Hydro exemption from water standards debated

Sunday, 10 November 2019, 1:25 pm
Article: NZ Energy and Environment Business Week

Hydro exemption from water standards debated

First published in Energy and Environment on October 31, 2019.

Treasury officials suggested to ministers all hydro generation schemes should be exempted from proposed freshwater quality standards.

Papers released by Treasury show when Cabinet papers were being drafted, Treasury noted the proposals to use the current exemptions mechanism in the National Policy Statement on Freshwater in its rewrite.

It proposes just listing the six largest hydro-electricity schemes as exceptions in the new NPS-FM – the Waikato, Waikaremoana, Tongariro, Waitaki, Manapouri and Clutha schemes. This would cover about 90% of hydro capacity and regional councils would have “clear direction on how to approach other existing schemes”.

The discussion document said maintaining adequate flow levels and variability in rivers is essential to ecosystem health. However, in some cases hydro-electric generation has changed water channels and flows to an extent that this can affect the health of downstream ecosystems.

Treasury officials recommended the consultation document present an alternative option of including all hydropower infrastructure within the exemption, regardless of size, and the Government commit to reviewing exemptions within 5 – 10 years of the NPS coming into effect.

“There appears to be a likely and significant risk that the proposal to include only the six largest schemes would undermine competitive pressure in the electricity sector. This risk to competition would likely contribute to increased electricity prices, which would impact wellbeing (particularly for low income consumers) and work against the Government’s emissions reductions objectives (increasing electricity prices will discourage electrification in areas such as transport and process heat),” Treasury warned.

They said reductions in the capacity of hydro schemes to provided flexible generation will also increase the probability electricity demand will be increasingly met from fossil fuelled generation.

“The more hydro schemes that are excluded, the greater this unintended consequence will be.”

They said a future review of the exemptions around 2030 – 35 could take account of technology improvements; including the feasibility of other energy storage and flexible renewable generation technologies which could mitigate the impacts on emissions, and whether the role of hydro in limiting the quality improvement of freshwater catchments has become more salient.

The current exceptions mechanism, allows regional councils to maintain water quality below a national bottom line if it is necessary to secure the benefits of hydro-electricity infrastructure as listed in Appendix 3 of the NPS-FM. However, this appendix has never been populated.

Under the proposals as presented regional councils would be required, when making plans or setting limits, to have regard to the importance of not adversely affecting the generation or storage capacity of a scheme or its operational flexibility.

Three of the working groups which advised the Government on its freshwater proposals were opposed to even the major hydroelectricity schemes being exempted from the new rules.

The Environmental Defence Society said it does not support providing any exemptions to major existing hydro-electric schemes and consider “any significant impact of hydro schemes on water quality in particular should be subject to the same obligations as other water users”.

Treasury was generally supportive of the water quality work saying human activity was polluting waterways. “These activities are not currently internalising the environmental costs of the activity, with regional planning neither sufficient nor fast enough to stop further degradation of freshwater and its ecosystems.”

Opening a debate to recognise these externalities was a way forward, but there was significant uncertainties on the impacts of some aspects of the policy proposals. “We understand that the economic, environmental, social and cultural impact of the package could be significant, but may be most acutely felt in different regions.”

First published in Energy and Environment on October 31, 2019.

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