Proposed National Policy Statement for Renewable Electricity Generation Management: Section 32 Evaluation

Preface

Executive Summary

1 Introduction

2 The Status Quo

3 Alternatives to the Status Quo

4 Section 32 Evaluation Methodology

5 Evaluation of the Proposed National Policy Statement for Renewable Electricity Generation

6 Risks and Uncertainties

7 Conclusions

Appendix A: Estimate of Costs

5 Evaluation of the Proposed National Policy Statement for Renewable Electricity Generation

5.1 Evaluation of the Objective

Section 32 requires evaluation of the extent to which the Objective is the most appropriate way to achieve the purpose of the RMA.  The purpose of the RMA is set out in section 5 as being:

1. to promote the sustainable management of natural and physical resources.
2. In this Act, sustainable management means managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural wellbeing and for their health and safety while –
   1. Sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and
   2. Safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
   3. Avoiding, remedying, or mitigating any adverse effects of activities on the environment.

The objective of this 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).

The government has identified four main climate change challenges¹⁸ that the country will face in meeting growing demand for electricity.  As noted in section 1.1.1, these are:

• to control and reduce New Zealand’s greenhouse gas emissions

• to support international initiatives for multilateral action on greenhouse gas emissions, principally through maintaining momentum on the implementation of the Kyoto Protocol and ensuring this momentum is carried through into whatever agreements emerge for the period after 2012

• to prepare for, and adapt to, the impacts of changes in New Zealand’s physical environment by responding to the risks and taking advantage of the opportunities they present

• to realise the objectives above at the lowest achievable long-term cost.

Economic growth is heavily dependent on a secure and cost-effective supply of electricity.  The supply and price of electricity support the continuation of current economic activity.  A secure and cost-effective supply of electricity, along with other key infrastructure, encourages an environment conducive to investment and growth.  The uses and benefits of electricity are too numerous to list but it is clear that a reliable and cost-effective supply of electricity is essential to the quality of New Zealanders’ lives.  In other words, electricity contributes significantly to the economic, social and cultural wellbeing of people and communities on a national scale.  Although in some areas efficiency gains could be made and electricity could be used more wisely, an increase in supply will be necessary to support improvement in the economic, social and cultural wellbeing of New Zealanders.

Importantly, the price of fossil-fuel generation is likely to increase as the global supply of oil and gas decreases, and as the cost of carbon emissions are increasingly factored into the economics of electricity generation.  The government believes there are obvious and low-cost greenhouse gas reduction opportunities in the energy sector in the form of renewable electricity generation when compared to other sectors.  A reduced dependence on fossil-fuel generation will minimise the country’s exposure to international fluctuations in resource price (primarily oil and gas) and limit the extent of its economic liabilities on the international carbon market.

Promoting an increase in the proportion of electricity generated from renewable sources to meet the government’s 90 per cent target by 2025 will also result in diversification of the range of generation types and locations of generation.  The result of developing a diverse generation sector is that security of electricity supply will increase as reliance on any one generation type or location reduces.  To illustrate the point, although 90 per cent of New Zealand’s electricity was generated from renewable sources in 1975, this came almost exclusively from hydro-generation and the overall system was extremely vulnerable to hydrological fluctuation and disruption to security of supply.

Taken together, increased security of supply and the comparatively reduced long-term cost of a generation system that is based heavily on renewable energy sources will provide economic, social and cultural benefits to the country.

Nevertheless, there are potential costs associated with a move to promote and increase the proportion of electricity generated in New Zealand from renewable energy sources.  These primarily include:

• the potential to increase pressure on the transmission network: renewable energy resources are often located in remote locations away from demand centres.  In addition, a high proportion of renewable electricity generation in the overall generation mix will require a particular transmission grid formation because of the intermittent output of some forms of renewable generation.  Modelling by MED and EECA for the NZES¹⁹ suggests that the cumulative generation and transmission costs of achieving the 90 per cent renewable energy target by 2025 would be approximately $310 million (using a 5 per cent discount rate).  Having a higher percentage of renewable generation, such as 95 per cent, would increase this cost to $1.1 billion.  Although these figures are significant, they will not be incurred directly as a result of the NPS because, regardless of whether the proposed NPS is gazetted, a significant degree of investment in generation and transmission infrastructure will be required

• the need to provide more installed capacity than would be the case if New Zealand opted for thermal generation.  Put simply, while thermal plants can operate 90 per cent of the time, wind (and to a lesser extent hydro) will be unavailable due to energy constraints (lack of wind or water) for a much greater proportion of the time.  To address this, ‘over-capacity’ is required and that needs to be dispersed around the country to increase the probability that the conditions for generation will be available at enough locations to allow renewable electricity generation to meet national demand

• the generation of electricity for renewable energy sources also implies the use and development of natural and physical resources, which may result in adverse environmental effects.  In this regard it is noted that the Objective works within the existing statutory framework of the RMA and decision-makers’ regard to the Objective (and entire NPS) will be subject to consideration against the matters included in Part II of the RMA.  In other words, in order for resource consent to be granted to a particular renewable electricity generation project, decision-makers will need to be satisfied that particular proposal appropriately sustains the potential of natural and physical resources to meet the reasonably foreseeable needs of future generations; safeguards the life-supporting capacity of air, water, soil, and ecosystems; and avoids, remedies, or mitigates any adverse effects of activities on the environment.

The benefits and costs of promoting an increase in the proportion of electricity generated in New Zealand were analysed during the development of the NZES and, on balance, it was concluded that the benefits to be derived from promoting the development of additional renewable electricity capacity outweighed the associated costs.

The preceding sections have identified that, without clear statutory guidance as to the benefits of renewable electricity generation, there is a risk that insufficient renewable electricity generation capacity will be consented under the status quo to meet the 90 per cent renewable generation target set by the government in the NZES.  As noted in sections 1.1.2 and 2.4 of this report, failure to meet this target could have significant social and economic effects and significant implications for the wellbeing of New Zealanders.

The intent of the proposed NPS is to clarify the RMA decision-making framework to foster consistent interpretation of section 7(i) and 7(j) of the RMA, and to promote achievement of the government’s target of 90 per cent renewable electricity generation by 2025.  The proposed NPS seeks to do this by articulating the government’s position on the benefits of renewable electricity generation.

The focus of this Objective is on recognising the national significance of renewable electricity generation and promoting its development in accordance with the government’s 90 per cent renewable electricity generation target.  This clarity is appropriate, given the context of the relatively ‘devolved’ system of policy development, administration and decision-making established by the RMA.  This NPS does not seek to provide absolute direction on how to weigh potentially competing values down to regional and district levels as this would likely be poorly received by local authorities and communities, and in any case would be extremely difficult to prepare at a national level.

Although the government clearly articulates its support for renewable electricity generation projects through this Objective, there is no intention to support these projects at the cost of the environment.  A key question, therefore, is whether the Objective will improve the opportunities for development of appropriate and well-conceived renewable electricity generation projects where the focus of the applicant is on developing renewable electricity generation capacity while also appropriately avoiding, remedying or mitigating any adverse effects.  Given that decision-makers’ regard to the Objective will be subject to Part II of the RMA and that specific consideration will be given to the various matters set out in sections 6, 7 and 8, the Objective’s support for renewable electricity generation activities will not imply unsustainable environmental sacrifice.  On the other hand, the clarity it provides will help to ensure that decisions made under the framework promote the sustainable management of natural and physical resources.

Table 6 evaluates the Objective against the components of section 5 of the RMA.

Table 6: Evaluation of the Objective

RMA provision	Evaluation
s5(2)(a)	This Objective clearly promotes the recognition of the national significance of renewable electricity generation and, by implication, the benefits derived from the use of renewable electricity.  Renewable electricity by its nature is focussed both on existing needs and on the needs of future generations.  Therefore, by developing renewable forms of energy generation, future generations are more likely able to meet their needs.
s5(2)(b)	Life-supporting capacity, while not directly mentioned, would be expected to be maintained through the management of adverse environmental effects of generation activities.  Many renewable electricity generation projects occur in sensitive environments.  This means that often detailed assessments of effects on water, air, soil and ecosystems are undertaken.  This allows informed judgement by decision-makers as to whether the strategies to manage adverse effects (which may include avoiding, mitigating or remedying them) are appropriate to the location.
s5(2)(c)	The proposed NPS Objective requires a greater focus on ‘promoting’ renewable electricity generation activities.  However, it does so within the existing RMA framework that clearly requires decision-makers to consider applications subject to Part II of the RMA, and to ensure that decisions promote the sustainable management of the natural and physical environment.
s7(i)	Section 7(i) of the RMA was inserted by the Resource Management (Energy and Climate Change) Amendment Act 2004 to add climate change as a matter to be considered by decision-makers.The Objective is consistent with this clause in Part II, specifically by recognising the national importance of the development, upgrading, maintenance and operation of renewable electricity generation activities such that 90 per cent of New Zealand’s electricity will be generated from renewable sources by 2025.  Hence, the proposed NPS will have benefits in terms of reduced or avoided greenhouse gas emissions.
s7(j)	The Objective is clearly consistent with this section of the RMA, which aims to recognise the specific benefits associated with use and development of renewable energy.
Social wellbeing	A reliable supply of electricity is essential to New Zealand’s economic and social wellbeing.  As such, the Objective would directly contribute to the economic and social wellbeing of people and communities.  However, this must also be balanced against the fact that there is some potential for renewable electricity generation projects to cause local-scale social impacts – often on a significant scale (eg, some of the hydro-electric power schemes developed in the South Island in the past).  In this regard it is noted that the Objective does not detract from the requirement of the RMA that proposals to use and develop natural and physical resources promote sustainable management.
Economic wellbeing	Economic wellbeing concerns also occur at both national and local level.  Local benefits from renewable electricity are perhaps greatest during construction or upgrade phases, but also typically contribute to local economies through a series of ongoing benefits such as increased security of electricity supply.  The national-level benefits of a larger proportion of our electricity coming from renewable generation are however more significant, and these are noted in the New Zealand Energy Strategy.
Cultural wellbeing	Cultural wellbeing is not specifically provided for in the Objective.  However, Part II of the RMA (including section 8) recognises, among other matters, the importance of Māori and their special relationships, important historical sites, and the Treaty of Waitangi.  The Objective itself does not have an impact on cultural wellbeing, and nothing in the proposed NPS suggests that such issues should be overlooked.  It is also noted that section 6 takes priority (including a number of cultural matters) over section 7 (which includes climate change and renewable energy).  Each proposal is still therefore assessed on its merits, and where there are significant adverse effects on cultural wellbeing, this would be considered in the usual RMA framework.
Health and safety	The health and safety of people and communities is both directly and indirectly dependent on a reliable supply of electricity.  To this extent the Objective would be expected to contribute to the health and safety of people and communities.  There are not considered to be any significant concerns arising from this Objective in terms of health and safety.

The conclusion of this evaluation is that the proposed Objective is well targeted towards addressing the problem identified with the status quo.  It will support the development of renewable electricity projects that promote the sustainable management of New Zealand’s natural and physical resources.  On this basis, it is considered that the Objective is the most appropriate way to achieve the purpose of the RMA.

5.2 Evaluation of the policies

5.2.1 Policy 1

The benefits of renewable electricity generation activities, at any scale, are of national significance.  Decision-makers must have particular regard to the national, regional and local benefits relevant to renewable electricity generation activities.  These benefits may include, but are not limited to:

1. maintaining or increasing electricity generation capacity while avoiding, reducing or displacing greenhouse gas emissions
2. maintaining or increasing security of electricity supply at local, regional and national levels by diversifying the type and/or location of electricity generation.

5.2.1.1 Policy intention

Policy 1 was drafted to explicitly ascribe national significance to the benefits of renewable electricity generation.  This policy also makes it clear that, in relation to the benefits of renewable electricity generation activities, national significance is not dependent on the scale of the project or the level at which these benefits manifest themselves – be it national, regional or local.

The policy also provides a non-exclusive list of benefits to guide decision-makers’ consideration.  This list focuses attention on the three key benefits of renewable electricity generation; those being:

• increasing New Zealand’s electricity generation capacity

• avoiding, reducing or displacing greenhouse gas emissions

• increasing security of supply.

5.2.1.2 Benefits

Importantly, the policy is drafted to ensure that it will have an immediate effect on consent decisions as there is no direct requirement for plans or policy statements to be changed or varied.  It focuses directly on addressing the potential for decision-makers to under-emphasise the benefits of renewable electricity generation when making judgements that balance the benefits to be derived from renewable electricity generation against the imperative of protecting the local environment.  This 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.

Policy 1 will guide applicants when making decisions as to what information they should include in applications, and the type of evidence they should present at hearings.  It will also remove the need for generators to justify the benefits of renewable electricity generation and, by doing so, should reduce the likelihood of costly and distracting debate at hearings over the whether these benefits exist, or are of a relevant scale.  This could lead to cost savings for councils as well as applicants.

Policy 1 will, therefore, increase market certainty that the benefits of renewable electricity generation activities will be reflected in the resource consent acquisition process.

An important feature of Policy 1 is that applicants are still required to establish that a certain proposal promotes the purpose of the RMA; this policy in no way undermines the ‘protective’ emphasis of section 6 of the RMA or the existing environmental safeguards of the RMA.

5.2.1.3 Costs

Policy 1 may set too narrow a list of benefits and, despite its non-exclusivity, this could be misinterpreted as sending a signal that other benefits recognised in the decisions of the Environment Court are somehow less important.  It also introduces other matters for decision-makers to consider and has the potential to further complicate the balancing judgements required of decision-makers.

Elevating the benefits of renewable electricity generation activities to national importance could tip the balance too far in favour of renewable electricity generation projects.  However, because the proposed NPS does not amend the obligations of the applicant to assess environmental effects in accordance with the Fourth Schedule to the RMA, and because all judgements are ultimately subject to assessment against Part II and the purpose of the RMA, this outcome is considered unlikely.

5.2.1.4 Conclusion

Policy 1 is central to the purpose of the proposed NPS and is directly focused on addressing the problem identified with the status quo.  It does so by clarifying the government’s position on the benefits of renewable electricity generation and guiding decision-makers’ consideration of these benefits.  Doing so will increase regulatory certainty and will encourage consistent interpretation of section 7(i) and 7(j) of the RMA into the future.

Policy 1 does not require or rely on plan changes or variations and will have an immediate effect on decisions made under the RMA.  This policy will take effect immediately at negligible or no cost because it does not require councils to amend their planning documents.

It is considered that Policy 1 will be efficient and effective and is the most appropriate way to achieve the Objective.

Table 7: Summary of costs and benefits associated with Policy 1

Costs	Benefits	Stakeholders
		Central government	Local government	Generators	Industry	General public
Economic
	Improved security of supply.
	Increase in national generation capacity.
	Investment required in human capital in renewable generation sector.
	Reduced long-term operation costs of generation.
	Maintenance and enhancement of New Zealand’s clean, green image.
	Reduced costs of meeting international emissions commitments.
Potential to place increased pressure on transmission infrastructure requiring upgrading.
Social
	The social benefits of a secure electricity supply are more directly recognised than at present.
Environmental
	Avoidance of further greenhouse gas emissions from the electricity generation sector.

5.2.2 Policy 2

When considering measures to avoid, remedy or mitigate the adverse environmental effects of renewable electricity generation activities, consent authorities must have particular regard to the constraints imposed on achieving those measures by:

1. the nature and location of the renewable energy source
2. logistical or technical practicalities associated with developing, operating or maintaining the proposed renewable electricity generation activity
3. the nature and location of existing renewable electricity generation activities
4. the location of existing structures and infrastructure including, but not limited to, roads, navigation and telecommunication structures and facilities, the local electricity distribution network and the national grid.

5.2.2.1 Policy intention

This policy has been proposed to recognise practical constraints set by location of the renewable energy resource or the technical/engineering aspects of the generation technology.  In some instances, these will limit the ability of developers to avoid or mitigate adverse environmental effects associated with the operation, maintenance, upgrading or development of new and/or existing renewable electricity generation activities.

The procedures for assessing the environmental effects of any proposal are set out in the Fourth Schedule to the RMA and the matters set out in Policy 2 would not alter these requirements.  Given the centrality of the ‘assessment of environmental effects’ to the resource consent process, the granting or refusal of an application frequently hinges on the assessment of particular effects as being ‘more’ or ‘less’ than minor.  Currently, the acceptability of adverse effects relies on the value-laden term ‘less than minor’.  Policy 2 is concerned with articulating particular matters peculiar to renewable electricity generation activities and, in doing so, will clarify the matters to which consent authorities must have regard when considering the environmental effects of resource consent applications for renewable electricity generation projects.  Although the nature of effects may not be changed by this policy, it may change how decision-makers view the acceptability of certain effects that are concerned with one or more of the matters listed in the Policy.  In this regard, Policy 2 seeks to tip the balance in favour of renewable electricity projects that, for reasons deriving from practical constraints, might otherwise fail to gain a commercially viable resource consent.

This policy also explicitly refers to constraints related to the nature and location of projects developed under previous resource management regimes.  In some cases, these projects may have been developed in sensitive areas where the current regulatory regime now emphasises preservation or protection.  This policy is intended to ensure that decision-makers consider the factors that may act to constrain operators’ efforts to maintain the ongoing contribution of existing renewable electricity generation capacity to New Zealand’s electricity system.

5.2.2.2 Benefits

Practical issues generally determine project design and site selection.  Policy 2 will require decision-makers to explicitly have regard to this when considering applications, particularly when setting consent conditions.  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.  Importantly, Policy 2 will require decision-makers to recognise that the location of other structures (navigation, telecommunication, etc) can also constrain options for site selection, and can again constrain mitigation options.

Policy 2 is directed towards decision-makers and its effects will be felt immediately without having to wait for plan changes or variations to take effect.  Because Policy 2 is focused on the decision-making process, it will not introduce additional direct financial costs to councils.

Setting out the list of factors that may constrain project design, site selection and therefore measures to avoid or mitigate adverse effects, will help both to define the information that should be supplied to decision-makers and the matters that decision-makers are required to consider.  The main benefit from Policy 2 is likely to derive from the increased guidance it provides to consent authorities surrounding the consideration of adverse effects.  Policy 2 will in no way alter the existing requirement to address any potential adverse effects in a manner that promotes the sustainable management of natural and physical resources.  On the contrary, it would likely place an onus on project proponents to show that options and technologies for addressing adverse effects had been adequately considered.  This could impose an additional cost on project proponents (generators) in terms of research and development and consenting costs, although this would be expected to be a minimal cost above the status quo.

Importantly, and as for Policy 1, this policy in no way undermines the protective emphasis of section 6 and applicants will still need to establish that any proposal promotes the purpose of the RMA.

5.2.2.3 Costs

It is conceivable that some applicants may seek to use Policy 2 to argue that it is not practical to avoid, remedy or mitigate significant adverse effects.  In this sense Policy 2 risks encouraging economically expedient site selection and project design.  Some council officers spoken to as part of this evaluation thought Policy 2 would create a very favourable regulatory framework for renewable electricity generation projects.  Although this is arguably consistent with the Objective of the proposed NPS, the question was raised about how far this balance would be tipped and whether Policy 2 would lead councils to ‘lower the bar’ for the determination of significance of adverse effects in their policy statements and plans.

Although this is mentioned as a possibility, it is not thought that amendments to this effect would or could occur under the framework provided by Part II of the RMA.  Regardless of how the policy is interpreted by local authorities, adverse environmental effects will still need to be avoided, remedied or mitigated, subject to consideration against Part II of the RMA.  Policy 2 does not alter this requirement and will actually require project proponents to show that the most advanced technical solutions for avoiding or mitigating adverse effects have been given due consideration.  In short, the policy would be expected to provide a benefit by promoting a higher quality of project design.  The policy may encourage further litigation around whether effects are adequately avoided, remedied or mitigated in a particular proposal.  However, significant litigation already occurs in this area and the added guidance around this would be a definite benefit for decision-makers.

Policy 1 has the potential to increase pressure to develop renewable generation projects in areas that are not appropriate, such as iconic landscapes or in sensitive river systems.  When combined with this potential effect of Policy 1, Policy 2 again introduces the risk of the proposed NPS tipping the balance in favour of renewable electricity generation activities at the cost of the natural and physical environment.  While this is acknowledged as a potential cost of Policy 2, it is not believed to be a likely outcome.  While the proposed NPS clearly aims to promote the development of renewable generation projects, it does not aim to so ‘at any cost’.  Once again, this outcome is considered unlikely given the underlying requirement for all decisions to promote the sustainable management of natural and physical resources subject to consideration against Part II of the RMA.

5.2.2.4 Conclusion

Policy 2 will require decision-makers to explain the practical determinants of site selection and project design to decision-makers.  Policy 2 does not require or rely on plan changes or variations and will have an immediate effect on decisions made under the RMA.  This policy will have no direct financial cost because it does not require councils to amend their planning documents.  As it will take effect immediately at negligible or no cost, it is considered that this policy will promote efficient achievement of the Objective.

While Policy 2 introduces further matters for consideration in the assessment of effects, it does not improve the capability of those conducting the assessments.  Some form of complementary guidance, possibly non-statutory, would be desirable to ensure its effective implementation.  Assuming effective implementation, it is considered that the policy would be effective and efficient in achieving the Objective, with benefits outweighing costs.

Table 8: Summary of benefits and costs associated with Policy 2

Costs	Benefits	Stakeholders
		Central government	Local government	Generators	Industry	General public
Economic
	Improved guidance for decision-makers.
	Improved economic efficiency through increased coordination with existing infrastructure.
	Encourages the efficient use of renewable resources.
Potential for increased cost in investigating options for addressing adverse effects.
Environmental
Potential for adverse environmental impacts to be overlooked through an over-emphasis on technical (or other) constraints.

5.2.3 Policy 3

When considering proposals to develop new renewable electricity generation activities, decision-makers must have particular regard to the relative degree of reversibility of the adverse environmental effects associated with proposed generation technologies.

5.2.3.1 Policy intent

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.

5.2.3.2 Benefits

Some renewable electricity generation technologies can have relatively reversible effects when compared with others.  Marine or wind turbine generators can, for example, be removed at the end of a project’s economic life and the environment returned to the pre-development state, to a greater or lesser degree.  This policy focuses decision-makers on the relative degree of reversibility of the effects associated with particular technologies.  Hence 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.

This policy captures the fact that some renewable electricity generation technologies have the potential to be transitional.  It is impossible to predict what electricity generation technologies will emerge in the future.  Current fossil fuel prices are prompting increased investment in alternative sustainable generation technologies and this rate of investment is expected to increase as oil and carbon emission prices rise.  Human innovation may uncover new carbon-neutral, highly efficient means of generation in the medium to long term.  In the interim it is appropriate to consider the longevity of effects associated with generation technologies and to provide an avenue of policy support for those that can be removed with relatively little long-term impact.

5.2.3.3 Costs

Focusing decision-makers’ attention on the relative reversibility of effects associated with particular generation technologies could prove prejudicial against those technologies with functionally irreversibly effects, such as hydro-generation.  This risks inconsistency with the Objective of the proposed NPS.

Section 3 of the RMA already contemplates temporary effects and, therefore, under the existing framework developers are able to invite decision-makers to consider the temporary nature, or reversibility, of effects associated with a particular proposal.  This policy, therefore, risks replicating an existing requirement of the RMA.

The concept of reversibility is open to interpretation.  For example, while it is possible to remove wind turbines at the end of their economic life, it is unlikely that the foundations and access roads would be removed.  In such an instance it is unclear whether the applicant could justify a claim that effects of the wind farm were reversible.  Also, although the vibration, flicker noise and other effects of turbines on the environment (including, for instance, effects on migratory birds) might cease once they are removed, the applicant may not be able to defend a claim that this equates to reversibility.  This lack of clarity as to what constitutes ‘reversibility’ could be used by project opponents in arguments against particular development proposals and has the potential to increase litigation costs.

Generators will be required to assess the reversibility of effects associated with their proposed technologies and this will introduce an additional cost.  However, it is considered that this cost would be minor in the context of assessments already required.

5.2.3.4 Conclusion

This policy requires consideration of the relative degree of reversibility of effects associated with particular generation technologies.  In doing so, it may establish a marginal preference for the development of those forms of renewable electricity generation that have relatively more reversible effects, that is wind, marine and geothermal generation.  So this policy could be argued to establish regulatory bias against new hydro-generation development.

On the other hand, the policy does not suggest that, because the effects of hydro schemes are less reversible than some other forms of renewable energy, such schemes should not proceed.  The policy provides an additional point of argument for wind and marine projects (in particular) but takes nothing away from the arguments that may be marshalled to support a hydro development.  It is noted that hydro schemes provide the benefits identified in Policy 1 and that reality is unaffected by Policy 3.

Hydro-generation plays an important role in a renewable energy system by servicing base load electricity demand.  This is reflected in the existing emphasis on new hydro-generation in current modelling of future trends.  With a reduced emphasis on hydro-generation, New Zealand’s electricity system would need to increase the supply of other renewable technologies that are able to service this base load demand.  In the short term this can be provided by an increase in geothermal generation capacity; in the long term it is expected that marine generation will play an important role in this regard.  New Zealand has world-class geothermal and marine resources.  Therefore, even if the policy does contribute towards a long-term shift 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.

For that reason it is considered that the policy will be both effective and efficient in achieving the Objective of the proposed NPS.

Table 9: Summary of benefits and costs associated with Policy 3

Costs	Benefits	Stakeholders
		Central government	Local government	Generators	Industry	General public
Economic
	Encourages decision-making that promotes flexible, sustainable use of resources.
Could introduce regulatory bias against those technologies with functionally irreversibly effects; such as hydro-generation.
Risks replicating an existing requirement of the RMA.
Potential to increase litigation costs.

5.2.4 Policy 4

By 13 March 2012, local authorities are to notify, in accordance with Schedule 1 of the Act, a plan change, proposed plan or variation to introduce objectives, policies and where appropriate methods, into policy statements and plans to enable activities associated with:

1. the identification and assessment by generators of potential sites and energy sources for renewable electricity generation
2. research-scale investigation into emerging renewable electricity generation technologies and methods.

5.2.4.1 Policy intent

This policy seeks to help ensure a secure supply of electricity in New Zealand, both up to and beyond 2025, by enabling generators to identify renewable electricity generation possibilities throughout the country.  Activities associated with identification, research, investigation and assessment of potential sites and sources of renewable energy, and emerging generation technologies, are subject to varying activity statuses across jurisdictions.  These activities will in most cases have limited environmental effects but anecdotal evidence suggests they can be subject to regulatory requirements more akin to those necessary for the assessment of effects associated with full-scale developments.  Removing unnecessary regulatory barriers such as these is necessary if generators are to obtain the necessary information to take advantage of new opportunities and emerging technologies as they seek to meet the government’s 90 per cent renewable target.

5.2.4.2 Benefits

This policy encourages research and investigation into new sites and sources of generation.  It removes unnecessary barriers to generators wishing to build a clear picture of the resources and opportunities in New Zealand.  This will provide the market with easier access to the information it requires to develop sufficient renewable generation capacity, to secure New Zealand’s electricity supply and to meet the government’s renewable generation target.

This policy will also enable smaller players on the margin of the industry to identify and investigate new technologies and sites, thereby carving themselves a market niche.  Innovative entrants to the generation market will complement the role of larger generators, which in most instances appear to have adopted a ‘technology follower’ rather than ‘technology leader’ approach to investment and development.

Fostering innovation in the New Zealand electricity market is critical: the country will need to be able to embrace emerging opportunities if it is to meet renewable electricity generation targets to and beyond 2025.  Building a regulatory environment that supports research and innovation will enable the New Zealand generator market to respond quickly to overseas innovation and experience, and to adapt to market movement.  This approach could also have significant economic potential as it may foster technical expertise in New Zealand that can be exported as intellectual property.

Importantly, policy in support of innovation should work to some degree to balance the potential limiting effect of Policy 3 on new hydro-development.

5.2.4.3 Costs

This policy could encourage a ‘speculation’ rush with monitoring sites being erected in greater numbers around New Zealand.  The effects of this will be minor, subject to landowner approval and in almost all cases temporary.

5.2.4.4 Conclusion

Removing unnecessary regulatory barriers to innovation in New Zealand’s energy sector will support adaptation to market change; it will also enable generators to embrace new opportunities in the short to medium term after already identified projects have been developed.

Given proposed implementation timelines, the council policy and plan changes and variations required by Policy 4 will be in place in time to enable the further monitoring, research and investigation necessary to develop new renewable generation capacity as the country approaches the 2025 target.  This policy potentially plays a crucial role in supporting achievement of the Objective.

Costs associated with council policy and plan changes and variations will be limited by aligning timelines with those changes required by the 2008 National Policy Statement for Electricity Transmission.  It is considered that the policy will be both effective and efficient in achieving the Objective of the proposed NPS.

Table 10: Summary of benefits and costs associated with Policy 4

Costs	Benefits	Stakeholders
		Central government	Local government	Generators	Industry	General public
Economic
	Will provide the market with easier access to the information it requires to develop sufficient renewable generation capacity to secure New Zealand’s electricity supply.
	Will also enable smaller players on the margin of the industry to investigate new technologies and sites.
	Will enable the New Zealand generator market to respond quickly to overseas innovation and experience.
	Could work to some degree to balance the potential limiting effect of Policy 3 on new hydro-development.
The word ‘enable’ is not clearly defined and litigation to define its meaning could complicate and increase the costs associated with implementation of this policy.
This policy could encourage a ‘speculation’ rush with monitoring sites being erected in greater numbers around New Zealand.

5.2.5 Policy 5

By 13 March 2012, local authorities are to notify, in accordance with Schedule 1 of the Act, a plan change, proposed plan or variation to introduce objectives, policies and where appropriate methods, into policy statements and plans to enable activities associated with the development and operation of small and community-scale distributed renewable electricity generation.

5.2.5.1 Policy intent

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.

5.2.5.2 Benefits

Small-scale developments have the potential to make a significant cumulative contribution to ensuring security of supply and to meeting the government’s 2025 renewable generation target.  However, small-scale projects currently tend to be caught under the same umbrella as larger projects and face disproportionately high regulatory compliance costs.  This policy will address this and will remove barriers to investment in a scale of generation that has the potential to make a significant positive contribution to the wellbeing of New Zealanders.  This contribution will be felt most particularly in rural communities and islands where small-scale distributed generation has the potential to increase security of supply by reducing reliance on the national grid, and also to provide an alternative income stream and land-use option by enabling the generation and export of electricity to the national grid.

The threshold of 4 MW installed capacity has been selected to capture the great majority of small-scale projects that are expected to be viable in rural and island locations across New Zealand, without providing a streamlined resource consenting process for those projects that may result in unacceptably significant adverse environmental effects.  Marine generation has been excluded in the definition of small and community-scale projects because it has not been possible to clearly establish the scale of effects that could be expected to be associated with a project of less than 4 MW installed capacity.  Similarly, installed capacity rather than electricity output has been used to promote clarity by avoiding the need to rely on generation efficiency estimates.

5.2.5.3 Costs

Removing barriers to this form of development could encourage the emergence of one to three wind-turbine assemblages in various rural and island locations, thereby spreading the adverse effects associated with this form of development over a wider area.

Specific policy support for small-scale renewable electricity generation activities could be misinterpreted as indicating particular support for small-scale over large-scale development.

5.2.5.4 Conclusion

The contribution of small projects to the security of the New Zealand electricity system is potentially significant.  This contribution comes both in terms of cumulative capacity and in terms of system resilience, as these projects are likely to be developed primarily to service remote rural villages.  Although there is the potential for Policy 5 to encourage the spread of renewable electricity generation activities across the countryside, with associated amenity effects, this will be mitigated by the following factors:

• the environmental preservation elements of the RMA are untouched by the proposed NPS and any proposal would have to establish that it promotes the purpose of the RMA within this framework

• they may provide an alternative income stream and land-use option for the community

• effects are likely to be small, given that it is only projects under 4 MW of installed capacity that are required to be enabled by this policy.

On balance it is considered appropriate to include a policy in the proposed NPS that seeks to remove unnecessary barriers to small-scale, community-focused development.  However, it may be necessary to define ‘enable’ in order to reduce litigation and therefore to improve the efficiency of this policy.

Table 11: Summary of benefits and costs associated with Policy 5

		Stakeholders
Costs	Benefits	Central government	Local government	Generators	Industry	General public
Economic
	Will remove barriers to investment in a scale of generation that has the potential to make a significant positive contribution to the wellbeing of New Zealanders.
	Potential to increase security of supply in rural areas.
	Potential to provide an alternative income stream and land-use option in rural communities.
The term ‘enable’ has not been clearly defined and its interpretation could lead to litigation.
Could increase diffuse adverse environmental effects.

It is noted that costs associated with council policy and plan changes and variations will be limited by aligning the implementation timeline with changes required by the 2008 National Policy Statement for Electricity Transmission.  It is considered that the policy will be both effective and efficient in achieving the Objective of the proposed NPS.

5.2.6 Policy development process / alternatives considered

The Objective and policies of the proposed NPS were refined throughout the policy development process, particularly following:

• feedback from key electricity market stakeholders on policies developed out of the draft report of the Government Reference Group, on the merits and potential scope of national guidance on the management of electricity generation under the RMA

• responses to consultation conducted in accordance with section 46 of the RMA

• workshops and meetings held in March 2008 with generators, local government representatives, and key stakeholders in the energy market

• feedback on draft policies gathered from a sample of generators and councils during the section 32 evaluation

• feedback from government departments.

The policy development process saw many policy iterations but key changes were made in five general areas as discussed below.

5.2.6.1 Specified regional generation and technology type targets

The option of specifying regional generation targets or technology type targets was considered early in the policy development process.  This approach was abandoned after meetings and workshops with generators, local government representatives, and other key stakeholders in the electricity market because:

• these targets could work to constrain the ability of generators to respond to market changes or to embrace technological innovation.  As a result, targets of this type could hinder the ability of generators to meet the government’s renewable electricity generation target of 90 per cent

• it is unclear what would happen should local authorities fail to meet generation targets

• there is a potential that, once targets had been reached, they could be used to justify blanket rejection of further resource consent applications

• local authorities lacked experience, did not have functions in this area, and would likely struggle to find the resources to manage the targets effectively

• it can be very difficult under the Local Government Act process to direct investment in areas where it is publicly unpopular; in this context regional targets could introduce another layer of political complexity into the process of gaining consent for renewable electricity generation projects.

5.2.6.2 Use of defined terms

Earlier versions of several of the policies used the word ‘facilitate’.  The use of this, and other words that did not have established meanings under RMA or case law, was minimised in an effort to limit uncertainty around interpretation.  One exception is the use of the word ‘enable’ in Policies 4 and 5.  The intention of this word is to require councils to remove unnecessary barriers from plans to specific forms of renewable electricity development, and ancillary activities such as research and monitoring.  This could be achieved by limiting the scope of discretion when considering these applications, or by providing for low-impact activities as permitted or controlled activities.  It was not considered appropriate to be so directive in the proposed NPS as to determine the activity status appropriate for certain activities; instead the emphasis was on conveying the government’s intention that there should be no unnecessary barriers in the planning framework to impede low-impact activities.  The word ‘enable’ was considered appropriate to convey this meaning.

5.2.6.3 Timing of changes required by the proposed NPS

As noted, there is a clear need for acting quickly to address the problem with the status quo, if enough renewable electricity generation capacity is to be constructed to meet growth in demand and the government’s 90 per cent renewable electricity target by 2025.  Earlier versions of the proposed NPS required more changes to regional and district plans within a shorter timeframe (within two years of approval of the NPS).  Feedback on this policy requirement indicated this to be an impractical and onerous requirement that would elevate the risk of litigation if councils failed to comply, or if they rushed through poorly conceived changes in order to comply.  It was also apparent that there was significant potential to minimise costs by consolidating the changes required to give effect to the National Policy Statement for Electricity Transmission, with those required to give effect to this NPS.  Consequently, the policies of this NPS were amended to shift the focus away from plan changes and towards guiding the judgements made by decision-makers, and to align the timeframes for plan changes required by both the ‘electricity’ NPSs.

5.2.6.4 Removal of requirement to identify and avoid ‘high-value areas’

Earlier versions of the proposed NPS required councils to identify those high-value areas shown by assessment to be sensitive to the potential adverse environmental effects of renewable electricity generation activities.  The preference was then to be given to avoiding adverse effects in these areas, although it was noted that in some instances it might be appropriate for development to take place.  This policy was intended to clearly demark areas where development was not desirable, thereby increasing certainty for regulators, developers and the general public.  However, on further investigation this approach was found to be fraught for the following reasons:

• there could be no guarantee that central government guidance would gain support and its development would be costly and time-consuming

• plan changes would take a long time to put in place

• there would be no certainty of consistency across the country, even with guidance (councils could choose to use their own methodology)

• there could be no guarantee that certain councils would not use this policy as justification for effectively putting a region-wide ban in place

• the process would be resource-intensive and likely to take up the time of those few officers in each council with the expertise to process consents for these complex, large and intensive projects.  Put simply, the resource would be diverted to policy and away from processing consents

• even with this diversion of resources, the task is a very complex one and there is a limited pool of expertise able to achieve it.  The results might vary in quality across the country

• it is likely that the policy would lead to extensive litigation over methodologies and definitions

• the cost would be significant.  For all councils to do this work (district, region and unitary) would cost in excess of $50 million for this policy alone (over a 20-year period).  If the requirement were tagged to regional councils the cost would be in the vicinity of $20 million for this policy alone (over a 20-year period)

• once the policy framework was in place, generators would need to apply on the basis of site-specific circumstances anyway.  As the Unison Networks case illustrates, decisions on the location of high-value areas may not have given the certainty that inspired the inclusion of this policy in the first place

• case law developed in response to this requirement could be quite different to that which is already evolving, possibly confusing the regulatory environment for those seeking consent, or required to process consents

• it potentially duplicated existing requirements of the RMA by requiring decision-makers to comprehensively consider and balance the national and local benefits and effects of renewable electricity generation twice: once at the plan-setting level then again when considering specific proposals against the purpose of the RMA.  This could amount to inefficient ‘double-handling’ of the issue given the relatively small number of large-scale, large-impact projects expected to come forward nationally.

Overall it was decided to abandon this policy approach on the grounds that it would:

• duplicate existing requirements of the RMA

• increase statutory complexity

• be extremely time-consuming and expensive

• not deliver clear or certain benefits.

5.2.6.5 Removal of the proposed requirement to optimise the use and development of the available renewable energy resource

Earlier iterations of the proposed NPS required decision-makers to have particular regard to the extent to which a particular application made use of available technology and site selection to optimise the use and development of the available renewable energy resource.  This policy requirement was included in response to the need to ensure that local authorities and decision-makers gave appropriate consideration to the quality of the renewable energy resource and the degree to which the proposed development optimised its use.  Its inclusion was prompted by the observation that, as electricity demand increases, it will become more important to ensure that available renewable electricity resources are used and developed efficiently.

While a policy of this type would promote the efficient use and/or allocation of resources, the section 32 evaluation concluded that the potential benefits of such a policy would not justify its inclusion in light of its costs.  The decision not to include a policy of this type was made on the basis of the following observations:

• it is possible that a policy of this type would lead to requests for generators to supply proof, including economic rationale, that the proposal appropriately optimised the use and development of the available resource.  In many instances, however, generators will be unable to specify the type of technology proposed to be used or detailed designs of the proposal as orders for parts are placed once consents are granted and specifying particular components could jeopardise negotiations.  Clearly, ‘optimisation’ includes a number of factors and some decisions in the process will draw on confidential information that should not be subject to public review.  Similarly, some manufacturers work with generators to confirm final site design and this information may not be available at the time of consent processing or hearing.  In any case, generators would likely argue that they already have very strong incentives to optimise their use of the resource

• this policy fails to specify the criteria by which generators should optimise the use of a particular renewable energy resource.  In so doing we are concerned that it may force developers to use the most technically efficient generation technology and prevent them from making sensible economically efficient trade-offs between cost and technical efficiency.  In particular, community-scale generation developments may not be able to cost-effectively employ the latest technology due to a lack of economies of scale

• a policy of this type could also curtail the use of second-hand wind turbines in New Zealand due to their marginally lower technical efficiency compared with ‘state of the art’ wind turbines.  This would rule out a particularly attractive option for community-scale generation developers noting that second-hand turbines have relatively low upfront costs and are available in small unit sizes

• the inclusion of a policy requirement of this type does not provide a level playing field between renewable generation and fossil-fuel generation.  Fossil-fuel generation is not subject to a similar policy requirement to optimise its resource use

• the term “optimise” would be open to interpretation and could lead to misinterpretation, litigation, regulatory uncertainty and increased costs.  In addition to increasing costs for developers, it was considered unlikely that territorial authorities would have the capacity to establish whether a particular proposal optimised the use of the available resource, and would need to engage expert advice.  In this regard, there is a risk that a policy requirement of this type could lead to the applicant arguing that the project represents the optimal use of the resource while the council’s or community’s independent expert could conclude the opposite.  While this situation plays itself out currently in relation to other environmental effects, a policy of this type would introduce another source of tension and therefore the potential for more cost.

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