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Renewable generation gets boost from law changes

Hon David Parker
Minister of Energy

5 September 2008 Media Statement

Renewable generation gets boost from law changes

Unnecessary barriers to electricity lines companies investing in renewable generation have been removed by a Bill amending the Electricity Industry Reform Act passed in Parliament today, Energy Minister David Parker said.

The Bill is a major rewrite of the Electricity Industry Reform Act, which requires separation of monopoly electricity lines and competitive generation and retailing businesses.

“The amendments made by this legislation will contribute to achieving the government’s 90 percent renewable energy target by 2025, which is a major plank in the New Zealand Energy Strategy and in the fight against climate change,” David Parker said.

“Electricity lines companies have an important role to play in developing the country’s renewable energy sources, especially smaller renewable projects in their area.

“The changes to EIRA will reduce uncertainty for lines companies investing in renewable generation by enabling them to sell the energy they generate directly to consumers.”

While lines companies are already able to own some types of renewable generation in unlimited quantities, the new legislation widens the definition of renewables to encompass geothermal, wind, hydro and others. It’s expected that local lines companies will invest in some of the smaller projects that are not of interest to the larger generators.

It also makes it easier for lines businesses to get back into retailing by allowing them to:

• Sell 100% of the nominal output of their generation to their own consumers

• Trade in financial hedges without restriction to manage risks

• Own generation and retail without limit outside their lines area.

The risk of monopoly lines businesses competing unfairly in retail markets is managed by retaining the requirements for corporate separation and compliance with arms-length rules, but the Bill lowers the costs of compliance.

See Questions and Answers below.


Questions and Answers

How much generation can a lines company own?

Renewables generation: unlimited
Non-renewables generation [The provisions relating to non-renewables generation will be subject to legislation on the renewables preference.] connected to its lines: 50 MW or 20% of maximum demand on its lines (whichever is higher)
Non-renewables generation not connected to its lines: unlimited

How much is a lines company allowed to retail?

100% of the nominal output of its permitted connected generation to customers connected to its lines. (That is, there is no limit on the amount it can retail provided it builds enough renewables generation)
• No limit outside its lines area.

What are the requirements on a lines company with regard to generating and retailing?

If it owns more than 10 MW of connected generation it must:
- set up a separate company (corporate separation) to generate and retail to connected customers
- comply with arm’s-length rules
[Main arms-length rules:
• Businesses must have separate boards. Cross directors are permitted (except for executive directors). Boards must have at least one independent director.
• Separate management is required for over 30 MW of connected generation (but staff and premises can be shared)
Information sharing and transactions must be conducted at arm’s length. ]

If it owns more than 5 MW of connected generation and retails more than 5 GWh/pa it must have a written, transparent use-of-system agreement with its retail arm

• There are no requirements for generating or retailing outside their lines area.


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