Government’s range of energy reforms – towards an Energy Security Act?

This has led to a variety of responses from industrial users, energy industry participants and the Government. More detail can be found here: Alleviating the energy security crunch - Bell Gully

Some industrial users have publicly stated the prevailing energy prices are not sustainable for them in the long term. Key sector participants have used demand-side management arrangements (both gas and electricity). This is not dissimilar to what has happened in some prior years, albeit without the attention these challenges have attracted this winter.

The Government has proposed or initiated several work programmes or reforms in response to this energy crunch. The table below summarises the key items and provides some brief commentary on each of the proposals.

There is a question left open by such a menu of reforms: should New Zealand have an Energy Security Act? This could bring together all the reform strands in a consolidated vehicle which addresses energy security in a holistic way, and ideally would have broad-based support to provide certainty to the industry. There is also a potential analogue New Zealand could draw upon – the UK Energy Act 2023, which passed into law in the United Kingdom late last year.

Proposal	Commentary
Removing legislative and consenting barriers to LNG importation	Stops short of the Government itself facilitating/funding LNG infrastructure or LNG imports to fill the short-term fuel shortage.
	Relies on market participants seeing the economic proposition and building/re-purposing infrastructure to facilitate LNG imports.
	Precise infrastructure mix will need to be developed – potential for facilities at Marsden Point, Port Taranaki or an offshore platform.
	Uncertain impact on domestic gas exploration and supply if LNG import facilities are developed and long-term LNG imports commence.
	Market factors will need to be worked through – availability and pricing of imported LNG (including LNG capable ships), longer-term impact of international LNG prices, and sovereign risk perception in some quarters.
Easing restrictions on electricity lines companies owning generation assets	Current restrictions prevent lines companies from owning grid-connected generation assets with capacity exceeding 250MW or generation assets exceeding 50MW connected to their own network.
	Easing these restrictions is intended to open up further sources of capital for additional generation investment by existing participants who understand the sector.
	Appetite of existing participants for investment of a scale that would significantly expand or change the overall mix of generation assets is unclear, but is important to help support increased distributed generation (particularly given constraints on the national grid).
	If this attracts some incremental investment in generation by existing market participants, that would be positive.
Changes to upstream legislation and settings	Government to progress with urgency the previously signalled changes to the Crown Minerals Act.
	Will include removal of the prohibition on the grant of new offshore acreage, as well as some changes to the new decommissioning/financial security regime (we do not anticipate wholesale changes).
	Legislative change will be one thing; much will depend on the exercise of administrative discretion by NZP&M in the management of the new regime.
	Basis of allocation of any new permits remains an open question – might the Government go back to priority in time allocation which worked in the past?
Ensuring gentailers can access hydro contingency	Not much detail provided in the Government’s announcement, but will be a keen area of focus before next winter.
	Aligned with Transpower’s earlier proposal to enable generators early access to contingency storage to alleviate supply risks due to historically low lake levels.
	Interplay with forward expectations as to hydro lake levels and available demand side response management arrangements will be important.
Energy Competition Task Force to review electricity market operations	Established by Electricity Authority and the Commerce Commission, with MBIE as an observer.
	Task Force has already met. Initial focus to enable new generators and independent retailers to enter and compete in the market and to provide more options for end users of electricity.
	Early days but formation of the Task Force reflects unusually high energy prices over winter 2024 and associated factors.
Electrify NZ plan (26 August 2024) See prior commentary on the Fast-track legislation here: Key Changes announced to Fast-track Approvals Bill and the RMA Reform: Phase Two - Bell Gully And here: Government’s Fast-track Approvals Bill released under 100 Day Plan - Bell Gully Further commentary on ERP2 is available here: Government seeks feedback on New Zealand’s Emissions Reduction Plans - Bell Gully And here: Climate Change Commission releases three key papers - Bell Gully	Suite of proposals to facilitate consenting and construction of renewable electricity generation as well as electricity distribution and transmission infrastructure.
	Electrify NZ announcements made at the same time, but separate from, the energy security announcements described above. Included announcement of offshore renewable energy regime (see below).
	Includes: · Consenting some major renewables and transmission projects under the planned Fast-track Approvals legislation. · RMA amendments to speed up consenting and increase default consent duration to 35 years for renewable energy projects. · Change the NPS for Renewable Electricity Generation and NPS on Electricity Transmission to enable renewables. · Changing regulatory settings to support growth of EV infrastructure.
	Consistent with ambition in the Second Emissions Reduction Plan to continue the expansion of renewable energy use and generation (goal to double by 2050).
	Much of the detail of these announcements had already been flagged or was known as part of the Coalition arrangements.
Offshore renewable energy regime (part of Electrify NZ announcements) Earlier commentary on framework design is available here: Offshore wind developments – what will the NZ framework look like? - Bell Gully	Continuation of the previous Government’s policy work to establish a robust offshore renewable energy regime.
	Government indicating it will move quickly through the legislative process – with legislation enacted during 2025, first feasibility permit round in late 2025, and first feasibility permits granted in 2026.
	Sensible approach adopted, drawing from parts of the equivalent Australian offshore renewables legislation (already enacted and operational), and from parts of the existing New Zealand offshore legislation (e.g., decommissioning and financial security).
	Likely to be keen interest in the gateway feasibility permits from those existing industry participants who have signalled interest, as well as any further interested parties who emerge as the regime moves towards conferring bankable rights.
	Issues to be resolved in the detail in terms of those with existing vested interests, as well as existing competing uses for the same offshore geographic area (e.g., seabed mining).
	While the focus for the regime has been on offshore wind, the legislation could be an enabler for emerging new technologies such as tidal projects, to the extent these are economic in New Zealand.
Gas Security Response Group formed in May 2024	Tasked to help the Government formulate plans to respond to the domestic gas market being significantly tighter than had previously been anticipated.
	Subsequently expanded to include key industrial users of gas.
	Intended to get those with the direct knowledge to work with the Government to address the current and expected future gas shortages in 2025 and 2026.
Improved infrastructure delivery See the most recent speech from Infrastructure Minister, the Hon Chris Bishop, at the Building Nations conference here: Speech to Building Nations 2024 \| Beehive.govt.nz	The Infrastructure Minister has been clear the Government wants to fundamentally shift the way New Zealand plans, invests in, builds and looks after infrastructure.
	The Government has directed the Infrastructure Commission to develop an independent 30-year National Infrastructure Plan by the end of 2025, which will include recommended priority projects and reforms.
	A new National Infrastructure Agency will be established on 1 December 2024 by repurposing Crown Infrastructure Partners. This is intended to unlock access to more capital for infrastructure and give the private sector a one-stop shop to partner with Government.
	Other Government priorities include a work programme on smarter and fairer ways to fund and finance infrastructure, including modernising the PPP model, and strengthening and improving asset management and resilience in New Zealand.
Carbon capture, utilisation and storage (CCUS) Further commentary of the CCUS proposals is available here: Carbon Capture, Utilisation and Storage – a way forward for New Zealand? - Bell Gully	Government to create a regime to enable CCUS, consistent with the approach taken in other jurisdictions.
	Will adjust the existing regulatory frameworks to the extent necessary to enable CCUS (e.g., existing ETS and RMA settings).
	New Zealand has some equivalent experience with underground gas storage operations (one existing and one proposed) as well as re-injection for enhanced recovery at some existing fields.
	Should be viewed as complimentary legislation to much of the other legislation and proposals designed to address energy security issues.
OIO Ministerial Directive Letter and streamlining energy sector investment Further commentary on the Directive Letter and proposed OIO reforms is available here: Government’s positive signals for overseas investments into New Zealand - Bell Gully	Ministerial Directive Letter updated to streamline and speed-up the OIO application and consenting process. OIO is to minimise compliance costs for investors and to focus on high-risk applications.
	OIO to target a 50% reduction in processing times for 80% of consent applications. Early indications are that the OIO is meeting (or exceeding) these targets.
	OIO has focused on the use by renewables developers of lease and easement structures for investments.
	While the benefit to New Zealand case for solar farms will need to focus on traditional benefit factors (i.e., creation of jobs, increased productivity), the OIO will consider illiquid asset benefit claims where a partially-developed solar farm needs more investment capital.
	OIO has indicated a focus on foreign investment into the electricity industry, with investments by overseas persons into larger electricity generators and electricity distributors likely to trigger mandatory national interest assessment. National security and public order (NSPO) notification may also be triggered in some cases.

If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.