Chapter 5: Commercial permits
Approximately 25 submitters commented on the proposals relating to commercial permits.
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Commercial permit allocation process
The discussion document sought feedback on the mechanisms for assessing commercial permit applications. Specifically, the document sought views on whether this process should be initiated by developers and whether the assessments should include an option to compare applications received at the same time. MBIE’s suggested approach was that developers initiate the commercial assessment with a time limited period for other projects to submit applications for comparison.
Almost all submitters supported a developer-initiated commercial assessment. However, these submitters were divided as to whether this should be a comparative or non-comparative or threshold-based assessment.
Most expressed a preference for a non-comparative process. Almost all these submitters noted a comparative approach would create too much uncertainty, delay development and undermine the exclusivity provided by feasibility permits. Some submitters also commented that comparative assessments at this stage would duplicate existing regulatory processes or market functions (e.g., connection processes).
A minority of other submitters supported MBIE’s suggestion of a comparative assessment at the commercial permit stage. These submitters said that such comparison would be necessary and justified to maintain a competitive environment and secure the best outcomes for New Zealand. A few submitters noted that it would be appropriate for the regime to include mechanisms that enable government to prioritise projects with the greatest value, given the potential for competition. Those that supported MBIE’s suggested approach noted that risks associated with a comparative process could be reduced by:
- incorporating strict timeframes for contesting applications;
- providing clear guidelines around who can contest applications (to avoid frivolous applications);
- proactively communicating with the industry when developments are expected to seek commercial permits;
- incorporating a price-based criteria (e.g., an auction for a contract for difference or some other revenue stabilisation mechanism); and
- establishing a decision-making board that includes iwi and hapū representation.
Commercial permit criteria
The discussion document sought feedback on the following proposed permit criteria: capability of the developer; readiness of the project; iwi and hapū involvement; arrangements for decommissioning; energy system impacts; economic development potential; health and safety credentials; and national interest.
Most submitters that commented on the criteria supported, at least in part, the proposed criteria and avoiding duplication with other regimes. Submitters supported aligning the criteria with the feasibility permit criteria, except a few that emphasised the focus at the commercial stage should be on the readiness of the project. A few submitters, mainly developers, did not support the inclusion of energy system and economic development criteria at this stage, noting it was ‘too late in the process’ to be assessing these factors and may create uncertainty for investors (especially if a comparative assessment is retained). Other criteria put forward by submitters included supply chain management and degree of innovation.
Some submitters suggested refining the factors considered in each of the criterion to provide greater clarity. Several submitters sought greater clarity around how the permit criteria would be assessed, with a few submitters preferring a simplified pass/fail assessment over a weighted merit-based assessment at this stage.
Ensuring permit-holders deliver on their commitments
The discussion document sought feedback on mechanisms to ensure permit holders deliver on the commitments of their application over the life of the projects. In the document, MBIE proposed that permit holders should provide regular reporting on the progress of their development. Failure to do so could lead to changes in the permit conditions or enforcement actions.
All submitters supported, at least in part, including mechanisms to monitor projects, so long as reporting obligations were not too onerous and were proportionate to the risks and commitments being monitored. Submissions referenced several effective mechanisms for monitoring compliance, including the VADE compliance framework, management plans, annual review meetings, permit conditions, performance bonds, independent auditing requirements, and an iwi-regulator review board.
Commercial permit duration
The discussion document proposed a 40-year duration for commercial permits, noting that this period should comfortably accommodate the expected life of the infrastructure and decommissioning without being too long.
Most submitters agreed with the proposed commercial permit duration of 40 years. A few submitters suggested this may need to be higher, as the typical life of offshore wind assets is expected to increase over time. As such, these submitters noted the regime should provide flexibility for extensions to repower assets as appropriate. A few submitters said the duration should, at least initially, be 35 years to align with the environmental consent durations, or 10-15 years to provide a regular period of review to ensure commitments are evolving over time and permits remain appropriate. A couple of submitters said that it would be best to avoid prescribing a maximum duration in legislation and that permit durations should instead be determined on a case-by-case basis.
Several submitters commented on the sequencing of commercial permits and other approvals that will need to be sought – specifically environmental consents and overseas investment consents. Submitters noted that the framing of the ‘readiness of project’ criteria will need to be carefully considered as there are interdependent approvals and decisions needed before construction can take place (e.g., final investment decisions, environmental consents, overseas investment consents, and securing vessels and personnel).
Approach to requests for permit extensions
The discussion document sought feedback on whether extensions to a permit area should be treated as a new permit application.
Submitters agreed, in principle, that a developer should require a new feasibility permit and commercial permit application for a geographical extension of an already-granted permit. However, submitters held differing views on how this should be applied and whether some flexibility should be provided for minor extensions.
Submitters representing environmental interests, iwi and the wider energy sector recognised that geographic extensions could have significant implications on the environment and the energy system, which would warrant a full reassessment.
However, several submitters, particularly offshore renewable energy developers and energy industry participants and experts, noted that this process would be inefficient for minor or inconsequential extensions. A few submitters noted that there should be flexibility for regulators to allow exceptions where extensions are small or to enable more efficient operations. They proposed an alternative approach where the regulator could exercise some discretion and not consider the full criteria, or it could apply a reasonableness test to determine whether an extension should be granted without a new permit being sought.
Scope of permits
The discussion document sought feedback on the scope of feasibility and commercial permits and whether they should apply to research and development activities. MBIE proposed that requiring separate permits to enable research and development activities is not currently appropriate or necessary in the New Zealand context.
The few submitters that commented on this issue expressed mixed views:
- Some submitters agreed research and development projects should not require permits, as this could impede innovation and development. A few submitters also noted that these activities are unlikely to occur in New Zealand.
- A greater proportion of submitters supported regulating these activities but had differing views on how this could be achieved. These submitters noted that even “small” demonstration projects will still be significant undertakings and may eventually mature to a state of commercial development.
- A few submitters noted that the regime will need to make clear what distinguishes research and development activities from commercial projects.