What does a Minns government mean for energy projects and the environment in NSW?

The NSW election on 25 March has resulted in a change of government. A Chris Minns-led Labor team will form a government with an interim Ministry sworn in on Tuesday, 28 March 2023.

While we wait for the final counts to come in, we look at what the change of government might mean for energy, climate change and the environment in NSW.

Snapshot

• On the whole, we expect to see some alignment between Federal Labor and NSW Labor on issues around climate change commitments, greater funding for the energy transition, streamlined approvals for renewables projects and increased protection of biodiversity.
• What we know so far about Labor’s plan for NSW is:
  • Labor will enshrine emissions reductions targets into law and establish a Net Zero Commission to develop a plan to pursue net zero by 2030.
  • A NSW Energy Security Corporation will be established as a State-owned corporation seeded with an initial $1 billion investment. The Corporation will pursue investment in renewable energy assets through private partnerships.
  • State-owned energy assets and service providers will not be privatised and there may be a possible buy back of Origin’s Eraring Power Station.
  • The government will establish a State-funded Hydrogen Centre for Excellence.
  • An energy relief fund will be established to relieve cost-of-living pressures.
  • An overhaul of the biodiversity offsets system is on the cards.
• Penny Sharpe has been sworn into the interim Ministry yesterday as Minister for the Environment and Heritage. She takes on the interim portfolio of Energy and Climate Change. We expect that portfolio will be held by Jihad Dib when the full Ministry is sworn in. We expect Paul Scully will take the role of Minister for Planning (the portfolio of Planning and Public Spaces is held by Daniel Mookhey in the interim Ministry).

1.  Emissions targets and Net Zero Commission

Labor has promised to legislate NSW’s carbon emissions reductions targets, aiming for net zero by 2025 and a 50% reduction on 2005 carbon emissions levels by 2030. This is consistent with the private members bill introduced by Labor in 2022 that did not pass.

The incoming government has also promised to establish a Net Zero Commission, responsible for creating and implementing a net zero plan and updating it every 5 years. The Commission will be able to make recommendations to government about how best to progress this plan.

2.  NSW Energy Security Corporation

The incoming government has committed to creating the NSW Energy Security Corporation, a State-owned corporation with a mandate to accelerate investment in renewable energy assets. The new Corporation will partner with private companies to work on renewable storage solutions like pumped hydro and community batteries. The aim is to provide dispatchable grid stability. The new Corporation will operate in a similar manner to the federal government’s Clean Energy Finance Corporation.

The new Corporation will receive an initial $1 billion in funding, drawn from the existing Restart NSW Fund (a fund established in 2011 to enable the funding of high-priority infrastructure projects).

Labor’s pre-election campaign describes its plan for the new Corporation as capable of producing an additional 12 gigawatts of renewable energy and 2 gigawatts of storage by 2030.

It is not clear what role the existing State energy authority, Energy Corporation of NSW, which is responsible for rolling out the NSW Electricity Infrastructure Roadmap projects will have in relation to the proposed new NSW Energy Security Corporation.

3.  Privatisations and energy security

In February 2022, Origin Energy has advised the market that its coal-fired Eraring Power Station (Australia’s largest power station) will close in 2025. During the election campaign, Mr Minns said that he would consider buying back the Eraring Power Station if Labor won the election, to ease security of supply concerns and power prices.

The incoming government has also promised to end privatisation of government assets and service providers. In the energy space, this includes Endeavor Energy, Ausgrid and Essential Energy.

4.  Hydrogen Centre of Excellence

The incoming government has promised to contribute $25 million to a vocational center in Glenwood to address skills shortages in hydrogen. It is thought that hydrogen may play a major role in the energy transition. The project will be operational by 2026.

5.  Energy Relief Fund

Labor’s pre-election promises included establishing an energy relief fund, designed to relieve cost-of-living pressures. It aims to reduce energy bills for eligible small businesses by $315 and energy bills for households receiving income support by $250.

6.  Streamlined approvals for renewables?

To be successful, the incoming government’s commitment to climate change will require streamlining of the approvals process for renewables projects. The Federal Minister for Energy has made similar promises. We are yet to see at a Federal or State level what a streamlined approvals process might look like and how it might be achieved.

At a State-level, the previous Labor government, major renewables projects were declared to be critical infrastructure and assessed under Part 3A of the Environmental Planning and Assessment Act 1979 (NSW). That regime ended and private major projects are now largely assessed under the State significant development (SSD) regime. The current process can present a hurdle to investment in renewables because of the length of time it takes to obtain development consent and the risk that consent will not be achieved at all.

There are various options open to the incoming Planning Minister to streamline renewables approvals and increase certainty without major legislative reform. These could include declaring private major renewables projects to be Critical State significant infrastructure or requiring the Independent Planning Commission to hold public hearings in relation to SSD applications for renewables. The latter would turn-off merits appeal rights (in the same manner that they are turned off for mining projects with public hearings). We will provide an update when we hear more from the new government.

7.  Biodiversity offsets

NSW Labor has made statements about overhauling biodiversity offsets. There are concerns that the current system is merely managing decline in endangered ecosystems, rather than avoiding it. This aligns with action being taken by the Federal government to increase listed species, make changes to the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 and establish a Commonwealth Environment Protection Authority.

NSW Labor intends to respond to a report tabled by a parliamentary inquiry in 2022 which says that NSW’s threatened species can be “traded away for cash” under the current scheme.

We look forward to seeing the detail of the changes and understanding what it will mean for both existing projects and pipeline projects, particularly in circumstances where biodiversity offsets are challenging to procure.

Key sources:
NSW Labor – Fresh start plan for energy and renewables.
Origin Energy – Eraring Power Station and Exit from coal-fired generation.

By Rebecca Davie, Executive Counsel, Peter Briggs, Partner, David Ryan, Partner, and Kristen Percy, Partner.