned/renewable option is the more desirable position, and accords with the scenario analysis of Appendix I.

Figure 2: Where is our Energy Future?

Chris Perley

APPENDIX I

Table 1: Scenario Analysis: Future Climate Change and Oil & Gas Price & Availability