New Zealand is committed to achieving 100 per cent renewable electricity by 2030 and reducing all greenhouse gases (except biogenic methane) to net zero by 2050. In addition to these targets, it is estimated that New Zealand will need increase its electricity supply by close to 70% by 2050 to meet domestic needs.
New Zealand has great impetus to supplement its existing renewable energy resources (these are primarily geothermal and hydropower at present). This has resulted in a strong pipeline of wind and solar power projects, currently in various stages of development throughout the country. In addition, the accelerated transition to a low emissions economy has prompted the exploration and advancement of progressive initiatives including the feasibility of specific Renewable Energy Zones (REZ), green hydrogen projects, offshore wind farm exploration and the proposed investment in ancillary infrastructure, such as the Lake Onslow battery scheme (a largescale pumped hydro proposal). This is coupled with significant regulatory reform intended to promote domestic and foreign investment in renewable energy and decarbonisation initiatives as part of New Zealand’s accelerated energy transition.
Regulatory reform: Creating the framework for transition
Significant changes to New Zealand’s regulatory environment are in motion that will impact the future consenting and land use framework within which low-emission and renewable energy projects are delivered. Key changes include:
- The Government plans to repeal the Resource Management Act (1991) (RMA) and enact new laws to transform the way New Zealand manages its environment. It is anticipated that the existing RMA will be replaced by three separate Acts: the Natural and Built Environments Act (NBA); the Strategic Planning Bill; the Climate Adaptation Bill. The first of these, the NBA, is expected to be enacted in late 2022;
- The Electricity Authority (which controls pricing in the New Zealand energy market) has recently decided to adopt a new “benefit-based” transmission pricing methodology in order to assist with the transition to a low-emissions economy by ensuring the best use of existing and future infrastructure to achieve better pricing for consumers;
- The Government has announced that it is developing a proposed regulatory framework for offshore wind farm development and licensing, with legislation anticipated to be in force by late 2024; and
- Reforming the Overseas Investment Act 2005 (OIA) and Overseas Investment Office (OIO) which govern foreign direct investment in New Zealand. The OIA has been subject to significant reforms in recent years, all of which are relevant to foreign entities seeking to develop or invest in New Zealand’s renewable energy sector.
A world-class regulatory framework is crucial to providing clear and timely processes for consenting new renewable energy projects in New Zealand. Effectively navigating this new framework will be key to the delivery of successful projects.
Challenges: The “dry year” scenario
New Zealand has an abundance of natural wind energy potential with average wind speeds that exceed most other countries. Significant opportunities also exist to increase geothermal and solar energy generation.
Despite superior conditions for low-emission energy generation, alternative generation and/or additional capacity is required to provide for circumstances when demand is high, hydro reservoirs are low (the “dry year” scenario) and the wind is light.
New Zealand is grappling to determine the best approach to ensure that consumers are guaranteed reliable, affordable electricity throughout the transition to low-emission and renewable energy.
The options leading this debate include producing a significant over supply in wind and solar generation coupled with battery storage. This storage may include building large-scale pumped hydro schemes like the proposed Lake Onslow scheme, building biomass power generation plants and using emerging technologies like hydrogen and ammonia production and storage to provide seasonal demand-response and potentially unlock export opportunities. It is likely that a combination of these options will ultimately be required.
Opportunities within the renewable energy sector
The cost of developing wind and solar generation continues to fall. New Zealand has obvious competitive advantages in the production of lower cost renewable energy than many other countries. This unlocks significant opportunities for New Zealand to attract energy-intensive businesses and to export low-emission energy to the rest of the world.
A number of large international data centre developments have recently been announced in Auckland and plans are in place to develop a hyperscale data centre near Invercargill in New Zealand’s lower South Island. In addition, a new under-sea fibre cable will be built, linking Christchurch, Dunedin and Invercargill with Australia, Indonesia, Singapore and Los Angeles.
Developers and investors have shown increased interest in offshore wind farm developments, following trends seen in the UK and Australia. For example, the Government pension fund (the NZ Super Fund) has partnered with Copenhagen Infrastructure Partners (CIP) to explore the feasibility of 1GW offshore wind farm off the coast of Taranaki.
In addition to private investment, the Government has set aside significant dedicated funds to drive the transition to low-emission energy production. These include:
- the Climate Emergency Response Fund which has allocated NZD4.5 billion for climate response initiatives (with NZD2.9 billion allocated over the next 4 years);
- the Government Investment in Decarbonising Industry Fund, which has earmarked NZD650 million of spending over the next 4 years with NZD1 billion in spending allocated over the next 7 years; and
- New Zealand Green Investment Finance Limited, a NZD400 million fund intended to accelerate low emissions investment in New Zealand.
How we can assist
It is an exciting time in New Zealand’s renewable energy sector and the opportunities for development and investment are obvious. Careful management of the changing regulatory environment will be key to assessing the viability of such investment and the successful delivery of projects.
MinterEllisonRuddWatts has been deeply involved with New Zealand’s regulatory reform and is a leading adviser in the country’s renewable energy market. We have a wealth of experience in assisting clients to navigate the country’s unique regulatory environment and offer an ‘end to end’ service to ensure successful project delivery.
Speak with one of our experts.
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