A package of energy sector discussion documents

A diagram depicting the relationship between the four energy sector discussion documents.

The titles of the four discussion documents are in blue boxes arranged in a compass formation:

• North – Interim Hydrogen Roadmap
• East – Gas Transition Plan
• South – Electricity Market Measures
• West – Offshore Renewable Energy

A double-pointed arrow runs between Interim Hydrogen Roadmap and Electricity Market Measures with the following text:

• Hydrogen production could impact electricity price
• Hydrogen could provide energy at peak times

An arrow points from Electricity Market Measures to Interim Hydrogen Roadmap with the following text:

• The Roadmap notes hydrogen production would require an extra 12.5GW of electricity generation for domestic use alone

A double-pointed arrow runs between Interim Hydrogen Roadmap and Gas Transition Plan with the following text:

• The Gas Transition Plan will consider the role of hydrogen on the phase out of fossil gas
• The Roadmap finds hydrogen could replace gas for hard-to-abate uses.

A double-pointed arrow runs between Gas Transition Plan and Electricity Market Measures with the following text:

• We need to consider how and when to reduce remaining fossil gas use in our electricity system

An arrow points from Electricity Market Measures to Offshore Renewable Energy with the following text:

• Electricity Market Measures considers the need for financial incentives to encourage renewables to be brought online.

An arrow points from Offshore Renewable Energy to Electricity Market Measures with the following text:

• Offshore renewable energy would have implications for electricity transmission and distribution

An arrow points from Offshore Renewable Energy to Interim Hydrogen Roadmap with the following text:

Offshore renewables may provide the scale of generation required for an NZ hydrogen industry.

Developed by MBIE, the 'Gas Transition Plan issues paper' seeks feedback on the strategic direction for the gas sector. This paper considers when and how fossil gas use should be phased out to meet New Zealand’s emissions reductions objectives, while maintaining security of supply for fossil gas consumers and the energy system. Importantly, an unmanaged phase out of fossil gas may mean New Zealand doesn’t have enough electricity generation at certain times of high demand.

While there is an imperative to decarbonise rapidly by reducing reliance on fossil gas, a key challenge is ensuring that investment in gas supply continues for an appropriate period so that the needs of the electricity system and gas consumers are met while the electricity system transitions to a fully renewable one. Without a clear plan for t he phase out, we could risk not having enough gas for managing peaks or the sector not making the necessary investment decisions to support this transition.

The paper also considers the role of renewable gases like biomethane and hydrogen, and technologies like carbon capture and storage, which offer promising ways to reduce emissions through the transition phase. Many stakeholders have argued that these technology options should be more actively considered through and beyond the phase out of fossil gas.

The fossil gas transition has particular relevance for the Taranaki region.

The Gas Industry Company is the industry body that works alongside industry and government to co-regulate the gas sector.

The key questions this document asks are:

• when and how should fossil gas use be phased out to help meet New Zealand’s emissions reductions objectives, while maintaining security of supply for fossil gas consumers and the energy system?
• what is the appropriate role for renewable gases like biomethane and hydrogen, and technologies like carbon capture and storage, which offer promising ways to reduce emissions through the transition phase?

Next steps

Submissions on the consultation will inform the development of a final Gas Transition Plan

'Measures for transition to an expanded and highly renewable electricity system' looks at how we can ensure electricity is affordable, reliable and resilient while we transition to an expanded and more highly renewable electricity system. The Government has set an aspirational target of 100 per cent renewable electricity by 2030. A key issue for the energy transition is how to manage the phase out of fossil fuels in the electricity system, while responding to substantially increased electricity demand that is occurring through the electrification of other sectors (such as industry and transport). The paper sets out work already underway by government and regulators, and seeks feedback on what else might need to be considered.

The key questions this document asks are:

• how do we ensure sufficient investment in new renewable generation to expand our electricity system for electrification and to replace retiring fossil fuel generation?
• how do we ensure adequate dispatchable generation capacity, storage or demand side response as fossil fuel plants retire and intermittent capacity grows including ensuring sufficient capacity for peaking, calm, cloudy periods, and managing the ‘dry year’ challenge (ahead of any NZ battery project solution)?
• how do we ensure competitive markets during transition to a more highly renewable electricity system?
• how do we grow and enhance transmission and distribution networks at a sufficient pace to meet our needs for demand growth and new renewable generation in a timely way?
• how do we support smarter use of networks and smarter technologies?

This paper has close links with the Interim Hydrogen Roadmap since significant green hydrogen production would require a large amount of additional renewable electricity. There are also links with Developing a Regulatory Framework for Offshore Renewable Energy, since offshore renewable energy could supply significant additional renewable electricity.

The market measures issues paper is accompanied by a separate paper - Implementing a ban on new fossil-fuel baseload electricity generation. This paper provides an opportunity for final feedback on the design and implementation of the emissions reduction plan action to ban new fossil-fuel baseload electricity generation.

Next steps

Submissions on Measures for transition to an expanded and highly renewable electricity system will help to determine next steps for the electricity market measures work. Any specific options to be progressed would be subject to further consultation ahead of implementation.

Following consultation on implementation issues relating to the Emissions Reduction Plan action to ban new baseload fossil fuel electricity generation, the Government will take final policy decisions later in 2023.

As well as substantial amounts of new renewable electricity, New Zealand will need other forms of green energy where electrification is not possible or economic. Hydrogen is one of the key technologies being considered for playing this role, and many countries are supporting it at significant scale.

The Interim Hydrogen Roadmap (the Interim Roadmap) sets out an emerging view on the potential role of hydrogen in New Zealand’s energy transition, to inform where the Government should best place its effort. Providing a roadmap for hydrogen in New Zealand will also help foster certainty for investors and project developers. Feedback is sought on whether stakeholders agree with the strategic context and direction of focus in the roadmap, or whether there are other circumstances Government should consider. The Interim Roadmap suggests that hydrogen has the most potential to play a role in decarbonising New Zealand’s hard-to-abate applications such as chemicals, fertiliser and parts of heavy transport (including aviation and marine), and that an industry in New Zealand could generate substantial economic activity. There is also significant international interest in New Zealand’s potential for providing hydrogen to export markets.

The Interim Hydrogen Roadmap also summarises the Government’s current hydrogen initiatives, and commits to new actions, including a public-private hydrogen body and a regulatory work programme. This is in addition to funding in Budget 2023 to provide a consumption rebate for hydrogen use and a clean truck discount which will apply to hydrogen vehicles.

The key questions this document asks are:

• do you agree that hydrogen has the most potential for New Zealand in decarbonising hard-to-abate applications such as chemicals, fertiliser and heavy transport (including aviation and marine)?
• since significant renewable electricity will be needed to develop large scale hydrogen production, do you agree that government should focus any support on hydrogen for domestic use rather than for export, in the first instance?

The roadmap has close links with Measures for transition to an expanded and highly renewable electricity system and Developing a Regulatory Framework for Offshore Renewable Energy papers.

Next steps

Submissions on this consultation will be analysed and taken into account in a final Hydrogen Roadmap. A key consideration for the final Hydrogen Roadmap will be better understanding how hydrogen production interacts with the broader energy system. The final Hydrogen Roadmap is due to be published by the end of 2024, alongside the Energy Strategy.

Many other countries are rapidly enabling offshore renewables to ensure that they can play a key role in the energy transition.  If New Zealand wants the option of using offshore renewable energy to meet growing electricity demand or to enable the production of new green forms of energy like hydrogen, we will need regulatory settings for offshore renewable energy generation that encourage investment while allowing the government to select appropriate developers and projects. This includes creating opportunities for meaningful iwi participation in the operation of the offshore renewable energy regulatory regime and within the industry. Offshore renewable energy developers have shown particular interest in the Taranaki, Waikato, and Southland regions.

Developing a Regulatory Framework for Offshore Renewable Energy consults on proposals for regulating the construction, operation, and decommissioning stages of development.

This discussion document complements Enabling Investment in Offshore Renewable Energy, which consulted on proposals for regulating offshore renewable energy feasibility activities in December 2022.

The key question this document asks is:

• What should the commercial permitting process look like: structure, criteria, nature of permit?
• How should this interface with environmental consents?
• Is there a case for revenue support and opportunities for government to gather revenue?
• Who should build and own offshore transmission infrastructure?
• How do we ensure developers have the funds and financial capability to decommission properly when the time comes?

This discussion document is closely linked with Measures for transition to an expanded and highly renewable electricity system and the Interim Hydrogen Roadmap. The Interim Roadmap considers that hydrogen production of any scale in New Zealand will need to be enabled by large amounts of new renewable generation - it cannot be sourced from our existing capacity. Offshore renewables developments may provide the scale of generation required to underpin a New Zealand hydrogen industry, and developers are already considering this. Separately, Measures for transition to an expanded and highly renewable electricity system considers the need for additional financial incentives to encourage renewables to be brought online. Offshore renewables developers have argued these incentives will especially be required for the industry to develop here.

Next steps

The Government aims to finalise proposals for the complete offshore renewable energy regime later this year.