While the Prime Minister was hosting his Infrastructure Investment Conference in Auckland, back in Wellington, MPs were well ahead of him in debating how to regulate what could potentially be two of the largest and most transformative pieces of infrastructure in the country.
It is evident that is not going to be politically easy and the coalition will have problems getting agreement among the three parties..
There are now two separate proposals for $5 billion wind farms off the coast of Taranaki that would each generate as much electricity as the entire Waikato River hydro schemes.
Some of that electricity could be used to power a hydrogen or ammonia production industry aimed at the Japanese market, thus setting up a major export industry.
But already, it is clear they will test the coalition with the questions their developers are asking.
On the one hand, the wind farms want limits placed on one of NZ First’s pet projects, undersea iron sand mining off the Taranaki Coast.
And on the other, the developers want the Government to underwrite the prices they receive for their power, a move that would likely be anathema to ACT.
The proposals amount to a 21st-century version of Sir Robert Muldoon’s “Think Big” projects, which turned Taranaki into an energy province and gave it the highest GDP her head in the country.
But whereas Muldoon simply imposed the projects on Taranaki, the two big current proposals are going through a much more democratic process.
A Select Committee is now holding hearings on the Offshore Renewable Energy Bill, which deals with how offshore wind farms will be regulated.
However, wind farm promoters, echoing the Muldoon years, have also raised the possibility of some form of Government help with their finance.
They say they don’t want a direct subsidy but want what they call “price stability”, which in Europe has meant a long-term Government guarantee on the prices they can receive for the power they generate.
A PWC report last year suggested such a guarantee could allow the windfarm promoters to access lower-cost finance.
Whilst the Windfarms have widespread support, the Committee has been asked questions about how they would affect other competing marine industries like rock lobster fishing or ironsand mining.
And here, politics come into play.
New Zealand First has been promoting undersea ironsand mining off the Taranaki Coast.
Its coalition agreement with the Government requires that the coalition investigate the strategic opportunities in New Zealand’s mineral resources, “including vanadium, and develop a plan to develop these opportunities.”
NZ First Resources Minister Shane Jones told Parliament in November last year that underseas mining off Taranaki for vanadium proposed by an Australian-based company (Manuka Resources) would bring a boom to the province.
The Government invited Manuka to apply for the project to be included in the Fast Track Approvals Bill.
The project involves mining up to 50 million tonnes of seabed material per year, processing it to recover 5 million tonnes of vanadium-rich iron ore concentrate, and returning the remaining material to the seabed.
Manuka Resources initially claimed the project could contribute $1 billion annually to NZ export earnings but later retracted that figure, stating production targets had not been derived.
Meanwhile, the New Zealand Super Fund and Copenhagen Infrastructure Partners (CIP) have proposed a $5 billion wind farm off the coast of Taranaki.
It would produce one gigawatt of electricity, more than our biggest power station, Manapouri, and as much as the entire Waikato River hydro system produces.
But that is only one proposal.
Meridian Energy and European-based Parkwind have signed a memorandum of understanding for the exploration of offshore Wind generation in New Zealand waters.
The companies say efforts will focus principally on the Taranaki coast and build on work already undertaken by Parkwind, including engagement with the iwi of Taranaki and key stakeholders.
One of the problems that offshore windfarms face is that they need safety zones around their wind towers and the undersea cables that link them to the mainland.
The CEO of the New Zealand Wind Energy Association, Kevin Hart, told the Committee that potential conflicts with other activities in the same area as the wind farm were likely to be substantive and introduce significant health, safety and environmental issues if multi-use industrial activities were permitted in the same area.
“We therefore propose that protections for offshore infrastructure, including the surrounding seabed, mimic the protections afforded to the Cook Strait power cable,” he said.
No fishing or anchoring is allowed along a seven-kilometre strip above the cables.
Given that any offshore wind farm would have its towers widely distributed across the seabed, the imposition of that sort of restriction would seem to be incompatible with an undersea mining operation in the same area.
It was a point raised by the Parliamentary Commissioner for the Environment, Simon Upton, with the Committee.
“If you’re going to grant exclusive rights to people to build wind farms at sea and so on, then they need to know that nothing is going to get in the way,” he said.
“And the bill is silent actually about other potential uses.
“Lots of things go on at sea.
“And if you want investment certainty, which I think is really the crucial issue here, I mean, if people are going to invest tens, hundreds of millions of dollars, then they need to know exactly what they are investing into.
“And I think that you should look at some criteria and a decision-making process to prevent new activities that are incompatible with offshore renewables from being granted approval.”
Parkwind Country Manager Pete Spence was also concerned about potential clashes with other users in the same undersea space and said his company was undertaking an assessment.
“We don’t have examples of what exactly the effect of seabed mining will be next to an offshore Wind farm,” he said.
“It takes time to do, but it’s something that we’re spending money on doing.
“And ideally, we will get an idea on what kind of buffer zones we think will be necessary for our investors to be satisfied that that risk is not significant.”
The other big question that Windfarm developers had was about the economics of their proposals.
Giacomo Galeffi, the commercial director for the CIG-Superfund partnership, the Taranaki Offshore Partnership, said no new offshore wind market had been established worldwide without some form of price stabilisation.
“That becomes obvious once we understand the magnitude of the investment and the amount of capital investment upfront,” he said.
“The level of capital expenditure, and especially the involvement of lending by banks for these long-term projects, has certainly been made cheaper by using mechanisms where the government underwrites something,” he said.
The Wind Energy Association suggested that the Committee look at Australia’s Capacity Investment Scheme, which underwrites the price received by a renewable energy generator.
The Australian Government has committed to underwriting up to 32 GW of renewable energy projects by 2026.
Hart told the Committee that building offshore wind energy projects required specialist expertise and experience, which would predominantly come from international investors.
“Given the unprecedented international demand for offshore renewable energy, New Zealand must attract and retain this expertise,” he said.
“At the moment, there are only three to four remaining experienced offshore wind energy developers investigating projects here, and this compares to over 12 in Australia, and developers here will likely reduce further due to the absence of any price stabilisation mechanism, as these international investors will simply turn to other markets of which there are many.”
But perhaps to pour cold water on this idea, Upton proposed that the wind farm developers pay the Crown a rental for their resource use that would place a value on the licence the Crown would give them.
“I’m not suggesting you try to fashion a resource rental,” he said.
“I’m suggesting that you impose a levy or a charge, which is at least putting a marker in the ground that we have given you something valuable; that’s exclusivity.”
The question of competition between undersea mining – particularly given its political support- and offshore Wind farms and whether the Government should underwrite them is the sort of fine print that was missing from last week’s investment summit.
They are both politically difficult to resolve.
Would NZ First agree to restrictions on undersea mining?
Would ACT agree to the Government underwriting private investments?
But the real question is surely whether the country can afford to give up the opportunities promised by the development of these massive wind farms.
