Proposed National Policy Statement for Renewable Electricity Generation

Preferred Option – National Policy Statement

A NPS can provide RMA decision-makers with guidance on resource management issues of national significance. Importantly, local authorities are required to amend their policy statements and/or plans to “give effect to” the objectives and policies of an NPS. The primary differences between an NPS and the alternatives assessed are that an NPS can:

ascribe national significance to the benefits of renewable electricity generation.
require that decision-makers have regard to the benefits of renewable electricity generation when considering applications and submissions on renewable electricity generation activities.
have an effect on RMA decision making without requiring local authorities to amend plans.

As such, an NPS can have an immediate and wide reaching effect on the RMA decision-making framework.

The proposed NPS has been drafted to focus policy guidance at the decision-making level in order to preserve the ability of decision-makers to build a ‘fine-grained’ analysis of the local situation into their judgements. This will also reduce the time it takes for the proposed NPS to have an effect on the status quo and will minimise costs to local authorities. Importantly, requiring decision-makers to consider the benefits of renewable electricity generation as a matter of national significance will provide an overarching consistency to the manner in which decision-makers address applications to develop renewable electricity generation capacity throughout New Zealand.

Nevertheless, some changes to the plans and policy statements of local authorities will be required and this will add to the stock of existing regulation. It is noted, however, that the plan review process is an accepted component of the status quo and that the timeline for changes has been set to coincide with complementary changes required by the NPS for Electricity Transmission. This should increase the efficiency of the plan change process and limit associated costs for local authorities and public submitters.

The proposed NPS contains one objective and five policies. The objective of the proposed NPS is:

To recognise the national significance of renewable electricity generation by promoting the development, upgrading, maintenance and operation of new and existing renewable electricity generation activities, such that 90 per cent of New Zealand’s electricity will be generated from renewable sources by 2025 (based on delivered electricity in an average hydrological year).

Policy 1 ascribes national significance to the benefits of renewable electricity generation, irrespective of scale, and provides a non-exclusive list of benefits to guide decision-makers’ consideration of applications and submissions. This list addresses the contribution of renewable electricity generation projects to: increasing New Zealand’s electricity generation capacity, avoiding reducing or displacing green house gas emissions and increasing security of supply. This policy sends a clear signal as to how government views the benefits of renewable electricity generation and should clarify the importance of these benefits in the minds of council officers and decision-makers.

Matters for submitters to consider in relation to Policy 1:

The decision has been taken to focus Policy 1 on the three core benefits associated with renewable electricity generation. Submitters may wish to provide information to assist the Board of Inquiry to establish whether a wider list of benefits would further clarify the regulatory framework within which applications are considered.

Submitters may wish to provide information to help the Board of inquiry clarify the effect that this policy will have on the ‘consentability’ of renewable electricity generation projects.

Policy 2 guides decision-makers’ consideration of proposals to avoid, remedy or mitigate the potential adverse environmental effects of renewable electricity generation projects. In doing so it requires decision-makers to recognise that the location of the energy resource or the practical technical constraints imposed by the generation technology itself will determine aspects of project design and site selection, and may constrain the ability of developers to avoid or mitigate effects. In some instances, decisions that require modifications to project design, or that set additional mitigation requirements, may threaten the viability of proposed projects. While such requirements may be necessary to promote the purpose of the RMA, this policy will ensure that decision-makers consider the implications of these decisions and recognise that in some instances the emphasis will need to be on mitigating rather than avoiding effects if projects of this kind are to be developed.

Matters for submitters to consider in relation to Policy 2:

Submitters may like to provide information to assist the Board of Inquiry to more accurately determine the potential consenting benefits and environmental costs of the proposed policy.

Policy 3 seeks to ensure that the relative degree of reversibility of different generation technologies is recognised by developers when designing projects, and that it is considered by decision-makers when considering applications for resource consent and submissions received. By doing so, it supports development that minimises the potential for decisions made now to foreclose on potential future options for the use and development of natural and physical resources.

Matters for submitters to consider in relation to Policy 3:

Submitters may like to provide information to assist the Board of Inquiry to more accurately determine the potential effect of this policy on the ‘consentability’ of hydro-generation proposals and/or the security of electricity supply.

Policy four requires local authorities to enable research and investigation in the field of renewable electricity generation. There are two main aspects to this: the assessment of potential sites and energy sources for renewable electricity generation; and research scale investigation into alternative renewable electricity generation technologies and methods. Removing unnecessary regulatory barriers such as varied consent status and assessment criteria is a necessary step if generators are to obtain the necessary information to enable them to take advantage of new opportunities and emerging technologies as they seek to meet the government’s target of 90 per cent renewable electricity generation by 2025.

Matters for submitters to consider in relation to Policy 4:

Submitters may like to provide information that will assist the Board of Inquiry to evaluate the benefit that this policy will have for generators when compared to the cost associated with the local government processes required to give effect to it.

Policy five seeks to address the disproportionately high consenting costs associated with small and community-scale renewable electricity generation projects with limited environmental effects. In doing so, the aim is to remove regulatory barriers that are currently acting to prevent small-scale developers from entering into the renewable electricity generation market.

Matters for submitters to consider in relation to Policy 5:

Submitters may wish to provide information to assist the Board of Inquiry to determine the appropriateness of the proposed 4 MW threshold. Other legislation has been amended to define small-scale generation as up to 10 MW installed capacity and legislative consistency is desirable where appropriate. In this regard, further information may aid consideration of whether a threshold of 10 MW would be appropriate in this instance.

Submitters may also wish to provide further information to enable the Board of Inquiry to more clearly establish the scale of effects that could be expected to be associated with a marine generation project of less than 4 MW installed capacity.

Expected benefits and costs of the preferred option

Benefits

The proposed NPS will promote an increase in the proportion of electricity generated in New Zealand from renewable sources. This will support the development of a diverse and resilient electricity generation sector, which will, in turn, increase security of electricity supply. A reduced dependence on fossil-fuel generation will minimise New Zealand’s exposure to international fluctuations in resource (oil and gas) prices. The proposed NPS will support other government initiatives seeking to reduce GHG emissions and to address climate change. Importantly, the proposed NPS will limit the extent of New Zealand’s potential economic liabilities on the international carbon market deriving from its climate change obligations. It is difficult to quantify these economic benefits, but they are expected to be significant.

Clear statutory recognition of the national benefits of renewable electricity generation will provide developers with a degree of certainty that decision-makers will give appropriate consideration to these benefits when considering plan provisions and applications.

Costs

The total present value cost of the proposed NPS is estimated to be $23.5 million. Tables detailing estimated costs and the assumptions behind these estimates are included in Appendix A. A discussion of specific costs associated with the project is set out below:

Government costs

The government will incur costs associated with the preparation of non-statutory guidance and explanatory workshops to support consistent interpretation and implementation of the proposed NPS - $260,000 undiscounted cost in the first year following approval. Further costs could result if Crown submissions are required in relation to specific applications and/or plan changes.

Local Authority (territorial authorities, unitary authority and regional councils) costs

A majority of costs associated with the proposed NPS will fall on local authorities, which will be responsible for notifying and processing plan changes. It is estimated that staff training/upskilling, and the process of plan change notification and hearings (assuming one plan change process per regional council, unitary authority and territorial authorities, and excluding the potential for synergy with other related plan changes) required to give effect to the proposed NPS will result in a cost to local government of $19.9 million (undiscounted cost spread over year’s two to five following approval). An additional $3.1 million (undiscounted cost spread over 20 years following approval) has been estimated to allow regional councils and unitary authorities to implement public education and advocacy in support of appropriate renewable electricity generation opportunities.

Generator costs

It is expected that generators will monitor plan changes made in response to the proposed NPS. It is likely that generators will lodge submissions on plan changes in areas where they have a commercial interest and a cost of $7.3 million (undiscounted cost spread over year’s two to five following approval) has been estimated to account for generator advocacy (one FTE per major generator plus $50,000 per plan).

Local community stakeholders and NGO costs

It is likely that the proposed NPS will stimulate an increased level of community involvement in plan advocacy. A cost of $3.4 million (undiscounted cost spread over year’s two to five following approval) has been estimated to account for public submissions.

Summary table of benefits and costs

Group/resource	Explanation	Cost/benefit
Benefits
Environment	Achieving increased generation capacity while avoiding or minimising GHG emissions.	Complements other initiatives to reduce GHG emissions and address climate change. Potential benefits cannot be properly costed, but are expected to be significant.
Generators	Increased regulatory certainty leads to greater market certainty.	More attractive and certain marketplace for investment. Potential benefits cannot be properly costed, but have the potential to be significant.
Local authorities	Increased regulatory certainty.	Clarified regulatory framework. Potential benefits cannot be properly costed, but have the potential to be significant.
Consumers	Increased security and resilience of electricity supply. Increased energy security.	Fosters a resilient economy and economic development; safeguards well-being. Potential benefits cannot be properly costed, but are expected to be significant.
Costs
Environment	The proposed NPS supports renewable electricity generation activities.	This may lead to an increase in the use and development of renewable energy sources, with associated effects on the local environment.
Central government	Some costs associated with the development of non-statutory guidance and all-of-government submissions.	Around $260,000 for non statutory guidance. Costs associated with all-of-government submissions are uncertain, but are not expected to be significant.
Local authorities	Potential for significant increase in costs associated with the need to change plans and policy statements. Costs will be more significant for councils that have yet to introduce renewable energy-related policies following the 2004 amendment to the RMA.	Potential costs of $23 million.
Generators	Increased costs associated with monitoring and advocacy in plan change processes.	Potential costs of $7.3 million.
Local community	Increased costs associated with monitoring and advocacy in plan change processes.	Potential costs of $3.4 million.

Risks

The primary risks and means of mitigation are set out in the table below:

Risks	Means of mitigation
Lack of local and/or regional action and uncertainty about how best to give effect to proposed NPS could lead to delays / litigation. Some councils may argue that their plans already meet the requirements of the proposed NPS, and therefore no further change is necessary. This may lead to potential confrontation, and possibly litigation between the Ministry, generators and local authorities.	Ongoing consultation and discussion between the Ministry and local authorities to ensure all parties clearly understand the Minister’s intentions. Non-statutory guidance will also have a role to play in mitigating this risk.
Underestimation of the costs and time it will take to put required changes in place.	The need to act quickly is largely addressed by targeting key policies to decision-making process without requiring plan changes. Plan changes required by the proposed NPS are kept to a minimum and relate to matters that will assume relevance over the medium term. The implementation timeframe set by the proposed NPS should provide enough time for councils to put changes in place in time to address market need and should enable councils to reduce costs by ‘dovetailing’ changes with other similar changes required by the NPS for electricity transmission.
The proposed NPS will require councils to undertake additional investigative, monitoring and policy development work. An estimate of these costs is provided in Appendix A of this report. One key risk to delivering on the proposed NPS is a lack of “professional” resources at regional and district councils. A further possibility is that the NPS could result in the resources of regional and district councils being diverted away from the processing of consents for renewable electricity generation projects towards policy development, or away from other high-priority programs.	This risk has been mitigated by targeting the decision-making process as much as possible, minimising the number of plan changes required and aligning timelines with those set by the related national policy statement for electricity transmission.
Policy requiring decision-makers to have regard to the relative ‘reversibility’ of effects of different technology types could potentially introduce a regulatory bias against investment in ‘non-reversible’ technologies such as hydro generation.	The requirement for decision-makers to consider ‘reversibility’ provides an additional point of argument for wind and marine projects (in particular) but takes nothing away form the arguments that may be marshalled to support a hydro development.In any case, policy support for other established renewable electricity generation technologies such as wind and geothermal should increase their share of generation capacity in the short term, and policy support for research and innovation will provide alternatives (such as marine energy) in the medium to longer term. Therefore, even if the policy does contribute towards in a long term shift term in emphasis towards the use of such renewable resources at the expense of further hydro development, there would not seem to be significant negative implications in terms of the ability to meet the renewable energy target.
Environmental effects. The proposed NPS could promote development in some areas where it would not have happened under the status quo.	The proposed NPS retains the existing environmental protection emphasis of section 6 of the RMA and does not alter the need for decisions to promote the sustainable management of natural and physical resources.

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