The Government has announced it will create a new feasibility permitting system to spur the development of offshore wind farms, and proposed a number of other changes in a consultation document released on Wednesday.
Globally, offshore wind farms have a collective capacity of more than 64 gigawatts – almost seven times New Zealand’s total installed power capacity.
At least five developers are understood to have an interest in building in New Zealand, including one that is aiming to apply for a consent in Taranaki.
The main barrier to construction so far has been the lack of a regulatory framework for offshore energy. The document released Wednesday includes the details of Cabinet’s in-principle decisions on allowing feasibility assessments to start taking place while also looking to “the development of the full regime”.
The regime is modelled roughly on the existing Crown minerals rules, which govern mining and oil and gas production. The document proposes making it a legal requirement to go through the permitting process in order to build and operate offshore renewable energy infrastructure.
On the feasibility side, permits will last for seven years but developers must show they are actively progressing feasibility work through regular updates or risk losing permission early. The holder of a feasibility permit also gets the exclusive right to apply for a commercial permit to build and operate a wind farm in the covered area.
Applications for permits will be determined based on seven criteria: financial, technical and commercial capability; iwi and hapū involvement prior and during feasibility; indicative electricity system impacts; indicative economic development opportunities; indicative decommissioning capability; health and safety capability; and national interest considerations.
After feasibility work is concluded, developers would have to seek a commercial permit. The process from this stage forward is still uncertain, with the bulk of the document examining options.
These applications would also be graded against criteria similar to those set for feasibility permits. However, rather than “indicative” electricity system impacts, economic opportunities and decommissioning capability, the regulator would at this stage expect to see more fulsome evidence on these topics.
Permits would be able to be granted for up to 40 years – that’s longer than many overseas regimes but takes into account the lengthening lifespans of offshore wind farms, the document said.
The Government is seeking views in a different document, also released Wednesday, as to whether subsidies for offshore energy should be created. These could take the form of contracts for difference – where the Government pays developers a top-up when power prices are low, to ensure schemes are worthwhile investments – or facilitating long-term power purchase agreements, for example.
Alongside this, the document asks whether offshore wind farms should be required to share some of their revenue with the Government (as currently happens with oil and gas operations in the form of royalties) and/or iwi.
The permitting process won’t replace the need to have projects consented under either the existing resource management system or the new one being phased in over the next decade. The document suggests consents would come after the feasibility process but before developers apply for a commercial permit, so the regulator could take the consent (or lack there-of) into account when deciding on commercial applications.
Further questions in the document asked about how the necessary grid infrastructure to support offshore wind farms should be paid for and built.
On decommissioning wind farms, permit applicants would be required to make plans to remove the structures at the end of their lives, to undergo regular financial audits to ensure they can afford to do so and to deposit financial security with the Government. Failure to decommission would be a criminal offence. The Government pointed to the $400 million bill left with taxpayers for decommissioning the Tui oil field as the reason for the stringent rules.
While the document focuses mostly on offshore wind, the full regime would in theory be agnostic as to the type of energy infrastructure. It would cover all offshore renewable energy programmes.
Five other documents were released by the Government on Wednesday, covering changes to electricity markets needed to transition to net zero, banning new fossil fuel baseload generation, the future of fossil gas in New Zealand, a draft hydrogen roadmap and more.
Feedback on all of the documents will go towards assembling a massive New Zealand Energy Strategy, due by the end of next year. That’s also the deadline the Government has committed to for publishing the final offshore energy regulatory framework.