Five energy policy discussion papers
The Government has today released five eagerly awaited energy discussion papers covering the:
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Gas Transition Plan;
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Interim Hydrogen Roadmap;
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regulations to enable offshore renewable energy development;
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market measures to improve the electricity market; and
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measures to implement the Government's commitment to ban new fossil-fuel baseload electricity generation.
All discussion papers are available here, with submissions due by 2 November 2023. For those looking for more information, open Zoom webinars are also being held on each of the above from Friday 18 August 2023 to 31 August 2023 (see the link for the specific timings). We will share more detailed thoughts on these in due course. Please get in touch if you would like to discuss or would like assistance preparing any submissions.
This release comes off the back of two days of renewable energy announcements on fast-track consenting of solar and wind projects and the NZ$2 billion BlackRock climate infrastructure fund. Our thoughts on these announcements are below.
Solar and wind projects
The Government began its series of renewable energy announcements with Prime Minister Rt Hon Chris Hipkins making a post-Cabinet announcement on renewable energy on Monday 7 August 2023. He spoke about the Government's recent prior decisions on fast-track consenting. It appears clear now that the Government was setting the scene for the further energy policy announcements that we have seen this week.
The Prime Minister highlighted:
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The three wind projects near Manawatu, Waiuku and Southland which have recently been accepted for referral to the fast-track consenting process under the COVID-19 Recovery (Fast-track Consenting) Act 2020 (FTCA) [1] - if consented, these projects would produce 419MW at peak output, cut emissions by around 150 million kg of carbon, and create 840 jobs.
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Since 2021, nine solar projects (with nearly 2 million solar panels able to produce 1147MW at peak output) have been accepted for referral to the fast-track consenting process.
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Fast-track consenting has reduced the turnaround time for consenting projects by an average of 18 months, improving the potential for projects to come online faster (assuming that they meet the environmental tests).
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Fast-track consenting for renewable energy projects will be made permanent in the Natural and Built Environment Bill (NBE Bill) currently before the House. The Bill provides a relatively similar process to that of the FTCA but has restricted the types of activities that can apply for the fast-track process to "eligible activities". Crucially, these eligible activities include wind and solar energy generation activities.
In our view, while permanent fast-track consenting is not a new announcement, its retention in the NBE Bill is positive for renewable solar and wind projects. Faster time to market should typically improve the business case, cost to market, and the chances of a renewable energy project seeing the light of day (or the wind on its face)!
Fast-track consenting is an improvement from the typical consenting process as it provides:
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Limited participation rights for other parties. The Bill does not provide for public or other notification as of right. Further, an expert consenting panel may only invite submissions from relevant persons or groups (for example, relevant local authorities, relevant iwi authorities, and owners or occupiers of land that the project is on or adjacent to).
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Limited appeal rights. Appeals can only be made to the High Court on points of law, and the usual de novo appeal rights to the Environment Court are no longer available. Appeals may only be applied for by certain persons (for example, those who provided a submission on the relevant project).
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Shorter processing timeframes. The overall timeframes for fast-track consenting under the Bill can be shorter than the standard consenting process (which could be subject to full public notification). This is intended to make the consenting process faster. Depending on the processing route, projects could save at least a couple of months over the standard consenting process.
Of note is that the content of a fast-track consent application must be just as good as a usual Resource Management Act consent application (if not better - for example, requiring a comprehensive suite of proposed conditions at the outset).
We are expecting the NBE Bill to pass into law in the coming weeks (ahead of the General Election in mid-October). The National Party have indicated that they will repeal the NBE Bill if they are elected and form the next Government, but we expect that fast-track consenting for renewable energy projects will remain in some shape or form.
There is plenty of opportunity for the benefits to start flowing - the Manawatu, Waiuku and Southland projects mentioned by the Prime Minister have yet to lodge their fast-track consent applications, and of the nine solar projects mentioned as having been accepted for referral to the fast-track consenting process, eight are either awaiting a fast-track consent decision or are yet to have their fast-track consent applications lodged. [2]
BlackRock
It was announced on Tuesday 8 August 2023 that the New Zealand Government has partnered with global investment company BlackRock to create a NZ$2 billion climate infrastructure fund to support New Zealand in reaching its goal of 100% renewable electricity. BlackRock has described it as a significant investment, given that it is the largest single-country, low-carbon transition investment it has ever made.
The Government will not be contributing any funds, but we anticipate potential for:
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the fund seeking to crowd in investment from Crown companies and entities into opportunities;
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BlackRock to manage and administer the fund under a typical 'private sector style' funding structure (in contrast with the Government grant funding which has been deployed on recent carbon transition initiatives, for example, New Zealand Steel's steel mill conversion);
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greater access to capital for climate infrastructure which may not otherwise have access to similar funds (including in wind power, solar power, battery storage, electric vehicle charging, and natural capital projects); and
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after the investment period, greater consideration of domestic divestment strategies.
Details are scant and time will tell how (and how quickly) this will benefit New Zealand, but it can only be good for the renewable energy sector to have another source of funding to consider. Ultimately, BlackRock is accountable to its investors, so we expect the usual investment disciplines (including a return that is commensurate with the investment risk and divestment to the highest value purchaser) will be applied.
Offshore renewable energy
On Monday the Prime Minister touted New Zealand's abundant offshore wind resource, claiming that New Zealand's least windy offshore renewable site has more wind potential than the windiest available offshore renewable site in Australia. With the Government releasing its second consultation on offshore renewable energy today (following its first public consultation in April 2023), the Government continues to push forward the development of offshore renewable regulatory settings.
Notably, the Government has made several in principle decisions to manage the feasibility stage of offshore renewable energy development following its first public consultation, including:
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creation of feasibility permits which provide the holder exclusive rights to apply for a commercial permit to construct and operate offshore renewable energy infrastructure;
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a feasibility permit duration of seven years (subject to "use it or lose it" provisions);
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confirmation of high-level feasibility permit criteria; and
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a high-level process to deal with competing applications (with stronger applicants based on feasibility permit criteria favoured if an overlap cannot be resolved between applicants).
We expect these in principle decisions will be welcomed by the industry and they are in line with our thoughts on the initial consultation (read our previous post here).
The Government has also reaffirmed its previous commitment to fit-for-purpose regulatory settings being in place by 2024.
With plenty of content to digest you can expect our further thoughts on the released discussion papers in upcoming Energy Blog posts.