Updated Draft Energy Policy Framework proposed to facilitate the transition to renewable energy in NSW

Introduction

The NSW Government has previously set an ambitious target to reduce emissions by 70% by 2035 compared to 2005 levels. Achieving that target requires the transition from conventional to renewable energy and significant investment in electricity infrastructure such transmission, renewable energy generation, storage, and firming infrastructure. Whilst the transition is well underway, with renewables contributing close to 31% of generated electricity,¹ meeting the State’s ambitious reduction target will require significant further investment in the renewable energy sector.

The Department of Planning and Environment’s (DPE) Draft Energy Policy Framework (Draft Framework) aims to facilitate the energy transition by making onshore wind, solar and transmission project planning and investment decisions less complex, more transparent and consistent from a planning perspective, by providing guidance to applicants, communities, councils, and the broader energy industry on how the impacts associated with these projects and transmission infrastructure will be assessed and managed.

The Draft Framework comprises the DPE’s Guide to the Energy Policy Framework, as well as the following specific guidelines and technical supplements:

• Draft Wind Energy Guideline supported by technical supplements for Landscape and Visual Impact, and Noise Assessment, and a Wind Energy Decommissioning Calculator;
• Proposed updates to the Solar Energy Guideline 2022, supported by a Solar Energy Decommissioning Calculator;
• Draft Transmission Guideline supported by a technical supplement for Landscape and Visual Impact;
• Draft Benefit Sharing Guideline; and
• Draft Private Agreement Guideline.

Submissions on the Draft Framework can be made via the Have your say section of the DPE’s Planning Portal, available here.

Draft Wind Energy Guideline

The Draft Wind Energy Guideline will replace the existing Wind Energy Guideline 2016 and will apply to onshore wind energy developments declared as State Significant Development (SSD) under the Environmental Planning & Assessment Act 1979 (NSW).

Application of the Draft Wind Energy Guideline will be phased in, such that it will only apply where the Planning Secretary’s Environmental Assessment Requirements (SEARs) have not been issued at the time of publication of the final Framework or where the SEARs have been issued but an environmental impact statement (EIS) is not submitted within 6 months of the SEARs. These arrangements give transitional relief for project developers that have already started down an EIS route informed by existing SEARs.

The Draft Wind Energy Guideline initially caused concern as it was issued with a map showing “suitable areas for wind energy development”, with the majority of NSW characterised as “less suitable”, and the implication that developers of wind energy projects may find it challenging to gain planning approval.

The DPE subsequently re-issued the Draft Wind Energy Guideline with a revised map that utilises terminology of “highly suitable” and “suitable sites”. This addresses the initial potential implication that wind energy projects had little hope of finding a suitable site according to DPE’s mapping given land is no longer proposed to be characterised as “less suitable sites”. The re-issued map provides further comfort by including the note that “unmapped areas are not necessarily unsuitable for wind energy development. The map is based on existing and planned transmission at the time of publication and is subject to change over time.”

The Draft Wind Energy Guideline does not represent a major shift from the existing policy position outlined in the 2016 Framework, instead:

• it provides advice to assist industry in selecting sites and designing projects, including on undertaking mandatory constraints mapping in the EIS process and on principles relating to the permissibility of micro-siting;
• it includes new guidance on evaluating and managing noise and health, shadow flicker, aviation safety and lighting, bat and bird impacts, traffic and transport, waste management landscape and visual impacts in the development assessment process. For example, new requirements are proposed relating to setbacks (based in height) where turbines are visible from private residences, and the assessment of impacts in relation to dwelling entitlements;
• provides for the Minister to consider requests to declare wind energy development to be Critical State Significant Infrastructure (CSSI) if it includes a significant energy storage system such as a delivery capacity of 750MW or more;
• includes minor updates to align the noise impact assessment methodology with updates to the South Australian Wind Farm Noise Guidelines, and creates a new criterion of 50dB(A) for passive recreation areas within National Parks as well as providing detail on the potential health impacts of noise by identifying that 37dB is an appropriate maximum level of noise exposure in residential settings; and
• includes a spreadsheet-based decommissioning calculator to assist in estimating potential costs of decommissioning.

Updates to the Solar Energy Guideline

The proposed updates to the Solar Energy Guideline are also minor and intended to align that guideline with key policy changes in the Draft Energy Policy Framework. Proposed key updates include:

• similar to the Draft Wind Energy Guideline, that the Minister will consider requests to declare solar energy developments as CSSI where they include significant energy storage (eg a delivery capacity of 750MW or more);
• a map showing “suitable locations” for development. As with the Draft Wind Energy Guideline, the guideline was initially issued with a map adopting terminology including “desirable sites” and “less suitable sites” – a reissued map uses the terminology “highly suitable sites” and “suitable sites” with a note that unmapped areas are not necessarily unsuitable sites; and
• a spreadsheet-based decommissioning calculator to assist in estimating potential costs of decommissioning.

Draft Transmission Guideline

The Draft Transmission Guideline is intended to apply to all major transmission projects that are declared as SSI or CSSI. As with the Draft Wind Energy Guideline, a phased in application is proposed and the guidelines will only apply to projects that have not been issued SEARs by the time of publication, or for those that have SEARs where an EIS is not submitted within 6 months of publication.

The Draft Transmission Guideline provides guidance on matters giving rise to impacts likely to arise from the development and operation of transmission infrastructure, including:

• the planning approval pathways relevant to transmission infrastructure development in NSW;
• route selection, including options development, corridor refinement and project design. The draft Transmission Guideline is supported by a Technical Supplement for Landscape and Visual Impact Assessment which is to be applied when considering landscape and visual impacts as part of the route selection process. The Technical Supplement outlines methodologies to be employed as part of the assessment process and when measures will be required to avoid or mitigate impacts, for example visual impacts on private land, including mandatory setbacks for fully visible transmission towers;
• Community and stakeholder engagement;
• Impacts on biodiversity values;
• Preparation of emergency management plans and bushfire risk management plans;
• Assessment of electric and magnetic fields (EMF) to ensure EMF levels do not exceed exposure guidelines; and
• Aviation risk management.

Draft Benefit-Sharing Guideline

The Draft Benefit Sharing Guideline provides guidance on the developing area of providing community benefit share initiatives for renewable energy projects. The guideline contemplates that the provision of funds to host communities can assist with social licence issues and facilitate faster planning processes for projects.

There is a focus on the achievement of a benefit sharing model through the statutory development assessment process as the Draft Benefit Sharing Guideline will be implemented in the planning process for utility scale renewable energy projects and will need to be considered by applicants for large-scale renewable energy projects where it is referenced in SEARs and in preparing a project’s EIS.

The guideline provides advice on and outlines a benefit sharing policy approach, objectives and implementation strategy. It is contemplated that applicants will need to include benefit sharing models in the EIS for the project (which would likely be reflected in a condition of a development consent), which models must include:

the estimated total value (financial amount or equivalent) of community benefits (both neighbourhood and local community benefits) to be provided as part of the renewable energy proposal, including any proposed funding amounts to be included in a planning agreement and the financial value of other initiatives offered by the applicant.

This modelling will need to consider the fair and appropriate benefit sharing rate set out in the guidance and the advice that applications should use a prescribed benefit sharing rate when determining the total funding value for community benefits for a given renewable energy project. The benefit sharing rate is prescribed as:

Total funding for benefit sharing should be:

$850 per megawatt per annum for solar energy development, or

$1050 per megawatt per annum for wind energy development, paid over the life of the development and indexed to CPI.

Draft Private Agreement Guideline

The Draft Private Agreement Guideline will replace the existing private agreement guidance in the 2016 Framework and the Large-scale Solar Energy Guideline 2022. Accordingly, the Draft Private Agreement Guideline will apply to all solar and wind energy generation projects declared to be SSD.

Like the Large-scale Solar Energy Guideline 2022, the Draft Private Agreement Guideline provides general advice to applicants, host landowners, and adjacent landowners on issues to be considered when entering negotiated agreements. In particular, the Draft Private Agreement Guideline addresses impact agreements with host and adjacent landowners, going as far as to provide a template agreement containing model clauses for both host agreements and neighbour agreements.

Whilst the guidance in the Draft Private Agreement Guideline mostly aligns the current guidance, the inclusion of a template agreement and model clauses could create an expectation in the market that private agreements should align with the template.

That said, the template is, however, not intended to be adopted in its entirety with the Draft Private Agreement Guideline noting that agreements should be specifically tailored to the individual circumstances of the landowner and the project and with the proviso that any agreement should be fair, reasonable, and written in plain English. In this regard, the following matters are worth highlighting:

• the template agreement provides an extensive definition of the term ‘impact’ and suggests that relevant impacts are fully particularised in the private agreement. The definition also suggests impacts include matters such as a broad catch-all “other elements relating to the operation of the Development which can be quantitatively assessed” and the potential health impact of “perceived risks associated with electric and magnetic fields”. It may be of some concern to developers that the DPE’s template agreement contemplates that impacts might include perceived health impacts;
• the Draft Private Agreement Guideline contemplates and the template agreement includes an obligation on the Developer to provide a copy of the private agreement to DPE. That model clause is not accompanied by any guidance as to why the DPE requires full copies of agreements, the use to which those agreements will be put by the DPE, nor how commercially sensitive information in those agreements will be managed;
• the template agreement contemplates the provision of a key information sheet to the landowner, which is to include information relating to the details of the development and its impacts, timing in relation to the development, access routes and contact details;
• The template agreement includes provision for periodic monitoring of impacts and reporting on those impacts to the landowner.
• The Draft Private Agreement Guideline and template agreement contemplate compensation being payable to landowners for material delays in developing projects or material changes in projects.

Next steps

We recommend that the Draft Framework be carefully considered by proponents (and their technical advisers) particularly those that propose to submit an EIS in 2024 or beyond particularly given we consider that the Draft Framework will have implications for proposed projects including expectations about community benefit sharing and matters to be addressed in private agreements.

Submissions to the Department must be made by 29 January 2024. Submissions may be made to query, support, or object to any aspects of the Draft Framework.

If you would like more information on the implications of the Draft Private Agreement Guideline or assistance in preparing submissions, please contact a member of our energy team.