The Government is now pulling out all the legislative stops as it attempts to deal with the energy crisis.
There is intense pressure on it to provide assurances that there will be sufficient power to keep industry working.
POLITIK has learned that one Asian ambassador has warned Ministers that plants owned by citizens of his country could move offshore if there is not a long-term assurance of competitively priced electricity.
This explains why today, the Prime Minister and Energy Minister Simeon Brown are expected to announce moves to increase electricity generation.
While they can do little about the immediate situation, they will be looking to the medium term.
Both the Prime Minister and Infrastructure Minister, Chris Bishop, have frequently blamed the length of time they claim it takes to consent to a wind farm as a reason for the generation shortage.
The Prime Minister claims 11 years; Bishop yesterday said it was eight.
But Meridian, the only generating company to quote windfarm consenting times to the recent Select Committee hearings on the Fast Track Consenting Bill, said the longest it had taken them was four years, and generally, it was up to two and a half.
Perhaps for that reason, yesterday, Regional Development Minister Shane Jones appeared to suggest the real problem was the structure of the electricity market.
“Why have those consented projects struggled to bring them to market, and why have they not been able to find the right offset arrangements with the current big players in the energy industry?” he said yesterday.
“Simeon Brown will have more to say about that tomorrow.”
Brown hinted at what might be coming today on Q+A yesterday when he said we needed more competition in the market.
“We need to actually see a greater number of companies actually investing in generation in New Zealand so it is more competitive,” he said.
The key phrase is “a greater number of companies.”
Currently, the so-called “gentailers” are vertically integrated generation-retail companies.
There is little incentive for an outside investor to enter the generation market unless they can do a deal with one of the gentailers to retail their power.
Therefore, the logical move in any Government intervention in the market could be to do a “Telecom” and separate the retailers from the generators, as the retailer Telecom was split off from what became Chorus, the telecoms infrastructure wholesaler, in 2011.
POLITIK understands that the Government is unlikely to go that far as a first step but rather hold it back as a threat that could be implemented if nothing changes.
However, the immediate problem in the electricity market is the need to produce more gas somehow.
That requires the passage of an amendment to the Crown Minerals Act, which would reverse Labour’s 2018 ban on offshore exploration and its ban on accessing onshore rigs through conservation land.
However, Jones has previously talked about other disincentives that act against increasing gas production, such as the lack of certainty for any investor because of the prospect that the Government might change.
It could even be that the Government might consider royalty concessions for drillers who are ready to get going ASAP.
But the legislation to do this has yet to enter Parliament.
“That will soon be passed,” Jones said.
“Amongst other things, it’s going to have an impact on dealing effectively with our energy challenges.
“I can assure you it’s being drafted as we speak.”
Transpower modelling released in June shows that the country has sufficient consented generation to last until 2029, provided it is all built.
But after that, we will need new generation that is currently unconsented.
However, Jones argues that we need to do more than sustain the status quo.
“If we’re going to go ahead with electrification, if we’re going to attract further foreign direct investment, which we’ve got people knocking at our doors wanting to do, we need to boost the supply capacity of the electricity system of New Zealand, and it’s better that we have some contingency rather than relying just on Indonesian coal,” he said.
Perhaps not surprisingly then, the Government yesterday reversed some of the key clauses in the Fast Track Consenting Bill to take account of the electricity industry.
Its decision to move the final decision on a fast-track consent out from the Beehive and Ministers to an independent panel and the decision to have only one (rather than four) Ministers oversee an application were moves that were asked for by the Electricity Sector Environment Group (ESEG) in its submission to the Select Committee considering the Bill.
The ESEG was concerned that both provisions, as the Bill had been drafted, would leave the Government exposed to a judicial review of its decision on consent.
This was particularly relevant to the proposal to have the Ministers decide what projects would be eligible for fast-track approval and then decide whether or not to approve them.
“The process should also be sufficiently independent rather than prone to the policy predispositions and priorities of the Government Ministers of the day for this legislation to have enduring benefits,” their submission said.
“For these reasons, ESEG submits that it is preferable that expert panels should have the final decision-making function rather than their powers being confined to making recommendations.
In particular, the ESEG considers that judicial reviews or appeals on points of law would almost inevitably be filed regarding decisions made by joint Ministers to depart from an expert panel’s recommendations on any project attracting a material degree of controversy.”
ESEG also argued that only one Minister should handle applications for the same reason.
The Bill proposes that the Ministers of Infrastructure, Transport, and Regional Development act jointly, and in some cases, the Minister of Conservation also consider any application.
“While having no particular preference as to which Ministers are involved, ESEG submits that it could run counter to the intended efficiency objective of the Bill, to provide for decision making by an amalgam of Ministers with different portfolio objectives, bearing in mind the likelihood of different streams of advice from officials across the respective departments or Ministries, informing each Minister’s decision involved,” their submission said.
“These differences may compound the risk of legal challenges to decisions made by Ministers.”
Other changes that may be coming will be unveiled when the Select Committee, chaired by former National Minister Scott Simpson, makes its final report.
Ironically, the changes announced yesterday are bringing the fast-track consenting process much closer to its former state in Labour’s Natural and Built Environments Bill, which National repealed.
While this is happening, work has begun drafting the replacement Resource Management legislation.
POLITIK understands that the process may involve amending Labour’s legislation rather than starting from a blank sheet of paper.
However, in the meantime, there is clearly huge anticipation for the fast-track legislation to be passed.
Infrastructure Minister Chris Bishop yesterday revealed that at the beginning of August the Government had received 384 applications for consents under the fast track.
They came from primary Industry, 29; renewable Energy, 71; infrastructure, 92; quarrying and other extraction,19; mining, 21; and urban development (housing), 152.
The applicants obviously fancy their chances under the fast track.
Though the decision will now be made by independent experts rather than Cabinet Ministers, Bishop confirmed yesterday that he was retaining a controversial aspect of the original Bill, which is the ability of what will now be the Minister to send back a declined application to the independent panel for another look.
The ESEG warned that decision-making under the fast track would not facilitate the “delivery” of infrastructure projects but, instead, the approval of such projects.
“Actual delivery will depend on a range of factors including funding, procurement, construction, plant and equipment pricing, and broader consent implementation,” their submission said.
That is the challenge Jones was talking about in the electricity market. There is more to producing more electricity than a resource consent, and addressing that is now the real challenge facing the Government.
