A large hydro scheme on the lower Waitaki River in Canterbury is a step closer.
The Environment Court has granted resource consents for parts of Meridian Energy's north bank tunnel concept.
This scheme would take water from the lowest dam on the Waitaki River, run it through a tunnel with turbines, and return it to the river 34km downstream.
The plan replaces Project Aqua, which was cancelled five years ago.
The tunnel scheme would produce 1100-1400 gigawatt hours of electricity per year, which is 3% - 4% of New Zealand's total consumption.
An interim decision was issued on Friday. The latest consents govern only water rights and conditions relating to wetlands and birdlife.
Meridian obtained the water rights last year, but the decision was appealed by the Lower Waitaki River Management Society.
The group says it is pleased with the conditions imposed by the court.
Further consents will be needed before building begins. Meridian says that's unlikely to occur before 2012.