With Parliament now ‘open for business’ we take a look at what to expect in the energy sector in the coming months as Ministers come up to speed and the Government pursues its 100 day action plan and coalition obligations.

Notably, the Government has committed to achieving Net Zero by 2050, including by doubling New Zealand’s renewable electricity. Following COP28, Aotearoa New Zealand has also been added to the official list of countries supporting a pledge to triple renewable energy and double energy efficiency by 2030. Facilitating renewable generation, the role of oil & gas in the energy transition, and increasing our transmission capacity will all be focus areas for the Government.

Below we discuss our top ‘areas to watch’ (and one honourable mention) as New Zealand’s energy policies shift under the current Government.

1. New Ministers and split portfolios

The previous Ministerial portfolio of Energy and Resources (held by Megan Woods) has been split into “Energy” and “Resources”. National MP Hon Simeon Brown has been appointed Minister of Energy, while, New Zealand First MP, Hon Shane Jones has been appointed as the Minister of Resources (ie. mining and petroleum).

The New Zealand First and National coalition agreement includes obligations relating to restarting offshore natural gas exploration, supporting the development of hydrogen in New Zealand and investigating opportunities for New Zealand’s mineral resources. We would expect Hon Shane Jones to approach his Ministerial duties with a view to furthering these objectives with the usual vigour he is known for.

You can read about our full run-down of the new coalition Government and the incoming Ministers here.

2. Renewable energy consenting – the RMA is “back”, with a fast-track bolt-on

Concerns have frequently been raised about consenting timelines and their impact on bringing renewable energy projects to markets. A recent Te Waihanga Infrastructure Commission report found that consent processing times will need to be 50% faster than projected under the Resource Management Act (RMA) if New Zealand is to meet its climate change aspirations.

Consistent with its 100 day plan, the Government has now passed the Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Bill under urgency to repeal the Natural and Built Environment Act 2023 (NBA) and Spatial Planning Act 2023. The fast-track consenting component of the NBA was retained.

Accordingly, the RMA remains the primary legislation for resource management in New Zealand, while keeping a fast-track option available. We also expect this Government to adjust and implement a fast-track process for nationally significant infrastructure, including energy. It also intends to introduce new (updated) national direction for renewable energy. However, once such measures are passed it will still take time for them to be fully implemented and deliver faster consenting timeframes.

3. New and amended national policy direction

National’s Electrify NZ policy indicates that it will require decisions on resource consents for non-hydro renewable generation to be issued in one year, and consents to last for 35 years. That is likely to require legislative change, and the detail of how it will play into appeal rights and court processes (which can be the cause of significant delay) remains to be seen.

Action 4 of the 100 day plan indicates the release of a new National Policy Statement for renewable energy generation (NPS REG). The existing NPS REG 2011, drafted more than 10 years ago, is less directive than other national policy statements in other areas like indigenous biodiversity or freshwater, meaning it provides relatively weak support for REG projects. For an example of the NPS REG’s limitations, see the recently refused consent application for a large solar farm in the Mackenzie Basin (you can read our insight here).

National’s Electrify NZ policy indicates that their new NPS-REG would make solar, wind, geothermal and biomass a controlled activity under the RMA, requiring councils to update their plans so that consents for these generation types become near-automatic. The Ministry of Business, Innovation and Employment (MBIE) also consulted on a revised NPS in April 2023. While that version of the NPS was somewhat more enabling and directive than the existing 2011 version, it was not nearly as permissive as what is proposed in the Electrify NZ document. As such, it may take some time for the new NPS to be developed.

In a similar vein, the Government has announced it is starting work to replace the National Policy Statement for Freshwater Management 2020 (NPS-FM), which is expected to take 18 to 24 months. While the main driver for the replacement appears to be implications and compliance costs for the rural sector, it can be expected that the new version may also include more certain consenting pathways for infrastructure, mining/quarrying, and renewable generation.

4. MBIE work programmes

The previous Government committed to delivering a cohesive New Zealand Energy Strategy by the end of 2024.

Feeding into that work programme, MBIE recently concluded five significant public consultations, with submissions closing on 2 November 2023. The results of those consultations are yet to be published. The discussion documents related to:

• A gas transition plan issues paper;
• An interim hydrogen roadmap;
• Developing a regulatory framework for offshore renewable energy (a second discussion paper);
• Measures for transition to an expanded and highly renewable electricity system; and
• Implementing a ban on fossil-fuel baseload electricity generation.

On the whole, these work programmes will remain highly relevant, and are likely to be progressed in some form under the new government (with the possible exception of the ban on fossil-fuel baseload generation).

The National Party has shown support for offshore renewable energy (in particular offshore wind) in their Electrify NZ policy. With early stage viability activity picking up (in particular in Taranaki), it is critical that this work proceeds at pace to develop a regulatory framework that is user friendly, provides certainty for investment into feasibility activities (and beyond), and which signals New Zealand is ready to be plugged into the offshore wind supply chain.

The National/New Zealand First coalition agreement also commits the government to furthering Hydrogen development and we expect work in this area to continue.

5. Crown Minerals Act

The Government’s plan to repeal the ban on offshore mining exploration licences has been well reported, and this policy was campaigned for by all of the coalition parties. The extent and speed by which new offshore exploration licences are taken up by the industry (with exploration campaigns implemented), and the extent to which social license will follow, remains to be seen.

Under the National/Act coalition agreement, there is an obligation to amend the purpose of the Crown Minerals Act to clarify its role as “promoting” the use of Crown Minerals. This change will be a direct u-turn from the 2023 amendment to the Act which changed the purpose from “promote” to “manage”.

The current purpose of the Act is:

to manage prospecting for, exploration for, and mining of Crown owned minerals for the benefit of New Zealand.

If the 2023 amendment to the Act is reversed, the purpose would say:

to promote prospecting for, exploration for, and mining of Crown owned minerals for the benefit of New Zealand.

Of note, Students for Climate Action brought a judicial review case against the Minister of Energy and Resources in 2021, challenging the grant of an exploration permit on the grounds that the Minister failed to substantively consider the climate change implications when making the decision. Ultimately, this challenge failed (with the decision to grant the permit being upheld as valid). The fact that the purpose of the Act (at the time) was to promote exploration was a significant factor in the judge’s decision.

It is therefore likely that this change back to a “promote” purpose will reduce the scope for interested parties to challenge permitting decisions made by the Minister of Resources, where the challenge is based only on climate change grounds.

The Supreme Court decision on Smith v Fonterra & Ors is also expected imminently. This is the most significant climate change case currently before the New Zealand courts and has the potential to extend our law to address climate change. You can read our commentary on the Court of Appeal judgement here and we will be keeping an eye out for the Supreme Court judgement (watch this space).

6. Transmission infrastructure

National’s Electrify NZ strategy proposes to eliminate the requirement for resource consent to upgrade existing transmission infrastructure. The New Zealand First/National coalition agreement is consistent with this proposition, with the parties agreeing to:

Require the electricity generator to implement regulations ensuring there is sufficient electricity infrastructure to secure the supply and avoid excessive prices;

Investigate the threshold at which local lines companies can invest in generation assets; and

Examine transmission and connection pricing to facilitate cost effective connection of new renewable generation resources, both on-shore and off-shore.

While MBIE also consulted on proposed changes to the NPS and national environmental standards for electricity transmission earlier this year, the proposed changes were not this permissive or far-reaching.

We expect these policies to support existing bodies of work which are ongoing to enhance New Zealand’s energy infrastructure. For example, grid connection and capacity constraints are a well-recognised pinch-point in our electricity system and are key gateways for any renewable energy development. As more generation is built at scale and becomes more complex (eg. offshore wind), this issue only become more important.

7. Overseas Investment Act

While not a direct action coming out of the 100 day plan or the coalition agreements, the Overseas Investment Act can be tiggered by renewable energy developments where there is international investment (in particular for solar energy). Solar developments tend to involve large tracts of land (eg. non-urban land over 5 ha) and/or farmland, and by their nature, require sole or predominant use of the land as a solar farm. Where an overseas investor is involved, complying with the requirements, and then securing the necessary consent at the right time, requires careful consideration and can add significant time (and cost) when bringing the project to market.

While this does not seem to be a current priority of the Government (and New Zealand First is likely to have reservations about moves to facilitate overseas investment), it is an obvious point of friction created by Government policy, which could be reviewed.

Honourable mention: NZ Battery Project / Lake Onslow

The Government has already confirmed that work on the Lake Onslow scheme has been stopped. The project was due to deliver a detailed business case and report on the preferred New Zealand battery option by mid-2024 (which would have also fed into the New Zealand Energy Strategy due for release by the end of 2024). Among other things, this means that developers and industry are now free to ‘strike out’ the Lake Onslow factor from their own business cases for long term infrastructure.

We will be writing further about these issues in the New Year and looking at what is coming up in 2024.