The Renewable Energy Law Review: New Zealand

Introduction

New Zealand's energy policy framework had been relatively stable for 25 years up until 2018.2 However, in recent years, there has been substantial policy development and financial investment in the renewable energy sector following New Zealand's international commitments at the Paris Climate Accord in 2015 (the Paris Agreement).

The key drivers of policy reform in New Zealand are the government's commitments to 100 per cent renewable electricity by 20303 and to reduce all greenhouse gases (except biogenic methane) to net zero by 2050.4 Those targets form part of New Zealand's broader energy transition.

New Zealand has long benefited from a high percentage of renewable electricity generated from hydropower, geothermal resources and, increasingly, from wind and solar. In 2021, 82 per cent of electricity generation came from renewable sources.5 However, 60 per cent of broader energy use still comes from fossil fuels6 and there is increasing focus on transitioning fossil fuel-intensive industries to renewable energy.

The year in review

The past year has seen significant activity in renewable energy policy and development. Ahead of the United Nations Climate Change Conference held in Glasgow in November 2021 (COP26), the government revised its nationally determined contribution (NDC) under the Paris Agreement to reduce emissions by 50 per cent of gross 2005 levels by 2030, an improvement on its previous pledge to reduce emissions by 30 per cent of 2005 levels.7 The government has indicated that it will meet the revised NDC through domestic emissions reductions under the government's emissions budget and by working with developing countries in the Asia-Pacific region to reduce their emissions.8 During COP26, the government also joined two international pledges to phase out coal burning for electricity in the next 10 to 20 years.9 These international commitments follow an April 2021 announcement to ban new low- and medium-temperature coal-fired boilers and phase out existing ones by 2037.10

The three-year NZ$70 million Government Investment in Decarbonising Industry Fund11 – known as the GIDI Fund – announced the first round of successful recipients in April 2021, which saw NZ$22.8 million allocated across 14 projects by businesses that are decarbonising their industrial process heat.12 The second round of funding, announced in September 2021, saw a further NZ$28.7 million allocated across 23 projects.13

In February 2021, the government announced that the Resource Management Act 1991 (RMA) will be repealed and replaced with three new pieces of legislation.14 In June 2021, the government released an exposure draft of the Natural and Built Environments Bill (the NBA Bill), the main land use and environmental legislation replacing the RMA, for public comment. The full NBA Bill is expected to be introduced to Parliament in 2022 alongside the Strategic Planning Bill and is to be followed by the Climate Adaptation Bill in due course.15

In April 2022, the Electricity Authority (EA) issued its final decision to adopt a new transmission pricing methodology (TPM) and is now consulting on the regulatory amendments required to implement the new TPM, with the new prices applicable from 1 April 2023.16 The new TPM is centred on a benefit-based charge, so electricity users pay for transmission services according to the benefit they receive. The new TPM is expected to facilitate New Zealand's transition to a low-emissions economy by providing pricing that more accurately reflects the costs of using the transmission grid and, consequently, send better price signals to grid users.17

In May 2022, the Electricity Industry Participation Code 2010 (the Code) was amended to enable battery energy storage systems (BESS) to offer instantaneous reserve.18 Prior to the amendment, batteries could only participate in the dispatch market.

Throughout February and March 2022, the High Court heard the judicial review case brought by Lawyers for Climate Action New Zealand Incorporated (LCANZI) against the Climate Change Commission (CCC) on its advice to the government on the first three emissions budgets and the Minister for Climate Change on the government's revised NDC.19 LCANZI claimed that both the emissions budget and the NDC are inconsistent with holding global warming to 1.5°C of pre-industrial levels, and that they violate the Climate Change Response Act 2002 and New Zealand's commitments under the Paris Agreement.20 A judgment on this case has not been given as at June 2022.

The first stage of Mercury NZ's 222MW Turitea Wind Farm was commissioned in the last quarter of 2021 and construction of the second stage is scheduled for completion in mid-2023.21 Construction on Meridian Energy's 176MW Harapaki Wind Farm commenced in June 2021, with commissioning expected in mid-2024.22 There is also increasing interest in offshore wind farm developments. NZ Super Fund (the government-owned pension fund) is partnering with Copenhagen Infrastructure Partners to undertake feasibility studies for a potential 1GW offshore wind farm in the South Taranaki Bight and the joint venture has submitted a pre-activity notice to the Environmental Protection Agency to deploy a FLiDAR (i.e., a floating light detection and ranging device) later this year.23 The government has also indicated that it would commence work on developing a regulatory framework for offshore renewable energy in the second half of 2022.24

Construction on Contact Energy's Tauhara geothermal development near Taupō commenced in March 2021 and, in February 2022, Contact Energy announced that it would increase the project's capacity from 152MW to 168MW, delaying completion until the second half of 2023.

New Zealand's total solar capacity increased by 29 per cent in 2021, with most of the increase coming from rooftop solar power.25 However, there were a few notable commercial solar projects commissioned in 2021, including Todd Energy's 2.1MW Kapuni solar project in South Taranaki and Kea Energy's 1.85MW Wairau solar project in Marlborough.26 The past year has also seen unprecedented levels of interest in commercial solar developments. Construction on Lodestone Energy's 39MW solar farm in Kaitaia and Far North Solar Farm's 16MW Pukenui Solar Farm have commenced, with completion expected by the end of 2022. Construction on Infratec's 4.37MW Naumai Solar Farm (purchased from Lightyears Solar in May 2022) and 4.9MW Komata Solar Farm is also expected to begin this year.27 Ranui Generation's 24MW Twin Rivers Solar farm in Kaitaia and Channel Infrastructure's 26.7MW solar farm at Marsden Point have received resource consent, and several more projects have been announced to the market, including from:

  1. Nova Energy;
  2. Solar Bay;
  3. Lodestone Energy;
  4. Helios Energy;
  5. HES Aotearoa;
  6. Harmony Energy;
  7. Manawa Energy;
  8. the Eastland Group and Infratec joint venture;
  9. the Contact Energy and Lightsource bp joint venture;
  10. the Genesis and FRV Australia joint venture;
  11. the Hawke's Bay Airport and Manawa Energy partnership;
  12. the Solar Bay and Christchurch Airport partnership; and
  13. the Far North Solar Farm and Aquila Capital partnership.

In December 2021, Halcyon Power (a joint venture between Tūaropaki Trust and Obayashi Corporation) commissioned its 1.5MW hydrogen electrolyser plant, which uses geothermal-generated electricity to produce hydrogen.28 Resource consent for the Hiringa Energy and Ballance Agri-Nutrients green hydrogen joint venture project was granted in December 2021 but is currently subject to appeal. If the project proceeds, it will see the construction of a 24MW wind farm to generate electricity for the production of green hydrogen.29 New Zealand's first nationwide hydrogen refuelling station network achieved financial close in September 2021 and construction on the first station commenced in May 2022.30 Contact Energy and Meridian Energy are also jointly carrying out feasibility studies and seeking registrations of interest from potential partners to develop a 600MW green hydrogen facility in Southland.31

Wholesale electricity prices remained high throughout 2021 and into 2022, largely driven by rising coal and carbon prices, tight gas supply and low hydroelectric lake levels.32 In January 2022, electricity spot prices regularly exceeded NZ$200 per MWh and reached NZ$362 per MWh on 1 February 2022. While prices have since eased, the average price is still high at approximately NZ$200 per MWh – more than double the historical average for this time of year.33

With approximately 80 per cent of electricity supply coming from renewable sources, security of supply is a key risk. This was highlighted by the widespread blackouts throughout New Zealand on 9 August 2021, when record levels of demand were met with an unexpected loss of generation from wind and hydro sources.34 The variability of water inflows continues to be a key risk for New Zealand's electricity market, given that hydro generation contributes 55 to 60 per cent of the electricity supply.35 This risk is likely to increase, with electricity demand projected to increase by approximately 55 per cent by 2050.36 The government has allocated NZ$30 million to the NZ Battery Project, which will evaluate the viability of pumped hydro schemes of various sizes at Lake Onslow and other potential energy storage projects to address New Zealand's dry-year problem.37 However, industry participants have raised concerns that building pumped hydro at Lake Onslow would be an inefficient use of funds when there are more affordable low-carbon dry-year solutions,38 expressing a preference for market-driven solutions.39 In the private sector, WEL Networks and Infratec have partnered to build a 35MW BESS in Huntly, with construction expected to start in July 2022 and the BESS commissioned in December 2022.40

In July 2020, Rio Tinto announced that it would close the Tiwai Point aluminium smelter,41 but will continue to operate the smelter until at least December 2024.42 However, in February 2022, Rio Tinto announced that it wanted to continue operating the smelter beyond 2024. The smelter is directly connected to the Manapōuri hydropower station and is New Zealand's single largest electricity consumer, consuming about 12 per cent of total electricity demand.43 The recent announcement brings greater certainty to the market and alleviates concerns relating to excess supply after the smelter's closure.

Supply chain delays and cost escalations as a result of the covid-19 pandemic continue to be key challenges faced by renewable energy project developers, and have been cited as key challenges in the development of Mt Cass Wind Farm and Tauhara Geothermal Power Station.

The policy and regulatory framework

i The policy background

There has been a notable shift in policy from developing all New Zealand's diverse energy resources (including oil, gas and coal) to an emphasis on accelerating investment in renewable energy generation, including the electrification of transport and process heat to help reduce New Zealand's energy-related emissions. The end of 2021 saw the end of the government's national energy strategy for 2011–2021, with a draft of the new national energy strategy (which will set the policy direction and priorities for the energy sector) expected in the second half of 2022.44 On 9 May 2022, the government announced its first three emissions budgets, which are broadly aligned with the CCC's advice to the government given in May 2021. The government has set out how it will achieve the first of the three budgets in its Emissions Reduction Plan (ERP), released on 16 May 2022.45

The primary driver of investment in renewable energy projects in New Zealand remains the Emissions Trading Scheme (ETS). The ETS incentivises investment in renewable energy ahead of fossil fuels by requiring carbon emitters to obtain and surrender emissions units to match the emissions from their operating activities. There is an overall cap on available units under the ETS and emitters can obtain units through the government's industrial allocation, sequestration or quarterly auctions, or on the secondary market.46

Each auction will offer 4.75 million units47 with a price floor of NZ$30 and a cost containment reserve of NZ$70.48 If the clearing price during an auction exceeds the cost containment reserve, the government can release more units to reduce the price. In its advice to the government in 2021, the CCC made several recommendations to strengthen the ETS, including increasing the price floor each year by 5 per cent plus inflation and the cost containment reserve by 10 per cent plus inflation.49 In August 2021, the Ministry for the Environment increased the cost containment price from NZ$50 to NZ$70 and has signalled a rising five-year price path to NZ$110.15 by 2026. Spot prices for units have been consistently high since the announcement, reaching a peak of NZ$86 per unit in February 2022, but recently trading at around NZ$75 per unit.

The renewable energy sector in New Zealand is not otherwise subject to any sector-specific support or fiscal mechanisms (including feed-in tariffs or renewable portfolio standards). While the government continues to champion the ETS as a primary component of New Zealand's strategy to drive the renewable energy sector, the industry and the government have recognised that it cannot be the only driver.

ii The regulatory and consenting framework

The Ministry for Business, Innovation and Employment acts as the regulatory steward of New Zealand's energy regulatory system and is responsible for developing regulatory policy in the energy sector. The EA oversees the efficient operation of the electricity industry, undertakes market facilitation measures, and monitors and enforces compliance with electricity market rules. The EA is also responsible for the Code.

New Zealand's Commerce Commission promotes competition in New Zealand markets and is responsible for the economic regulation of natural monopolies, including Transpower and other electricity lines services under the Commerce Act 1986.

The Overseas Investment Office (OIO) regulates overseas investment in New Zealand under the Overseas Investment Act 2005 (OIA) and will be relevant to renewable energy project developments with more than 25 per cent ownership or control by overseas persons.

New Zealand's renewable energy environment is governed by a series of regulations designed to ensure security of supply, encourage renewable generation and keep renewable energy assets safe. The central regulatory tools governing the operation of New Zealand's renewable energy system are the Code, the RMA and the ETS.

The Code governs the operations of electricity market participants. Each person who buys or sells electricity on the wholesale spot market, or who sells electricity to end users in the retail market, must register with the EA as a market participant and comply with the Code.

New Zealand's electricity system consists of the following key participants:

  1. Transpower owns and operates New Zealand's national grid. Transpower acts as system operator and has the role of coordinating the real-time transmission of electricity as a contracted service provider to the EA.
  2. Contact Energy, Genesis Energy, Mercury NZ and Meridian Energy (together, the large gentailers) collectively own and operate 153 power stations.50 There are 40 other companies that own and operate approximately 90 other power stations, which are mostly distributed generation.
  3. There are 29 local electricity distribution businesses (EDBs) that transport electricity from the national grid or from distributed generation to end users. Significant restrictions prevent EDBs from also engaging in retailing or generation of more than 250MW of electricity directly connected to the national grid (among other restrictions).51
  4. About 30 electricity retailers sell electricity to end users. However, about 90 per cent of end users buy their electricity from the four large gentailers.

Generators and retailers must participate in the spot market for wholesale supply and purchase of electricity, which is administered by the EA and hosted on the ASX.

The RMA plays a central role in regulating the development of renewable energy generation in New Zealand. The RMA aims to ensure that natural and physical resources – such as soil, air, water and buildings – are managed sustainably. The effects that certain activities may have on resources are managed through a hierarchy of planning documents developed under the RMA. Those documents contain policies, standards and rules that prescribe whether an activity is permitted, requires resource consent or, in rare cases, is prohibited.

Renewable energy projects require resource consents from consenting authorities (which are predominantly regional and district councils) to undertake activities that are not otherwise permitted under those rules or standards. The RMA regulates the process for obtaining a resource consent.

In making resource consent decisions, consenting authorities must consider the environmental impacts of allowing the activity, any mitigating or offsetting proposals and the relevant provisions of statutory planning documents, including national and regional policy statements as well as regional and district plans.

The RMA places obligations on local and regional councils to consider climate change matters when preparing or changing their planning documents and when considering consent applications. There are a number of common hurdles to obtaining resource consents for renewable energy projects in New Zealand. The inherent sensitivity of the sites proposed for renewable energy project developments – such as wind farms or hydro generation – together with the public participatory regime of the RMA mean that projects often attract significant opposition, which can result in protracted hearing and appeal processes. For example, in respect of wind farm developments, objections have focused on factors such as landscape effects, visual impacts, blade reflections, turbine noise and ecology.

The RMA also requires consideration of Māori values and interests when determining applications for resource consents. Decision makers are required, when exercising functions and powers under the RMA, to:

  1. recognise the relationship of Māori and their culture and traditions with their ancestral lands, water, sites, wāhi tapu52 and other taonga53 as a matter of national importance;
  2. have particular regard to kaitiakitanga;54 and
  3. consider the principles of the Treaty of Waitangi.55

These obligations will often be further articulated and directed through the relevant planning documents. Consents for some renewable energy projects have been refused following court assessments of the adverse effects the proposed land use would have on Māori values, interests and the relationship to their ancestral land.56

Of particular relevance to the renewable energy sector is the significant role of the National Policy Statement for Renewable Electricity Generation 2011 (NPS REG) in promoting renewable energy project development in resource consents. As discussed above, consenting authorities must have regard to any relevant national policy statements (NPSs) when making consent decisions. The NPS REG sets out the objectives and policies for renewable electricity generation under the RMA and requires recognition of the benefits of renewable electricity generation activities. Notably, the NPS REG acknowledges that decision makers should have particular regard to the need to locate the renewable electricity generation activity where the resource is available and the connection to existing infrastructure, especially the national grid, is viable.

There is potential for tension between competing policies in NPSs. The National Policy Statement for Freshwater Management 2020 generally seeks to prioritise the health and well-being of freshwater ecosystems. However, the NPS REG:

  1. recognises that there may be a need for an activity in a freshwater environment;
  2. allows regulatory authorities to give appropriate consideration to the benefits of hydro generation when setting limits on water use; and
  3. requires decision makers to have regard to the contributions and operational requirements of New Zealand's five largest hydro generation schemes.

As discussed above, significant reform of the resource management framework is expected in the near future with the repeal of the RMA and the introduction of three new pieces of legislation. The NBA Bill is likely to see a greater focus on achieving positive environmental outcomes, greater use of environmental limits and consolidation of planning documents, and will be supplemented by the Strategic Planning Bill and Climate Adaptation Bill. Given the early stages of these reforms, it is currently unclear how they might affect the development of future projects.

Renewable energy projects that have more than 25 per cent ownership or control by overseas persons and involve investment in sensitive land or significant business assets may require a consent from the OIO before the investment can proceed. Whether land is classified as 'sensitive land' under the OIA will depend on the area of land being acquired and the land type. For example, all non-urban land larger than five hectares is considered to be sensitive land.57 Temporary interests in sensitive land may also require consent, for example, where a lease has a term of 10 years or more. Leases of rural land with a term of less than 10 years and true easements are not considered 'interests in land' under the OIA and do not require OIO consent. Where the investment involves farmland, the landowner will be required to advertise the farmland to the market (to allow New Zealanders an opportunity to acquire the land) before entering into an agreement with the overseas person. Overseas investment in significant business assets – that is, acquisitions in assets exceeding NZ$100 million (or higher for certain jurisdictions) – will also require consent from the OIO.

Additionally, investments in strategically important businesses may need to be notified to the OIO. The definition of 'strategically important businesses' includes businesses involved in electricity generation, distribution or metering, or aggregation if the business is a generator with a total nominal capacity in a financial year exceeding 250MW. These transactions may be blocked or have conditions imposed if this is considered necessary to manage significant national security and public order risks.

Renewable energy project development

i Project finance transaction structures

Limited recourse project financing has been relatively limited in the New Zealand renewable energy sector. The large gentailers have historically been responsible for the majority of new renewable energy project developments and have primarily financed their projects on a corporate-financed or on-balance-sheet basis.

Any project financing of renewable energy projects in New Zealand has been driven largely by independent developers. Independents have found it relatively difficult to get renewable energy projects banked over the past decade because of difficulties in creating projects of sufficient scale, difficulties attracting offtakers that will offer a sustained and satisfactory price and the distance of the renewable energy projects from the national grid. However, the past few years have seen an increasing number of renewable energy projects banked on a limited recourse basis, which are mostly geothermal and wind projects with solar increasingly joining the mix.

The principal developers of project-financed renewable energy projects have been:

  1. in wind, solar and hydro projects, independent energy companies and developers, such as Nova Energy, Pioneer Energy and Ventus Energy, and, recently, Lodestone Energy, Solar Bay, Lightyears Solar, Lightsource bp, Helios Energy, HES Aotearoa and Harmony Energy (among others), as well as EDBs such as MainPower; and
  2. in geothermal projects, Māori land settlement trusts that have ownership of or access to geothermal resources (often in partnership with the large gentailers) and TOP Energy in Northland.

The lenders most active in New Zealand renewable energy project financings have been three of the 'major' New Zealand banks: ANZ Bank New Zealand, Bank of New Zealand and Westpac New Zealand. However, the Waipipi Wind Farm (completed in March 2021) saw international banks project finance a wind project in New Zealand for the first time.

The primary offtakers of power generated from renewable energy projects in New Zealand have been the large gentailers. They have been the offtakers under power purchase agreements (PPAs) or counterparties on hedging contracts in the wholesale market. Recently, we have seen four major electricity users collaborate on the New Zealand Renewable Energy Project, a major procurement project seeking 2,000GWh of electricity from a range of new renewable energy projects.58 Several projects were shortlisted and, in October 2021, Oji Fibre Solutions and Pan Pac Forest Products each secured a 10-year PPA with Contact Energy for the supply of renewable electricity through to 2034, supporting Contact Energy's investment in its Tauhara geothermal project.59

Documentation for the project financing of renewable energy projects in New Zealand largely follows international norms. The key documentation includes:

  1. a PPA or hedge contract to fix long-term pricing for the output from the project;
  2. an engineering, procurement and construction contract to construct the project;60
  3. a long-term operation and maintenance agreement, particularly for wind and geothermal projects;
  4. land rights agreements, which often take the form of leases or easements, depending on the nature of the project;
  5. a transmission services agreement (TSA) and a connection works agreement, each with Transpower, to allow connection to the national grid and transmission of output from the projects or a connection agreement with an EDB for access to a distribution network; and
  6. a resource consent for the project.

Security structures generally follow international standards with security being held by the financier directly or (where there are multiple financiers) by a security trustee under a security trust structure. Security typically comprises all-asset security provided by the project vehicle (including over rights under project contracts, interests in land, and consents and licences) and share security given by the holding entity. In addition, financiers will normally have the benefit of direct deeds with project contract counterparties.

Bank debt tenors for project financings of renewable energy projects in New Zealand over the past few years have typically been in the range of three to seven years, with most lasting for approximately five years.

As project financing of renewable energy projects is not a standard practice in New Zealand, as in many other countries, each project tends to have its own unique features. We highlight below some impediments new renewable energy projects may face:

Under the Code, it is not possible to enter into a TSA with Transpower until the project is connected to the national grid, which is usually well after financial close. The Code addresses this issue by requiring Transpower to offer a default transmission agreement to the project, which is found in the Code. In addition, Transpower does not generally agree to enter into direct deeds.

A renewable energy project will require resource consents (as described above). Depending on the level of local opposition, it can take a prolonged period to obtain suitable resource consents and this must be factored into any project programme.

Where the project involves land not registered under New Zealand's Torrens land registration system (such as Māori land) or is not held privately (such as land owned by government entities or utilities), obtaining the necessary land rights to conduct the project, and formulating and registering an appropriate security package for the particular land, can be complex and time-consuming.

Geothermal projects rely on access to the geothermal resource, which is often held by Māori land settlement trusts. Care needs to be taken when structuring security arrangements so that the project can access the geothermal resource after the security has been enforced.

ii Non-project finance development

Most renewable energy projects in New Zealand are funded by the large gentailers on balance sheet using corporate-financed structures. We have, however, seen some hybrid structures under which a form of limited parent guarantee or underwriting has been provided to ensure that the project is bankable.

Distributed and residential renewable energy

Distributed solar energy and storage is beginning to play a greater role in New Zealand's energy mix,61 but it is starting from a relatively low base, particularly compared to Australia.62 Until recently, in large parts of New Zealand, solar energy alone was not economically viable as peak electricity demand tends to be in the evening and in winter when solar energy is not available.

Structures for rooftop solar projects range from standard supply and installation packages – where end users connect to the distribution network as a distributed generator – to fixed-price solar and battery packages with no upfront costs but a long-term fixed-price commitment.63

Key participants in this market include Sunergise, Solarcity NZ, Vector Powersmart, Sky Solar, Harrisons Energy Solutions, Trilect Solar and CPS Solar.

Mergers and acquisitions

In August 2021, Mercury NZ and PowAR (an Australian renewable energy investment fund) acquired Tilt Renewables for NZ$3.1 billion.64 The acquisition saw Mercury NZ acquire Tilt Renewables' New Zealand assets (including five operational wind farms and development options in Manawatū, Northland, Otago and Southland),65 while PowAR acquired all of Tilt Renewables' Australian assets and 100 per cent of Tilt Renewables' shares.66 The sale price was a 105 per cent increase on Tilt Renewables' pre-offer share price in December 2020.67 The sale of Tilt Renewables' represents the success of renewable electricity development in Australasia and has led to increased interest in renewable energy project development.

In June 2021, Mercury NZ entered into a conditional agreement with Trustpower to acquire Trustpower's retail business.68 The Commerce Commission granted clearance for the acquisition in September 202169 and the transaction completed on 2 May 2022 with a final price of NZ$467 million.70 On completion, Mercury NZ acquired Trustpower's 234,000 retail customers and Trustpower became New Zealand's largest stand-alone electricity generator and renewable energy project developer under a new brand, Manawa Energy.71

Renewable energy supply chains

On a global scale, New Zealand has a relatively small renewable energy manufacturing sector limited to discrete small to medium-sized businesses that focus on developing novel product technologies and intellectual property, as opposed to mass-scale manufacturing.

In recent years, New Zealand's limited manufacturing sector has suffered key losses, including the liquidation of HydroWorks (a manufacturer of water turbines and pumps for hydro generation) in 2017 and Windflow Technologies (a publicly listed company manufacturing two-bladed wind turbines) in 2019.72

The government offers no sector-specific subsidies for the manufacture of renewable energy products in New Zealand. Although the government continues to emphasise the importance of growth in New Zealand renewable energy generation and investment in emerging renewable energy technologies, the role of New Zealand renewable energy product manufacturers has not generally been a major consideration.

In April 2019, the government established New Zealand Green Investment Finance Limited (NZGIF), a green investment bank with an initial NZ$100 million of investment capital. In May 2021, the government allocated an additional NZ$300 million of investment capital to NZGIF in the 2021 fiscal budget.73 While the focus of this NZ$400 million fund is to accelerate low-emissions investment in New Zealand, the entity has a broad mandate that could capture early-stage companies looking to develop renewable energy products, particularly in the areas of transport, process heat and agriculture. To date, it has invested NZ$92.45 million of debt and equity in eight companies across various sectors including transport, agriculture, distributed energy and energy-efficient services.74

New Zealand is party to 13 free trade agreements with several countries and does not impose any specific tariffs on renewable energy equipment from its trading partners.75

Conclusions and outlook

The government has recognised that significant investment in New Zealand's renewable energy generation capacity is required if New Zealand is to maintain energy security, affordability and environmental sustainability, while pursuing the government's ambitious renewable electricity and climate change goals.

The consistently high wholesale electricity prices and the August 2021 blackout has signalled to the market that there is a need for new renewable energy project developments, which has led to substantial activity in the past year. The government has also continued to provide strong signals that it is committed to its energy transition with the release of its emissions budget and corresponding ERP, and the imminent release of the draft national energy strategy.

Footnotes

1 Anton Trixl is a partner at Anderson Lloyd. The author would like to thank Lyna Luo and George Leach of Anderson Lloyd for their invaluable assistance in the preparation of this chapter.

2 Ministry for Business, Innovation and Employment (MBIE), 'Regulatory Charter – Energy markets regulatory system' (August 2018), p. 10 <https://www.mbie.govt.nz/assets/46dcfbf4e1/energy-regulatory-system-charter.pdf>.

3 In recent speeches, the government has been noticeably silent on its goal of achieving 100 per cent renewable electricity by 2030, leading some commentators to believe that the government is edging away from the policy at least as a fixed end-of-decade deadline. See https://www.energynews.co.nz/news/renewable-energy/115379/govt-edging-away-100-renewables.

4 The Climate Change Response Act 2002 sets the net zero emissions target and a goal to reduce emissions of biogenic methane within the range of 24–47 per cent below 2017 levels by 2050, including to 10 per cent below 2017 levels by 2030.

6 MBIE, 'Briefing for Incoming Minister Energy and Resources' (November 2020), p. 6, <https://www.beehive.govt.nz/sites/default/files/2020-12/Energy%20and%20Resources.pdf>.

7 The Conversation, 'COP26: New Zealand depends on robust new rules for global carbon trading to meets its climate pledge' (November 2021), <https://theconversation.com/cop26-new-zealand-depends-on-robust-new-rules-for-global-carbon-trading-to-meets-its-climate-pledge-171194>.

8 New Zealand government, 'Govt increases contribution to global climate target' (October 2021), <https://www.beehive.govt.nz/release/govt-increases-contribution-global-climate-target>.

9 RNZ, 'New Zealand pledges to phase out coal for electricity in next 10-20 years' (November 2021), <https://www.rnz.co.nz/news/national/455023/new-zealand-pledges-to-phase-out-coal-for-electricity-in-next-10-20-years>.

10 New Zealand government, 'Government delivers next phase of climate action' (April 2021), <https://www.beehive.govt.nz/release/government-delivers-next-phase-climate-action>.

11 New Zealand's first Emissions Reduction Plan, announced on 16 May 2022, will see an additional NZ$650 million allocated to the GIDI Fund over four years. See https://www.energynews.co.nz/news/emissions/120787/govt-massively-increase-gidi-fund?utm_source=newsletter&utm_medium=email&utm_campaign=energy-news-newsletter.

12 See footnote 10.

13 New Zealand government, 'Government invests in reducing industry emissions' (September 2021), <https://www.beehive.govt.nz/release/government-invests-reducing-industry-emissions>.

14 New Zealand government, 'RMA to be repealed and replaced' (February 2021),<https://www.beehive.govt.nz/release/rma-be-repealed-and-replaced>.

15 Ministry for the Environment, 'Select Committee inquiry on the exposure draft of the Natural and Built Environments Bill' (February 2022), <https://environment.govt.nz/what-government-is-doing/key-initiatives/resource-management-system-reform/exposure-draft-for-the-natural-and-built-environments-bill/>.

18 EA, 'Enabling energy storage systems to offer instantaneous reserve – Final Decision Paper' (29 March 2022).

19 Ministry for the Environment, 'Judicial review of Climate Change Commission and Minister of Climate Change' (May 2022), <https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/emissions-reduction-targets/judicial-review-climate-change-commission-and-minister-climate-change/>.

20 LCANZI, 'LCANZI sues Climate Change Commission over errors in its Advice to Minister' (July 2021), <https://www.lawyersforclimateaction.nz/news-events/ccc-jr>.

21 Mercury NZ Limited, '2022 Interim Report' (22 February 2022).

26 ibid.

27 Lightears Solar website, https://www.lightyearssolar.co.nz/.

29 Balance, 'Kapuni 'green' hydrogen project seen as catalyst for NZ market' (June 2019), <https://ballance.co.nz/Kapuni-hydrogen-project>.

30 RNZ, 'Work begins on first hydrogen refuelling station in North Island' (May 2022), <https://www.rnz.co.nz/news/business/466347/work-begins-on-first-hydrogen-refuelling-station-in-north-island>.

33 ibid.

35 MBIE, 'Energy in New Zealand 2020: 2019 Calendar Year Edition' (August 2020), <https://www.mbie.govt.nz/dmsdocument/11679-energy-in-new-zealand-2020>.

36 Transpower, 'Briefing to the incoming Minister: Minister of Finance and Minister for State-Owned Enterprises' (November 2020), <https://www.transpower.co.nz/sites/default/files/publications/resources/2020%20Transpower%20Briefing%20to%20the%20Incoming%20Minister.pdf>.

39 EA, 'Briefing to the incoming Minister' (November 2020), <https://www.beehive.govt.nz/sites/default/files/2021-01/Electricity%20Authority%20BIM.pdf>.

41 RNZ, 'Rio Tinto announces plans to close Tiwai Point smelter' (July 2020), <https://www.rnz.co.nz/news/business/420817/rio-tinto-announces-plans-to-close-tiwai-point-smelter>.

42 RNZ, 'Tiwai Point aluminium smelter to keep operating until end of 2024' (January 2021), <https://www.rnz.co.nz/news/national/434490/tiwai-point-aluminium-smelter-to-keep-operating-until-end-of-2024>.

43 See footnote 36.

45 New Zealand government, 'Aotearoa sets course to net-zero with first three emissions budgets' (May 2022), <https://www.beehive.govt.nz/release/aotearoa-sets-course-net-zero-first-three-emissions-budgets/>.

46 Ministry for the Environment, 'ETS Auctions and how to buy New Zealand Emissions Units (NZUs)' (July 2021), <https://environment.govt.nz/what-government-is-doing/key-initiatives/ets/nz-ets-market/where-to-buy-new-zealand-emissions-units/>.

47 Newsroom, 'Emissions Trading Scheme: NZ's carbon market explained' (March 2021), <https://www.newsroom.co.nz/emissions-trading-scheme-nzs-carbon-market-explained>.

48 Ministry for the Environment, 'Annual updates to emission unit limits and price control settings' (July 2021), <https://environment.govt.nz/what-government-is-doing/areas-of-work/climate-change/ets/nz-ets-market/annual-updates-to-emission-unit-limits-and-price-control-settings/>.

49 ibid.

51 Electricity Industry Act 2010, Section 75.

52 Wahi tapu means a sacred place, sacred site or a place subject to long-term ritual restrictions on access or use (e.g., a burial ground, a battle site or a place where tapu (sacred) objects were placed).

53 Taonga means treasure or anything prized and is a term often applied to anything considered to be of value including socially or culturally valuable objects, resources, phenomena, ideas and techniques.

54 Kaitiakitanga means the exercise of guardianship.

55 The relationship between the Crown and Maori is founded on the Treaty of Waitangi. Investigations of claimed breaches of the Treaty are provided for under the Treaty of Waitangi Act 1975. Settlement of Treaty claims is a process between Maori and the Crown, and involves both acknowledgement of and apology for breaches. It also sets out mechanisms to provide redress. Redress may involve vesting of Crown land or statutory acknowledgements or deeds of recognition in relation to Crown land or water bodies. Statutory acknowledgements apply to areas or sites with which iwi have a special relationship and will be recognised in any relevant proceedings under the RMA.

56 Unison Networks Ltd v. Hastings District Council [2011] NZRMA 394 (HC).

58 One Step Off the Grid, 'NZ biggest corporate PPA seeks up to 2,000GWh a year of new renewables' (July 2020), <https://onestepoffthegrid.com.au/nz-biggest-corporate-ppa-seeks-up-to-2000gwh-a-year-of-new-renewables/>.

59 Contact, 'Contact to supply Oji and Pan Pac electricity for 10 years' (October 2021), <https://contact.co.nz/aboutus/media-centre/2021/12/13/contact-to-supply-oji-and-pan-pac-electricity-for-10-years>.

60 However, we are beginning to see disaggregated construction arrangements with the project sponsors bearing a greater degree of integration risk. For example, the construction contracts for the Waipipi Wind Farm were split between turbine supply, civil balance of plant and electrical balance of plant contracts, and several other project sponsors are considering similar models for their wind farms.

61 See footnote 25.

62 Australia has over 26,000MW of installed solar capacity as at March 2022. See https://pv-map.apvi.org.au/analyses.

65 NZX, 'Mercury acquires Tilt Renewables' New Zealand operations' (August 2021), <https://www.nzx.com/announcements/376610>.

66 Tilt Renewables, 'Scheme of Arrangement' (2021), <https://www.tiltrenewables.com/investors-landowners/scheme-arrangement/>.

67 Tilt Renewables, 'NZX and ASX Announcement – Tilt Renewables Board recommends acquisition proposal from a consortium of Powering Australian Renewables and Mercury NZ' (14 March 2021), p. 2.

68 Mercury, 'MERCURY ENTERS INTO BINDING AGREEMENTS TO ACQUIRE TRUSTPOWER'S RETAIL BUSINESS' (June 2021), <https://www.mercury.co.nz/news/20210621-mercury-enters-into-binding-agreements-to>.

69 Commerce Commission, 'Mercury cleared to acquire Trustpower's retail business' (September 2021), <https://comcom.govt.nz/news-and-media/media-releases/2021/mercury-cleared-to-acquire-trustpowers-retail-business>.

71 See footnote 50.

72 Stuff, 'Wind turbine maker put into liquidation' (December 2019), <https://www.stuff.co.nz/business/118409446/wind-turbine-maker-windflow-technology-put-into-liquidation>.

74 NZGIF, 'Our investments' (2022), <https://nzgif.co.nz/investing/our-investments/>.

75 New Zealand Foreign Affairs and Trade, 'Free trade agreements in force' (2022), <https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/>.

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