The Offshore Renewable Energy Bill (the "Bill"), introduced to Parliament in December 2024, aims to facilitate the development of offshore renewable energy ("ORE") projects in New Zealand. The Transport and Infrastructure Committee (the "Committee") has now reported on the Bill, recommending that it be passed, with some key amendments. For more detail on the key elements of the Bill, see our article from December 2024. This article focuses on amendments suggested in the Committee's report that will be the focus of developers looking at ORE opportunities in New Zealand. The relevant amendments are summarised below:
No pricing support mechanism
There remains no proposal for a pricing stabilisation support mechanism. While this is provided for in certain other ORE regimes internationally, it was not addressed in the Committee's Report. This approach is consistent with the lack of price support for onshore renewable energy generation in New Zealand and the market-based electricity model.
Managing competing uses in the offshore environment
A key focus of any ORE regime is on the competition between projects for the use of the offshore environment. While the Bill prevents multiple ORE projects from holding permits in overlapping areas, there are no equivalent protections against overlapping activity by non-ORE projects. The Committee identified two options to address this:
- Option one would involve amendments to the Crown Minerals Act 1991, the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 and the Resource Management Act 1991 to prevent marine and mining consents from being issued in areas where an ORE permit already applies.
- Option two would be to amend the ORE Bill to require that non-ORE activities in areas subject to an ORE permit must consider the existing ORE activity. This approach would be an alternative to a blanket prohibition of all other activity and would appear to align with the Australian regime, which allows the potential coexistence of industries.
The Committee considered that Cabinet should be given more time to discuss and address this matter.
Multiple feasibility permits allowed
As introduced, the Bill prevents an applicant from applying for more than one feasibility permit for a given technology in a region. The Committee suggested this restriction be removed and that non-legislative guidance, together with the existing requirement that permit areas be of a "reasonable size", would provide adequate protection from developers applying for multiple permits in adjacent areas to circumvent permit size limits.
Competing applications for permits
The Bill contains a process for the Minister for Energy (the "Minister") to follow where there are competing applications during a feasibility permit application round. The Committee has suggested clarifying the process by explicitly stating that the Minister may:
- invite any applicants to revise their application to "the extent needed to resolve the competition for the same permit area";
- grant one permit over another based on merit and suitability; and
- reject one or more applications.
Public notice of decisions
The Committee has recommended that the Minister be required to give public notice when an application is granted or rejected but does not support the mandatory inclusion of any rationale in the notice, citing commercial sensitivity and administrative burden.
Consultation requirements
Amendments to various consultation requirements were suggested, including:
- that applicants for commercial permits would be required to consult with Transpower and the Electricity Authority before making a permit application; and
- to extend the requirement to consult with Māori groups such that it applies when varying the terms of a permit, if those variations are likely to significantly impact those groups.
Applicant's capability to deliver project
Before granting a commercial permit, the Minister must be satisfied with the applicant's technical and financial ability to install, operate, maintain, and decommission the proposed ORE generation infrastructure. The Committee, envisaging that applicants might not have fully agreed all the relevant commercial arrangements at the time of application, has suggested providing flexibility for the Minister to approve an application if an applicant is:
- highly likely to have the relevant technical and financial capabilities; and
- will be ready within a reasonable time to carry out the proposed development.
Duration of commercial permits
The requirement that the total duration of a commercial permit not extend past 80 years would be removed. Instead:
- each extension to a permit would be limited to a maximum of 40 years, with permits being reassessed before any extension is granted; and
- the Minister would retain the discretion to grant permits for less than 40 years where the relevant infrastructure will have a shorter operational life.
Strengthening of 'use it or lose it' provisions
The Committee recommended strengthening the 'use it or lose it' regime, including:
- a requirement to specify in an application what feasibility activities will be undertaken within 12 months of the permit start date;
- specifying that ORE feasibility activities must commence within 12 months of the start date specified by the feasibility permit; and
- an annual requirement to report to the Ministry's chief executive about ORE feasibility activities conducted that year.
Exclusion for non-commercial ORE infrastructure
The Committee recommended that an exclusion to the definition of ORE be built into the Bill, which would exclude infrastructure with a generating capacity of no more than 30MW and which is either:
- not primarily intended for commercial gain; or
- used for research development, demonstrating energy generation potential, or similar.
The Committee noted that the Bill was not intended to capture small scale energy generation, and that this amendment may be a useful exclusion for energy infrastructure supporting aquaculture activities.
Trailing Liability
Trailing liability for decommissioning obligations under the Bill have been clarified. Specifically, the Committee has suggested clarifying that trailing liability to decommission only applies to infrastructure that was already in place at the time a permit holder ceases to hold that commercial permit. However, the Minister must release a previous permit holder of its decommissioning obligations if the Minister is satisfied that the new permit holder has put in place financial security arrangements that has secured at least 100% of the determined decommissioning cost estimate.
Decommissioning proposals
Several amendments were suggested in relation to decommissioning proposals, these included:
- specifying that a decommissioning proposal must:
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- be based on the total removal of ORE infrastructure (unless total removal is not best practice or not in line any with regulations);
- describe the decommissioning options considered or that are available;
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- specifying that the cost in a proposal must include estimates of the cost to the Crown of the anticipated decommissioning; and
- clarifying that unless otherwise specified in standards or other requirements that are in place, decommissioning involves total removal of the ORE generation infrastructure.
Fast track consents
As expected, the Committee has recommended amendments are made to the Fast Track Approvals Act 2024 to allow consents for ORE to be applied for under fast track.
Conclusion
The Committee's recommended amendments will now proceed to the House to be considered at the Bill's second reading. While many of the proposed changes are positive steps that offer greater clarity, flexibility and certainty for investors and developers, a key unresolved issue remains the treatment of competing offshore commercial activities, specifically whether and how non-ORE projects will be restricted in areas subject to ORE permits.
Clarity on this issue may be central to commercial confidence in the regime. Without a clear framework for managing these interactions, developers may face considerable uncertainty in assessing project risk. Given the Committee's preference for an approach that requires non-ORE activities to have regard to existing ORE permits, rather than excluding them outright, it is possible that this option will be the preferred approach.
While the final position is not yet settled, the direction of the Bill remains encouraging. If passed with the current set of amendments the Bill would establish a credible and workable foundation for developers hoping to advance ORE opportunities in New Zealand.