DOE A/S KARSNER MEETS WITH NEW ZEALAND ENERGY LEADERS

UNCLAS SECTION 01 OF 04 WELLINGTON 000048

SIPDIS

SIPDIS

SENSITIVE

DOE FOR A/S KARSNER
STATE FOR EAP/ANP AND EAS

E.O. 12985: N/A
TAGS: PGOV PREL TRGY KGHG AY NZ
SUBJECT: DOE A/S KARSNER MEETS WITH NEW ZEALAND ENERGY LEADERS

REF: 07 WELLINGTON 695


1. (SBU) Summary: On January 14, US Department of Energy (DOE)
Assistant Secretary Alexander Karsner met in Wellington with key NZ
energy officials and experts in roundtable discussions hosted by the
NZ Ministry of Research, Science and Technology (MoRST). The
productive dialogue covered many energy-related topics, during which
Karsner encouraged continued collaboration between NZ and the US on
energy issues and invited NZ representatives to visit DOE research
facilities in the US. End Summary.

Roundtable Discussion with NZ Energy Officials
-------------- -


2. (SBU) On January 14, DOE A/S Karsner met in Wellington with key
NZ energy officials in a roundtable discussion at the offices of
MoRST. Participants included Dr. Helen Anderson (Chief Executive,
MoRST),David Smol (Deputy Secretary, Energy and Communications,
Ministry of Economic Development),Tony Frost (Senior Advisor,
Technology and Fuels, Ministry of Transport),Eric Pyle (Director of
Environmental and Social Development, MoRST),David Crawford
(General Manager, Land Transport Environment and Safety, Ministry of
Transport),Ken Kirkpatrick (Department of the Prime Minister and
Cabinet),Mike Underhill (Chief Executive, Energy Efficiency and
Conservation Authority),and Martyn Pinckard (Senior Manager,
Household Sustainability Program, Ministry of the Environment).
Also accompanying A/S Karsner were an Embassy political specialist
and Poloff.


3. (SBU) In his opening remarks, Karsner noted how NZ successfully
meshes its environmental and energy policy debates, to include
inter-agency communications and the allocation of resources, toward
meeting the challenges presented in both areas. He commented that
in order to meet the world's environmental challenges, energy must
be part of the solution and not "the culprit." That is a global
effort, according to Karsner, and one country alone cannot supply
all of the answers. In the last three years, continued the A/S, the
US has made enormous strides in the development of renewable energy
by changing focus from research and development to applied science
and commercialization. The US is also incorporating the
technological "push" and the market-demand "pull" to good effect.
Communication and the sharing of knowledge are vital as well, he
stressed, if the development of renewable energy is to move
forward.

New Zealand Energy Strategy Explained
--------------


4. (SBU) Ministry of Economic Development Deputy Secretary Smol
stated that the GNZ has taken a bold approach by announcing its goal
to make NZ a completely "sustainable" nation and that, over time,
the GNZ will sharpen that goal into focused policy outcomes. He
explained that the NZ energy strategy has three tracks:

- Leadership (including the use of "flagship projects" such as
carbon neutral government agencies, waste management/minimization,
sustainable government procurement to grow markets, and energy
efficiency standards);

- Modifying household and business behavior (i.e., modifying
consumer and business purchasing decisions); and

- Working with other partners (energy producers, private industry
and NGOs) to establish "platforms" for the development of
sustainable energy (as one example, to encourage the development of
such energy, the GNZ has announced a 10-year moratorium on the
construction of base-load energy generation that uses fossil
fuels).

This overall strategy is based on two underlying concepts:

- The government's target of carbon neutrality; and

- The implementation of the government's proposed comprehensive
"Emissions Trading Scheme" (ETS). (reftel)

According to Smol, it will be "a tricky balance between global and
local challenges," i.e., to comply with the Kyoto Protocol and meet
NZ's environmental goals "without disrupting the energy distribution
system and prices."


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5. (SBU) Karsner commented that NZ's implementation of ETS will be
a useful measurement tool, but it is insufficient by itself and must
be combined with other mechanisms and options in order to
successfully bring about change. The US, for example, has a broad
range of options at the state and federal levels to address
renewable energy, energy security, emissions control, and climate
change mitigation. The US has 53 "laboratories" (i.e., states and
territories) for energy research and development, all relatively
powerful when compared to the US federal government. He added that
NZ appeared to have more of a regulatory focus than the US, which is
relying more on market forces as the instrument for developing
renewable energy. It is not government regulation, the A/S
maintained, but the marketplace that is the real locomotive for
change.


6. (SBU) Pyle noted that NZ has every conceivable natural resource
to assist in providing a renewable energy supply, including wind,
solar, geothermal and tidal.

Biofuel Is Promising, But It's Role Depends on Economics
-------------- --------------


7. (SBU) Smol stated that the role of biofuel is largely dictated
by economics. Once the regulatory framework is established, the oil
companies must then adjust their practices to deal with the new
operating environment. Moreover, NZ must be careful that the
development of biofuel does not adversely impact the environment and
that "we don't cut down forests to do it." In order to achieve
meaningful progress in this area, NZ must work with the USG.


8. (SBU) Karsner stated that in 2007 the US committed USD 1 billion
toward research and development of waste stream biofuel, and
estimated that 2008 will be the first time in 35 years that the US
will import less petroleum than the previous year. However, he
noted that biofuel will only be successful as an alternative to
fossil fuels when market forces and the profit imperative pull fuel
companies into the business. He also invited NZ officials to visit
the US National Renewable Energy Lab in Colorado to learn more about
what the US is doing in the field of biofuel.

Tidal Current Energy - At Experimental Stage Only
--------------


9. (SBU) Smol noted that tidal current energy has huge potential in
NZ, but the technology cannot match aspirations at present and it is
only in the experimental stage.

Transportation - Promotion of Flex-fuels and Electricity
-------------- --------------


10. (SBU) Crawford stated that NZ has approximately 700 vehicles
per 1,000 persons - a similar ratio to the US. He explained that if
NZ is to become carbon neutral, it must first stop the annual
increase in vehicle emissions, which must begin with the government
fleet. There, the GNZ is focusing on improving fuel efficiency and
the use of flex fuels. Karsner warned that the use of flex fuels in
the US caused "an aberration" by actually reducing fuel efficiency
and requires more study.


11. (SBU) Frost commented that NZ has a goal of being a leader in
the use of electric vehicles - both buses and cars. In that regard,
the Ministry of Transport aims to facilitate the entry of electric
vehicles into the marketplace by creating an environment where
electric vehicles are more attractive to consumers. NZ is also
working with Boeing Aircraft Company to develop biodiesel fuel from
algae.

Energy Storage is the Key to Integrating Renewable Energy
-------------- --------------


12. (SBU) PM Advisor Kirkpatrick asked Karsner if the development
of energy storage sites was a priority for the USG. Karsner
responded that energy storage is the highest priority in all sectors
of US Department of Energy research. "It is the key to integrating
renewable energy into the grid."

Antarctica - Karsner Desires a Switch to Renewable Energy
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13. (SBU) Karsner mentioned his recent visit to Antarctica as a
guest of the US National Science Foundation, and noted that the US

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McMurdo Station, the US Amundson-Scott South Pole Station, and the
NZ Scott Base are all completely dependent on the import of
petroleum fuels for power and heat. He expressed his interest in
helping those facilities switch to renewable fuel sources to cut
costs and to demonstrate US commitment to renewable energy.
Anderson mentioned that NZ's Meridian Energy Company is already
looking into the construction of a wind energy site at NZ's Scott
Station.

Roundtable Discussion with NZ Energy Experts
--------------


14. (SBU) A/S Karsner also participated in roundtable discussions
with NZ energy experts in the MORST office. In attendance were
Karsner, Anderson, Dr. Elspeth McRae (Group Manager, Biomaterials
Research, Scion Corporation),Colin Harvey (Geothermal Business
Development Manager, GNS Science Corporation),Dr. Tom Richardson
(Chief Executive, Scion Corporation),Alan Seay (Corporate Affairs
Director, Meridian Energy Corporation),Dr. Sean Simpson (Chief
Scientific Officer and Founder, Lanzatech Corporation),and Poloff.


15. (SBU) McRae explained that Scion is actively working toward
development of NZ's biomass resources. However, NZ needs a
dedicated energy crop for biofuel production because biomass waste
resources will not be enough to provide for NZ's energy security.


16. (SBU) Harvey explained NZ's current involvement in geothermal
energy production, noting that NZ has a grid capacity of 7,000
megawatts (MW) and, of that capacity, geothermal has the potential
of providing 2,485 MW. At the present time, however, geothermal is
providing only 900 MW. Simpson stated that development of renewable
energy sources is not the only challenge. One large unresolved
issue is how to integrate all sources of energy into the market and
into the grid.

Photovoltaics - Depends on Efficiency, Cost and Integration
-------------- --------------


17. (SBU) Seay noted that the biggest hurdle for Meridian in the
development and use of photovoltaic energy is the efficiency of
solar cells. Karsner replied that, at least in the case of the
developing world, efficiency is not as important as cost. Also, as
with the use of all renewable energy sources, storage is the key to
integrating such energy into the grid. Karsner emphasized that
energy storage is a priority for his office, and the key to
integrating renewable energy into existing systems.

Biofuel - Making Ethanol from Steel Production Flue Gas
-------------- --------------


18. (SBU) Simpson outlined Lanzatech's research program, and noted
that it is developing ethanol production using flue gas from steel
production waste.

Geothermal Energy - Vast but Challenging
--------------


19. (SBU) Anderson commented that there is a greater incentive to
develop NZ's vast geothermal energy potential over all other
options. Karsner asked why NZ's geothermal potential is not being
maximized. Seay explained that the available geothermal resources
are at inconsistent depths and temperatures. In addition, many of
the sites with geothermal potential lie on Maori land (which
presents licensing difficulties) and geothermal is not without
disadvantages (chemical effluent/waste).

Wind Energy - Harder than it Looks
--------------


20. (SBU) According to Seay, NZ has vast wind energy potential.
However, the problems in developing that potential include a
shortage of wind turbines, where the demand currently exceeds supply
(though a manufacturing plant is now being constructed in China);
and transmission hurdles (i.e., the most potential exists on the
south island, while the most demand exists on the north island).


21. (SBU) Seay noted that it is preparing to install 62 wind
turbines near Wellington, and three turbines at NZ's Scott Base in
Antarctica by March 2009 and is exploring the installation of
another 14 turbines. Simpson added that Lanzatech is exploring the
use of wind turbines with expandable blades, which promise to

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increase efficiency by 40 percent.

A/S Karsner Concludes with Call for Dialogue
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21. (SBU) In concluding the discussions, A/S Karsner expressed his
appreciation for the opportunity to confer with NZ officials and
experts on the subject of renewable energy. He urged continuing
dialogue between NZ and the US and renewed his invitation for GNZ
representatives to visit the DOE National Renewable Energy Lab in
Colorado.

MCCORMICK