Drawing on Australia's approach
At an energy sector breakfast on 20 February 2024, Minister for Energy the Honourable Simeon Brown stated:1
“We’re working quickly around having legislation in Parliament this year so that we can set up that regime as quickly as possible, so that we’re able to align what New Zealand’s ambitions are around offshore wind with Australia’s so that we are able to enable that industry to be able to achieve economies of scale.”
While the regulatory framework for offshore renewable energy did not make it into the new Government's 100-day plan, Minister Brown gave clear signals that this policy remains a high priority for his energy portfolio and alignment with the Australian regime will provide international investors with opportunities in both Australia and New Zealand.
In the Ministry of Business, Innovation and Employment's (MBIE) second discussion document on New Zealand's offshore renewables regime, Developing a Regulatory Framework for Offshore Renewable Energy (closed for submissions in November 2023), the consultation considered the extent to which the New Zealand regime should align with the Australian approach (among other options and regimes). Minister Brown's comment provides significant insight into the National-led Government's direction for the scheme – although we are awaiting the Government's more comprehensive views following the consultation process.
The New Zealand Government's approach is favourable for international developers planning or undertaking projects in Australia, as a parallel regime will be familiar, ensure efficiencies in the permitting and approvals processes, and provide the opportunity to harness project scale across the two jurisdictions. Replicating parts of the Australian offshore renewables scheme would also reduce the time and cost for New Zealand lawmakers to design and implement a tested regulatory regime.
Implications for New Zealand projects
Various offshore renewable zones proposed in Australia have been declared ready for investors to apply for feasibility permits, and others are in the consultation stage.2 If New Zealand accelerates an offshore renewables regime in 2024, New Zealand could also soon be ready for feasibility permit applications. In mirroring parts of the Australian scheme, New Zealand will remain well-placed to learn and adapt from Australia's implementation experience.
Key design elements in the Australian regime
MBIE's second discussion document included consultation questions which drew on design elements from the Australian regime – which are likely options for alignment:
- Commercial permit duration: The consultation questioned if the appropriate maximum commercial permit duration should be 40 years (question 7). This proposed option is consistent with the Crown Minerals Act 1991, but also the commercial permit duration of the Australian offshore renewables regime.
- Revenue gathering mechanisms: Questions 10 and 12 of the consultation questioned whether there is an interdependency between the case for revenue support mechanisms and the decisions as to whether to gather revenue from the regime, and whether the regime should include any revenue flow to the Government. While highlighting the various revenue gathering mechanisms of other regimes internationally, Australia was cited as a jurisdiction that does not collect revenue from the offshore projects and operates on a cost recovery model. This is likely to be preferred in the current economic climate, to attract investment to New Zealand.
- Decommissioning: The consultation questioned whether developers should be required to submit a decommissioning plan, cost estimate and provide financial security for the cost estimate (question 28). In its discussion of relevant considerations, the discussion document noted the similarities between the decommissioning regime under New Zealand's Crown Minerals Act 1991 and the offshore renewables regimes in Australia and the United Kingdom. We expect that a similar process will be required for offshore renewable assets in New Zealand, including placing a legal obligation on the permit holder to decommission infrastructure, requiring decommissioning plans and cost estimates at the permit application stage, and requiring permit holders to undergo regular financial capability assessments and provide financial security for their decommissioning plan.
- Safety zones: Question 41 of the consultation considered how safety zones should be structured. The discussion document referenced the Australian approach, where a regulator has the power to establish a safety or protection zone around offshore infrastructure and impose conditions on the activities that can be undertaken in the area.
These will build on the New Zealand Government's in-principle decisions in July 2023, to give the sector greater clarity about how feasibility permits will be allocated to grant developers exclusive rights to test areas for development. Cabinet agreed to progress with policy development that would enable feasibility permits to have a duration of seven years and be subject to use it or lose it provisions. Permits would need to be exercised within 12 months. If a developer is not actively progressing feasibility work and making progress against key milestones, it will risk losing its permit. To support these provisions, feasibility permit holders would be required to report regularly on their progress.
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