Chapter 4: Proposals for managing feasibility activities

The proposals in this document only deal with the early stage of exploring the feasibility of offshore renewable energy projects. A second discussion document in 2023 is expected to canvas further
elements of required regulatory settings such as how best to manage the construction, operation and maintenance, and decommissioning stages of offshore renewable energy infrastructure.

Together, the 2 discussion documents will contribute to establishing timely and fit-for-purpose regulatory settings by 2024.

Feasibility is the first step of development

The feasibility stage is an opportunity to determine the scale and location of renewable infrastructure through assessments and studies that could subsequently inform applications for relevant consents to construct. The purpose of the feasibility stage is to determine whether the construction of offshore renewable energy is technically, commercially, environmentally, culturally, and socially appropriate in a given location. This involves:

  • gathering the necessary information, and
  • balancing any competing uses, interests, and values in deciding whether to proceed with the development.

The government can have different degrees of involvement in the feasibility stage of an offshore renewable energy project. On one side of the spectrum, the government could prepare the information itself, involving significant time and cost to the Crown. On the other, this task can be assigned to developers who would absorb these costs themselves. In a new market like Aotearoa New Zealand, the data across the different categories of information may not be available, may be limited, or may be of variable quality. For example, although some offshore areas are specifically protected for their conservation value, significant habitats for species, and their migratory paths may lie outside
of marine protected areas or marine mammal sanctuaries in both the territorial sea and the exclusive economic zone. Obtaining a better understanding of the importance of areas for marine species and ecosystems needs to be an integral part of the feasibility stage.

The availability of data could also vary by region. For example, in Taranaki where oil and gas exploration has been occurring for decades in the territorial sea and exclusive economic zone, much
is known about the geotechnical and geophysical characteristics. This may not be the same in other regions such as Waikato and Southland.

In Aotearoa New Zealand, competing uses, interests and values would usually be balanced during the consenting process to construct offshore renewable energy developments. The feasibility process will be vital to gather information about these uses, interests, and values, particularly for local iwi, hapū, and whānau.

Internationally, governments have taken different approaches to gathering information and balancing uses, interests, and values

The Dutch tendering model is an example of the greatest role for government, in which the government identifies specific areas where renewable energy development could be feasible, having
itself conducted significant feasibility work. This includes environmental and conservation assessments and specific studies about wind, soil and water conditions to determine construction and operation conditions.
Scotland’s marine sector plan for offshore wind energy is based on government-led environmental and socio-economic impact assessments to identify locations for offshore wind energy deployment. 

The assessments are designed to identify potential constraints to steer future investigations by developers.

Australia’s “declared areas” policy is an example where the government identifies broad areas where renewable energy development could potentially be feasible, having identified and undertaken some consideration of potential conflicts with other users, interests, and values.

The Danish “open door” policy is an example where government plays a limited role by inviting developers to conduct comprehensive studies and assessments to identify areas where renewable energy development could be feasible.

Annex 3 includes detailed information on several other jurisdictions’ approaches to offshore wind regulation.

Annex 3: Why does the government need to enable feasibility activity now?

We propose a developer-led approach to feasibility

From overseas experience it is clear that information can be gathered by the government, a developer, or a combination of both. However, balancing competing uses, interests, and values is always performed by a government and the choice is about when it occurs – prior to feasibility or when the developer is ready to construct. The choice of timing is influenced by how much baseline information is available to confidently balance other uses, interests, and values.

The potential advantages of greater and earlier government involvement in feasibility are:

  • increased investor confidence through government balancing competing uses, interests, and values up front (rather than at construction) and allocating space for renewable energy generation
  • wider dissemination of environmental and other information to all interested parties, and
  • data standardisation.

On the other hand, the potential advantages of a developer-led approach are:

  • greater opportunity for developers to identify optimal areas for development, with the lowest levelized cost of energy generation
  • more timely development where developers are incentivised to conduct feasibility analysis, and
  • fewer costs for government.

Timing is a key consideration in choosing an approach for Aotearoa New Zealand. In the short-to medium term, progressing a government-led approach to gathering feasibility information could mean materially slowing down the development of offshore renewable energy development in New Zealand. As outlined in Chapter 2, offshore renewable energy has potential to contribute to our emissions reduction goals. Adding the time for a potential government-led sectoral planning exercise to existing offshore development timelines (ten years plus) would delay and possibly undermine the ability of offshore renewable energy to contribute to these important goals.

There are also a number of offshore renewable energy developers, specifically offshore wind developers, exploring Aotearoa New Zealand right now. They are operating in an environment in which international demand for offshore wind is growing rapidly, with opportunities in many countries. Therefore, even once some form of government-led assessment, such as a marine spatial plan, has been completed, it cannot safely be assumed that developers will be ready and waiting to resume activity. This could result in even further delays to activity or an absence of activity altogether.

Below we discuss 2 options for implementing a developer-led approach to improve our understanding of where offshore renewable energy development could occur in New Zealand.

More government involvement may be suitable and possible in the medium-to-long term 

Internationally, there is a trend towards using government-led processes, though this often reflects
the result of a gradual maturing of the market. In the Netherlands, for example, prior to its adoption of a “one-stop-shop” in 2013, developers were responsible for initiating site selection and verification.

More and earlier government involvement in the medium-to-long term would align with proposed reforms of our resource management system that will gradually introduce regional spatial strategies that will identify areas for specific uses, including in the territorial sea. However, no equivalent planning process is proposed for the exclusive economic zone right now, where most offshore renewable energy development is likely to occur. Annex 2 describes the proposed replacement of the Resource Management Act 1991.

Annex 2: Proposed resource management reforms

6. What role do you think government should have in gathering feasibility information for offshore renewable energy development?

7. Do you agree that, at least in the short-to-medium term, a developer-led approach to gathering feasibility information is appropriate for Aotearoa New Zealand? Why or why not?

8. Is there another approach not considered above that may be more suitable?

Implementing a developer-led approach

We propose a developer-led approach to gathering feasibility information that could be used in the preparation of relevant consent and other permissions to construct and operate. As this will involve a significant investment, developers are seeking the confidence to invest without the potential for a different developer gaining priority over them through a first-in-time consent application over the same location.

To address this, we compare 2 options below:

  • Option 1: establish a permit for feasibility activities that would provide a sole right to apply for later permissions to construct and operate, or
  • Option 2: enable a collaborative approach among developers, government and iwi, hapū, and whānau.

Option 1: Establish a feasibility permit with rights to apply

Under this approach, the government would grant permits over specific offshore areas (with limits on size) for the purpose of conducting feasibility activities. The permit would offer the holder a sole right to apply for subsequent permissions to construct and operate offshore renewable energy infrastructure, but would not guarantee these permissions.

Permit holders would remain responsible for complying with all relevant legislation when carrying out their feasibility activities, including relevant requirements under the RMA and EEZ Act.

We note that other general research and activity in a given area would not be prohibited. The permit would only apply to feasibility activities undertaken for the purpose of seeking later rights to construct and operate renewable energy generation.

The advantages of a feasibility permit are:

  • The ability to select the developer and development: The government needs to consider whether the developer and development is appropriate for New Zealand’s national interests. 
    A permitting approach enables the government to assess initial proposals against defined criteria in a competitive manner.
  • Improved investor confidence: With a permit providing a sole right to apply for construction and operation, a developer could be assured that their investment in feasibility will be justified as they will have an advantage compared with other developers. This will reduce investment uncertainty for offshore renewable energy developers.
  • Provide for participation by mana moana: A permitting approach enables government to set specific and enforceable criteria to ensure that Māori participate in the feasibility process.
  • Timely and efficient: Permitting is a familiar model in New Zealand (in the Crown minerals regime) and internationally, with clear roles and responsibilities. This experience would make a permitting approach more straightforward to establish and administer.

There are a range of considerations in establishing a feasibility permit, which we examine below.

Option 2: Enabling collaboration among developers

As an alternative to granting exclusive feasibility permits, the Government could enable an approach whereby interested developers, the Crown and Māori collaborate to conduct feasibility activities. Technical studies and environmental assessments are an obvious area for collaboration, while more commercially sensitive assessments may not be suitable.

A collaborative approach need not be formally regulated, but a formal agreement would be needed between all parties, including cost-sharing arrangements.

These participating developers would effectively have an exclusive opportunity to apply for subsequent permissions to construct and operate, since other non-participating developers would
lack the detailed site information necessary to seek these permissions.

Following the feasibility assessment, developers would individually choose whether to seek permissions to construct and operate, and over what sites that were identified through the collaborative feasibility assessment process.

The advantages of a collaborative approach are:

  • The possibility of lower costs and efficiencies through pooling resources and skills.
  • The possibility of more, better-quality data. The collaborative approach may allow a greater quantity and quality of data to be gathered through pooling of resources, skill sets, and cooperation.
  • Developers and developments would be selected later in the project lifecycle. The government could take a decision on the competitiveness of a developer in meeting criteria based on a greater degree of information.

The drawbacks of a collaborative approach are:

  • Lower investment confidence: This approach is unlikely to provide sufficient investment certainty to developers, which would risk developments proceeding, and therefore not achieve the objectives set out in this document.
  • Higher administrative costs: There may be higher administrative costs for all parties in negotiating to set up a collaborative approach, which may also take significant amounts of time.

We see a strong case for a permitting approach, but seek your views on the viability of the collaborative model

International experience and the observations of developers active in Aotearoa New Zealand suggest that reducing investor risk is a prerequisite to greater investment in feasibility analysis. An exclusive feasibility permit could make a significant contribution to reducing investor uncertainty, while helping to mitigate the first-in-time features of the current resource management system. A collaborative model could be preferable if it is viable. We seek views on the viability of the collaborative model, including how it could function in practice.

9. Do you agree with the 2 shortlisted options (permitting and collaborative) that we have identified? If not, what other viable options might we be looking at?

10. Assuming a developer-led process to propose sites and assess feasibility, do you think the permitting approach or the collaborative approach would deliver a better outcome for Aotearoa New Zealand and why?

11. How could a collaborative approach be designed to enable the objectives set out above, and what could the government do to support collaboration?

12. Have we captured a complete list of trade-offs between the 2 shortlisted options? What else, if anything, should we be considering?