Open Letter to Prospective Investors in the Stationary Energy Sector

Re: New Zealand Energy Strategy

The purpose of this letter is to clarify the Government's intention on the application of proposed measures aimed at encouraging renewable energy.

On 11 December 2006, the Government released the draft New Zealand Energy Strategy to 2050. Since release, the Government has been asked to clarify its intention with respect to the expected date of implementation. More particularly, the Government has been asked whether it intends to apply measures concerning new stationary energy, including electricity capacity, to all additional capacity from the date of release of the final Energy Strategy, or some later date.

Amongst other things, the Transitional Measures document accompanying the draft NZES explains different mechanisms that may be used to control, prevent or price carbon emissions from additional fossil fuel energy production in the stationary energy sector.

Measures currently being considered are:

• Emissions trading, including the following options
  • Cap and trade
  • Baseline and credit
  • Offset trading
• A CO₂ charge
• Direct regulatory options, including under the Electricity Act and the Resource Management Act

I want to be clear to all prospective investors in the stationary energy sector that the Government's present intention is that any "additional capacity" measures finalised through the energy strategy would likely apply to all capacity built or recommissioned from the date of release of the final Energy Strategy (unless commissioning had commenced prior to that date). For example, fossil fuel projects not yet commissioned, such as those currently contemplated at Marsden, Otahuhu C and Rodney, would likely be covered by any measures applying only to additional capacity.

I thought it important to record this in writing to avoid any misunderstandings.

I recognise the desirability of clear regulatory policy. Further clarity on these matters will be possible next year following consultation.

Yours sincerely

Hon David Parker
Minister of Energy

cc: Chair, Electricity Commission

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