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Presentation to
Energy Trusts of New Zealand
David Laurie – General Manager, National Grid,
Transpower New Zealand
28 September 2006
Content
• The importance of transmission to New Zealand
• Role of the regulator in developing as strong grid
• Interaction between network companies and
Transpower to benefit all consumers
2
Why transmission is important to New Zealand
3
Transmission is important to New Zealand
because….
• We don’t
connect to any
other country.
• We have to
meet all of our
own electricity
needs.
• Geography
dictates that
our network will
always be
linear ie N-S.
4
Transmission is important to New Zealand
because… (cont)
• Many of us
live in places
like this:
• …and not
many live in
places like
this:
5
Transmission is important to New Zealand
because…(cont)
We’re running out of the capacity provided by the
significant investment of the 50s and 60s:
length built
3500 45000
Generated
length of transmission lines built (km)
40000
3000
35000
electricity generation (GWh)
2500
30000
mid-decade
2000 25000
1500 20000
15000
1000
10000
500
5000
0 0
s
s
s
s
s
s
s
s
00
20
30
40
50
60
70
80
si 90
20
19
19
19
19
19
19
19
19
e
nc
6
Transmission is important to New Zealand
because…(cont)
Our electrical demand keeps growing:
2006 - A Winter of Records (so far)
Item New Record % increase
(all in 2006) on last record
Total NZ Demand 6748 MW 3.6%
North Island Demand 4505 MW 2.7%
South Island Demand 2252 MW 1.3%
Auckland/Northland 2133 MW 6.8%
Demand
Wellington Demand 646 MW 6.8%
Christchurch and upper 1081 MW 4.0%
South Island Demand
7
Transmission is important to New Zealand
because…(cont)
Sometimes the demand is well in excess of what has been forecast:
2,300
Auckland/Northland Peak demand
2,250
2,200 ?
2,150 Actual, 2006 to
date
?
2,100
2,050
2,000 Actual, 2005
1,950
2005 2006 2007 2008
Low Medium High Actual
8
Transmission is important to New Zealand
because…(cont)
Some statistics:
• Since 1997 the amount of electrical energy carried
by the grid has increased by 16%.
• Electricity demand growth is forecast to continue at
an average of about 2% a year over the next 35
years.
What do these mean?
9
Transmission is important to New Zealand
because…(cont)
• By
2015 usage expected to have increased by 27%
compared to 2005 to 47,000 GWh
• Consumption of electrical energy forecast to almost
double by 2045
10
Transmission is important to New Zealand
because…(cont)
In its terms of reference for a new energy strategy, the
Government has indicated a preference for renewable forms
of energy to be exploited.
This presents some technical and economic challenges
since:
• Economic wind, hydro or geothermal energy almost certainly
does not coincide with areas of demand;
• Renewable fuel sources can’t be transported to areas of
demand, but their energy can.
A robust transmission grid can provide a level playing field
for new renewable energy generation options against fossil-
fuelled alternatives.
11
Summary of why transmission upgrades
are important.
• NZ’s power system is isolated from other power systems.
• Highly populated areas are generally remote from the areas
of high generation.
• Demand continues to grow – unabated.
• The existing grid is nearing its capacity.
• Renewable generation options require a robust transmission
grid.
12
The role of the regulator
in developing a strong grid
13
Where does the regulator fit in?
• Transpower is a monopoly provider of transmission
services, so a regulator is needed to review:
– Terms and charges for using the transmission network are
fair and reasonable.
– Solutions are not over-designed or over-built.
– Transpower’s proposals are economically sound.
• Since the suspension of the 400 kV proposal,
Transpower has been working closely with the
regulator to ensure a workable framework for
assessing future investment proposals.
14
Transpower’s Investment Proposals
• Transpower prepares investment proposals that may form
part of a formal Grid Upgrade Plan that is submitted to the
regulator. See current Annual Planning Report on Internet.
• Transpower must obtain approval from the regulator for any
such investment.
Approval means:
• Transpower can include the project cost in its rated asset base.
• Transpower can recover the costs of the project through its regulated
rate of return.
• Transpower anticipates approximately $4 billion of new grid
investment from 2006 to 2016.
15
Moving to the “holy grail” of transmission
investment.
• Ideally we want an environment where:
– Transmission development is signalled well ahead of when
it is needed through robust and transparent planning
methodology;
This allows consenting and property issues to be resolved early.
– The electricity industry and business generally can plan with
confidence around the well signalled plans of investment
and a robust and transparent process for approving them;
This allows others to make sensible plans.
– Regulatory oversight enhances the investment decisions of
the transmission company;
– Investment is timely and with acceptable project risks;
– There are clear responsibilities and accountabilities.
• Do we have these here…..?
16
Moving to the “holy grail” of transmission
investment (cont).
We’re heading in the right direction:
- Transpower is incrementally improving its planning processes;
- Transpower is being more transparent about its investment plans
(publication of Annual Planning Report this year forecasting 10 years of
issues and possible solutions);
- Regulatory processes becoming more enshrined in Transpower’s
project paths (e.g. RFIs, more obvious consideration of alternatives,
preparation of proposals etc);
- Both Transpower and the regulator continuing to learn from the
inaugural application of the Grid Investment Test to a major
investment (the 400 kV proposal);
- The regulator has now approved some $200 million of
Transpower’s investments representing about 30 projects.
17
Ways in which networks and the grid need
to interact for the benefit of all customers
18
What we can do
• Greater transparency:
– Transpower’s Annual Planning Report (APR) highlights future transmission
constraints and proposes possible solutions;
– Transpower has joined the Electricity and Gas Complaints Commission
scheme.
– Transpower is committed to consulting on the needs and solutions with its
stakeholders.
• Better communication
– Ensure that Transpower is structured to better interact and communicate
with customers, stakeholders, communities using various forums and
approaches.
• Closer co-ordination to help secure New Zealand’s energy
future
– Regional planning forums with customers and others
– MOUs with various national bodies
– Transpower and Vector MOU to help secure Auckland’s power supply
19
What we can do (cont).
Work together to resolve issues of mutual interest
and concern.
Perhaps there are some common issues that affect many
parts of the industry:
» Acquisition of property rights
» Consenting under the RMA
» Long term planning and co-ordination of investment
» Orthodox and consistent regulatory approaches
» Energy policy development
20
In Summary
• NZ will always need a robust transmission grid that provides future
certainty for investors.
• The grid needs to be upgraded to meet increasing demand for power
across the country.
• Transpower has signalled the need for about $4 billion of investment
over the next ten years.
• The processes for planning, assessing and approving transmission
investments are improving all the time.
• Greater transparency, better communication and closer co-ordination
between Transpower and its stakeholders will benefit all consumers.
• How can parts of the industry work better together?
21
