Transpower submits amended investment proposal

24 October 2006

Transpower submits amended investment proposal

Transpower has submitted to the Electricity Commission an amended proposal for upgrading the transmission supply into Auckland and Northland.

“Transpower firmly believes that this amended proposal is the most cost effective and efficient way of responding to the growing electricity demand in the upper North Island”, said chief executive Ralph Craven.

Dr Craven said Transpower has taken on board issues arising from the Electricity Commission’s draft decision in April, the 12 June outage in Auckland, and the revised Government Policy Statement on Electricity.

“This amended proposal is more flexible in terms of when a higher voltage is needed, responds to the call for greater diversity of supply into Auckland, is less expensive than the alternatives, and makes better use of a scarce land resource.”

The amended proposal involves:

- Building an overhead transmission line from Whakamaru to near the South Auckland urban boundary, which will be 400 kV capable but will operate initially at 220 kV. (Delaying expenditure on costly transformer equipment).
- A transition station near the South Auckland urban boundary, where the overhead line will connect to underground cables.
- An underground cable section from the transition station to Pakuranga substation. (Rather than Otahuhu, increasing diversity of supply).

- A second underground cable section to Otahuhu substation to be added at a future date (As demand increases).
- Voltage to be raised from 220 kV to 400 kV at a future date.
- Using triplex conductor (a bundle of three wires) to maximise the capacity of the overhead line, pushing the need for another new line well into the future.
- An estimated cost of $683 million (in 2006 dollars, including contingencies, interest during construction and foreign exchange risk management).

“Over the last few months Transpower has worked closely with the Electricity Commission to better understand the application of the Grid Investment Test, to deliver a proposal that we believe meets that Test,” Dr Craven said.

“The proposal has been tested against realistic alternatives. Economically it is the most cost-effective solution and meets the requirements of the Grid Investment Test. It is also, in Transpower’s view, the best long-term strategic decision for the country.”

In recent months ten transmission options were detailed and assessed. These were then reduced to a short-list of four.

The four options are:

1. A new 220 kV double-circuit transmission line from Whakamaru to Pakuranga (with an underground cable section in South Auckland) with a second 220 kV double-circuit line between Whakamaru and Otahuhu within 20 years.

2. A new double-circuit transmission line operating initially at 220 kV and increasing to 400 kV at a later date (Transpower’s proposal).

3. Duplex (replace the single conductor with twin conductor) the existing Whakamaru to Otahuhu A and B lines and connect them to Pakuranga via an underground cable, build a new 220 kV double-circuit line by 2020 and a second 220 kV double-circuit line by 2035.

4. Duplex the existing Whakamaru to Otahuhu A and B lines using a new high-temperature conductor, build a new 220 kV double-circuit line by 2029.

In Transpower’s assessment, Options 3 and 4 have been found to be considerably more expensive.

Options 1 and 2 are virtually identical in terms of NPV (Net Present Value), which is how the options are assessed under the Grid Investment Test. Option 2 is $10 million better than Option 1. Additionally, when 20 key assumptions were varied in a sensitivity analysis, Option 2 came out ahead 80% of the time.

Ralph Craven says the proposal also has other advantages.

“It is a strategic investment that underpins New Zealand’s economic growth over the longer term, it supports competition between generators and encourages the development of renewable generation, and it provides long-term confidence to business investors.

“Importantly, it is the only feasible option that requires just one new transmission line into Auckland to be built for the next 35 years. All other buildable options involve more lines and more towers over the same period.”

Dr Craven said Transpower anticipates receiving a draft decision on its amended proposal by the end of the year.

Transpower will begin consultation this week with those communities potentially affected by the South Auckland transition station and the underground cable route through to Pakuranga substation.

Attached:
Questions and Answers on the amended North Island Grid Upgrade Proposal
Map

ENDS

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