Presentation to Energy Trusts of New Zealand

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Presentation to Energy Trusts of New Zealand

• David Laurie General Manager, National Grid,
  Transpower New Zealand
• 28 September 2006

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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

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Why transmission is important to New Zealand
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Transmission is important to New Zealand because.

• We dont 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.

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Transmission is important to New Zealand because
(cont)

• Many of us live in places like this
• and not many live in places like this

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Transmission is important to New Zealand
because(cont)
Were running out of the capacity provided by
the significant investment of the 50s and 60s
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Transmission is important to New Zealand
because(cont)
Our electrical demand keeps growing
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Transmission is important to New Zealand
because(cont)
Sometimes the demand is well in excess of what
has been forecast
Auckland/Northland Peak demand
?
?
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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?

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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

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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 cant 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.

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Summary of why transmission upgrades are
important.

• NZs 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.

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The role of the regulator in developing a strong
grid
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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.
• Transpowers 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.

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Transpowers 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.

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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..?

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Moving to the holy grail of transmission
investment (cont).

• Were 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
  Transpowers 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 Transpowers investments representing about 30
  projects.

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Ways in which networks and the grid need to
interact for the benefit of all customers
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What we can do

• Greater transparency
• Transpowers 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 Zealands
  energy future
• Regional planning forums with customers and
  others
• MOUs with various national bodies
• Transpower and Vector MOU to help secure
  Aucklands power supply

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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

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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?