Advocacy Report Reader

Levi Gibbs

Published: November 2, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: This consultation document discusses a proposed ban on new thermal baseload electricity generation. We oppose this proposal due to four main reasons. Each is detailed further in the submission attached. 1.) No developer is exploring to, nor planning to, construct new thermal baseload generation. This is likely to continue due to technology improvements that promises lower LCOE. Renewable forms of technology are already far cheaper and superior. 2.) However, despite the low probability of new thermal baseload, there a several scenarios that could justify new baseload. First, for an specified reason, renewables could fail to deliver sufficient baseload generation, thereby compromising security of supply, thus warranting new baseload. Second, new plant might be necessary to replace aging ones that could still play a role in the system for unspecified and unknown reasons. Replacing existing plant with modern and more energy efficient units capable of operating as baseload if necessary during dry years could be beneficial. Lastly, participants may identify opportunities for new co-generation to enhance the efficiency of their industrial process. 3.) The ban is unnecessary within a system that is already capped under the Emissions Trading Scheme. The ETS presents a large hurdle for any form of carbon-intensive generation, without the direct intervention of regulatory bans and ministerial interference. If the system necessitates new thermal baseload, despite higher carbon prices, it merely signifies that this plant and its emissions hold a higher value relative to other emissions (underscoring the existence of more cost-effective abatements elsewhere in the economy. A ban would free units to less valued ends, while have implications on energy affordability and security.

Levi Gibbs

Published: November 2, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: MBIE has released a paper outlining possible measures, including financial support mechanisms, regulatory changes and new guidance/standards to help support the transition. Our recommendations include: 1. Reduce uncertainty from NZ Battery Project and the 100% aspirational renewable electricity target. 2. Avoid duplicating existing work programmes, adhere to MDAG's recommendations. 3. Entrust assessment and measures surrounding competition to the EA and Commerce Commission. 4. Streamline consenting processes for transmission, distribution and generation. 5. Ensure regulatory frameworks facilitate proactive forward-looking investment in distribution/transmission. 6. Form industry consensus on the measures needed to ensure sufficient peaking capacity is available. 7. Ensuring settings balance the Trilemma. Despite price signals incentivizing new generation, prolonged high prices are unsustainable and detrimental to industry 8. Additional renewable penetration and growing peak demand is creating challenges for the grid. MDAG has demonstrated the need for more demand response to reduce the risk of blackouts. But for this to occur, demand response must be sufficiently incentivized for industry to offer their capacity.

Levi Gibbs

Published: November 2, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: MBIE has released its second consultation document on the creation of a regulatory regime for offshore wind electricity generation. The first document relates to the feasibility stage of a permit regime. This document relates to the commercial permitting and decommissioning stage. We have outlined several priorities and recommendations the Government's approach should include: 1. Fast implementation of a permit regime with a straightforward criterion to ensure feasibility studies can begin. 2. Streamline the commercial permit stage by simplifying it to a pass or fail test based on a simpler capability criterion. 3. Simplify the consenting process by extending current policy guidance in the NPS-REG to the EEZ Act, so both Acts have the benefit of guidance. 4. Ensure coherence and avoid duplication in decision-making by appointing an authority for the EEZ and RMA components. 5. Clarify roles and taking necessary action for local port infrastructure, including investigations into required upgrades and funding mechanisms. 6. Develop a proactive workforce and supply chain strategy in tandem with the feasibility studies process, while being integrated into a sector-wide plan.

Levi Gibbs

Published: November 2, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: This paper released by MBIE, outlines the issues and opportunities relating to the Gas Transition Plan. We recommend that the priorities underlying the GTP should include: 1. An enduring and bipartisan understanding about the important role of gas throughout the transition and the right policy settings to reflect this role. 2. Restore enough confidence to ensure investment in deliverability by ruling out further heavy-handed interventions and replacing existing decommissioning requirements that lock away capital needed for incremental drilling. c) Investigate routes on how CCS technology could be deployed sooner, while developing regulatory settings that enable and incentivise the use of CCS technology. d) Keep all options open. Regulatory interventions aimed at reducing emissions may limit optionality, i.e., a ban on new residential gas connections limits biogas and hydrogen, destroying option value. e) A joint-up approach is needed in the formulation of policy. The direction of ETS policy could determine a firms’ presence in New Zealand and its demand for gas. f) Clarify the role of renewable gases, including the actions required to enable biogas or hydrogen blending. g) Clarify the role, responsibilities and costs involved in the decommissioning of some existing gas infrastructure

Levi Gibbs

Published: November 2, 2023

Submitting To: Ministry of Business, Innovation and Employment (MBIE)

Issue for Business: This paper is an interim roadmap before the release of a final roadmap. The paper outlines several opportunities for the use of hydrogen. We have recommended several main priorities underlying the hydrogen roadmap: a) The roadmap should aim to enhance the investability of hydrogen. In doing so, it should provide a lucid understanding of hydrogen's role in New Zealand. Once this clarity has been given, it will attract investments and international attention. b) Conduct a comprehensive assessment outlining the distinctive characteristics of NZ's possible market which is grounded in our unique energy system, including our geographic nuances, economic landscape and demand profile, prioritizing local considerations over global trends that may not be relevant for New Zealand's future demand. c) Perform analysis encompassing the uncertainties and risks associated with hydrogen utilization. This should explore alternative applications, ensuring that the evaluation is not isolated from other potential uses. d) Ensure ongoing monitoring of international and domestic developments that could significantly influence the economic and technological developments that could influence the economic viability of hydrogen. e) Promptly implement PwC's hydrogen regulatory pathway report submitted in July 2022.

Levi Gibbs

Published: July 28, 2023

Submitting To: Electricity Authority

Issue for Business: The EA has assessed the risk of an disorderly exit of thermal electricity generation. The Authority considers the risks to be low. Based on their assessment with modelling done by Concept Consulting, thermal generators experience net-cash flow volatility, depending on the type of generator. But overall they remain positive. They believe current market settings provide sufficient signals to existing thermal to remain in the system. This submission outlines BEC's response to several issues and matters raised. Among the several considerations mentioned in the submission, below are a few: 1. BEC believes this assessment should be ongoing because is the risk is ongoing. 2. BEC recommends that the Authority's analysis should be broadened to encompass a more comprehensive, contestable and open assessment. 3. We agree, in theory, a decrease in demand may not necessarily lead to a disorderly phase-out of thermal generation. However, at present, market participants express their deep concern about the lack of incentives and returns to justify the investment into a fast start peaking plant. This is concerning. 4. Gas supply in the broader conversation about sufficient thermal capacity must be considered adequately. 5. Existing policy uncertainty, including proposals like the NZ Battery Project and the 100% renewable electricity target, is severely damaging the investment feasibility of building new peaking plant. Abandoning the proposal would restore much needed certainty and investor confidence.

Levi Gibbs

Published: July 19, 2023

Submitting To: Commerce Commission

Issue for Business: The Commission's draft decision largely retains the current methodology. This may not be prudent considering the evolving needs of electrification. There are instances where the Commission proposes changes that are retrograde steps, such as reductions to the weighted average cost of capital (WACC) percentiles for EDBs, which seem questionable given the need for investment in decarbonisation and the transition away from being less dependent on thermal generation. The WACC impacts financiability by acting as a building block for the rate of regulated return – the return that a regulated network can earn on investments. Implementing a steady state or incremental approach, in this context, could possibly slow electrification, and thus jeopardise the country’s energy transition. Insufficient allowances for network companies would likely result in a slower and impeded transition, making it more challenging for the country to meet its international commitments to achieve net-zero emissions within the designated timeframe.