Earlier in our offshore wind blog series we set out how the current New Zealand landscape and consenting regime applicable to offshore wind operates – see our Energy Blog post here. In this article we outline our take on the potential future for offshore wind in New Zealand and what an ideal legal consenting framework might look like.
There is world class offshore wind resource in New Zealand.1 Offshore wind development has immense potential to assist New Zealand to reach net-zero carbon emissions, help us keep pace with demands for electricity2 and to provide many economic benefits.3
The key to unlocking investment potential in offshore wind is New Zealand's regulatory framework. This includes the existing Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (EEZ Act) and Resource Management Act 1991 (RMA), and whether those pieces of legislation can appropriately facilitate this emerging industry while managing the effects posed by such infrastructure.
Government signals changes to existing regulatory settings to assist offshore wind development
The New Zealand Government has announced the development of a "regulatory framework" for offshore renewable energy.4 This is reflected in the Emissions Reduction Plan.5 However, at this stage, it is not clear whether these settings will be:
- new – providing a standalone comprehensive framework for offshore wind;
- combined – providing a new licensing framework, potentially similar to the Crown Minerals Act 1991 (CMA), that sits alongside the EEZ Act and RMA consenting framework; or
- status quo – where the EEZ Act and RMA consenting framework applies and there is no other licensing framework.
In order to attract investment in this space, the options being explored will need to provide potential investors with some level of certainty of their investment; for example, by providing exclusivity to pursue a proposal in a particular area and, initially, the ability to gather necessary information.
There's no need to reinvent the wheel
In earlier Energy Blog articles, we discussed the licensing frameworks in the UK and Australia. For New Zealand, we expect there to be low political appetite to develop a new standalone framework for offshore wind that does not interact with the EEZ Act and RMA. We therefore consider the combined approach to be an effective option with:
- an offshore wind licensing regime that sits alongside the current EEZ Act and RMA consenting regime, to provide a pathway for exclusive licensing; and
- amendment to the EEZ Act (given most of the offshore development, excluding supporting infrastructure, will be 12 to 200 nautical miles offshore) to facilitate and prioritise offshore renewable energy.
Offshore licensing regime
To provide certainty of investment, the Government could specify and allocate rights to specified areas for offshore wind development (development blocks). The CMA can provide a close example as to how a licensing framework can operate. For example:
- Licensing/permits – the CMA regime for prospecting, exploration and mining permits can be adapted (and potentially simplified) to enable a grant of licence based on the applicant's technical and financial competence. This can include:
- exclusive feasibility licences (to "test the waters") in respect of designated development blocks, which could be issued through a competitive allocation similar to the process under the CMA – licence terms would include duration, area, and timing of development commitments; and
- development licences could follow the outcome of feasibility studies (in a similar way to the issue of mining licences off the back of an exploration licence under the CMA).
- Consultation with iwi and hapū – the CMA contains principles around the Treaty of Waitangi and consultation with iwi and hapū which could form the basis of principles to apply in an offshore wind context and which will be of critical importance to a successful offshore wind licensing regime. That said, with developments since the CMA was drafted, we expect a licensing framework would have more robust Treaty provisions.
- Reporting/information gathering – the CMA regime for reporting to Government with yield data and other relevant information can be applied (with the reporting and data requested adapted for offshore wind requirements and metrics).
- Royalties – if relevant from a policy perspective, payment of royalties to the Government could be addressed in a similar way to the CMA. In our view, royalties should not be a priority for the Government, as opposed to supporting the transition to decarbonisation and general economic development.
- Compliance – the relevant regulatory bodies would have similar powers to monitor compliance with any licence conditions (for example, in relation to de-commissioning of the facilities in due course) and could require financial bonds/guarantees etc to secure such compliance.
An exclusive licence is necessary to ensure bankability of the project, as well as enable the licence holder to secure the necessary environmental consents, meet health and safety requirements, and secure access to any relevant connected land.
Fine-tuning the EEZ Act
The EEZ Act currently applies to offshore wind development from 12 to 200 nautical miles out from New Zealand's coast. However, given offshore wind was not front of mind when the EEZ Act was developed, we suggest some amendments to ensure it is fit for purpose:
- Amendment to the purpose of the EEZ Act to acknowledge renewable energy and climate change commitments – amending the purpose of the EEZ Act would flow through all subordinate legislation and policy statements (as those documents must be in accordance with the purpose of the EEZ Act). This "top down" approach would facilitate the seeding of offshore wind principles throughout the EEZ Act regulatory settings as policy setters and decision makers must have regard to it. This would be the first step in creating a clear pathway for consenting offshore wind developments.
- Changes to activity statuses for certain offshore activities – this could include consideration of limited notification requirements (eg only to people with "existing interests"6 or those who are "materially affected" rather than full notification). This would focus the issues being considered in any application to those raised by parties with relevant interests – reducing costs and time for those involved.
- Potential integration with broader RMA reform – we expect the resource management reform will need to provide greater recognition of renewable energy to allow the country to reach its climate change commitments and goals. The EEZ Act should therefore be updated to be generally consistent with this wider reform.
The EEZ Act is a logical consenting base framework. What we would like to see is a tweak in priorities and smoothing of the process so that there is a clear pathway to consenting offshore wind operations. This would reduce consenting risk, clarify timeframes, and ultimately reduce the time to market (and costs).
So, what's next?
We'll be keeping an eye out for any Government updates on the "regulatory settings", noting the Government intends for settings to be in place by July 2024.7
We consider an approach that mirrors the current CMA regime, with an exclusive licence to "open the door" for developers and provide breathing space to work through a consenting process (with appropriate and balanced offshore wind "enablers" built in) has substantial merit – as always, the detail of the rules and striking the right balance between competing interests, will be critically important.
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