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Executive Summary

Demand for electricity is increasing with population growth, rising incomes and new technology powered by electricity. The combination of growing demand and the need to provide electricity in environmentally sustainable ways gives increased importance to the improvement, upgrade and extension of the New Zealand electricity transmission network, or national grid.

The main issue confronting development of the national grid is the lack of appropriate recognition / consideration of the national benefits of electricity transmission. This creates inconsistent cross-border treatment that impacts on the efficiency of the grid. In particular, the elongated and cross-boundary characteristics of the network mean there is a high potential for externality effects, ie, actions in one locality having implications elsewhere.

This report examines alternatives to the status quo and concludes that, in order to fully address this problem, a national policy statement (NPS) on electricity transmission is required. It is recognised that other mechanisms, such as further use of Ministerial ‘call-ins’ and ‘all-of-government’ submissions would complement and assist the NPS to resolve this problem. The NPS is intended to provide national direction on the sustainable management of the electricity transmission network and, in particular, to raise the status of electricity transmission to one of national significance when considering resource management proposals.

This report evaluates the National Policy Statement on Electricity Transmission in accordance with section 32(2) of the Resource Management Act 1991 (RMA). A section 32 evaluation requires four inter-related examinations:

  • the extent to which each objective is the most appropriate way to achieve the purpose of the RMA1

  • whether, having regard to their efficiency and effectiveness, the policies, rules or other methods are the most appropriate for achieving the objectives

  • the benefits and costs of policies, rules or other methods

  • the risk of acting or not acting if there is uncertain or insufficient information about the subject matter of the policies, rules or other methods.

To follow is a summary of the section 32 evaluation.

To what extent is the objective the most appropriate way to achieve the purpose of the RMA?

The objective of the NPS is:

To recognise the national significance of the electricity transmission network by facilitating the operation, maintenance and upgrade of the existing transmission network and the establishment of new transmission resources to meet the needs of present and future generations, while:

  • managing the adverse environmental effects of the network; and

  • managing the adverse effects of other activities on the network.

The objective has been found to be generally appropriate in fulfilling the purpose of the RMA. In particular, the objective acknowledges that electricity supply, through the electricity transmission network, is nationally significant and a beneficial physical resource. When evaluated against potential alternatives, the NPS objective offers a complete response and efficient solution.

Are the policies proposed the most appropriate for achieving the objective?

Based on the considerations outlined below, it is concluded that the policies represent the most appropriate means of achieving the objective of the NPS. In particular, it is considered that policies will be effective and efficient in achieving the objective and that while there is some risk associated with uncertainties, this will be mitigated by the established processes for the implementation of the NPS.

Effectiveness

Table ES.1 summarises each policy’s effectiveness in relation to the objective.

It is considered that, overall, the policies will be effective in achieving the objective. In particular, it is noted that the three key outcomes sought by the objective are well addressed in the policies. Specifically, the national benefits of transmission are addressed by Policies 1, 2 and 3, adverse effects of transmission on the environment by Policies 7, 8 and 9, and managing the effects of others on the grid by Policies 10 and 11.

Table ES.1: Summary of effectiveness

Policy Elements of the objective Effect on
Recognition of national benefit Manages effects of the grid on the environment Manages effects of others on the grid Impacts on council plans Impacts on resource consents and designations

1

½√

2

½√

3

√ (indirect)

½√

4

5

6

7

√(indirect)

8

√(indirect)

9

½√ (indirect)

10

√(indirect)

11

√(indirect)

12

√(indirect)

½√

13

½√

½√

14

½√

½√ (indirect)

Source: NZIER

What are the benefits and costs of the proposed policies?

The costs and benefits are summarised in Table ES.2.

The quantifiable benefits of the NPS and its policies stem largely from cost savings for Transpower in relation to what it currently spends on plan advocacy, RMA appeals, dealing with third-party activities and applications each year. Dealing with third-party activities is the main cost saving.

Benefits could also accrue nationally if grid capacity improvements, facilitated by the NPS, encouraged the development of more renewable energy generation, subject to the grid improvement itself passing a benefitcost test. Another benefit may be a more secure national grid. Some of these benefits may also accrue from improvements in network security and operation.

The costs of the status quo are likely to escalate as demands on the electricity system grow and require further upgrades and extensions of the transmission network. The benefits of ironing out any undue impediments and costs from the environmental management issues around the transmission grid will increase in future years.

Costs are likely to stem largely from costs to local government in changing plans to recognise the NPS, increased transaction costs with land owners and increased appeals; to some land owners adjoining the transmission network who may have their future activities further curtailed; and to government in implementing the NPS.

Table ES.2: Summary of costs and benefits

Group / resource Explanation Cost / benefit

Benefits

Environment

Potentially a small benefit. Safeguards in place that reduce risk of substantial environmental losses, particularly from policies

Potential benefits cannot be properly costed, but will be small

Grid operator (Transpower)

Large benefits because of NPS guidance particularly for third-party activities

Potential benefits of $10.0 million

Government

Some benefits will accrue to government, through security of supply and as owner of Transpower and claimant on its profits

Potential benefits cannot be properly costed, but will be small

Consumers

Some benefit from increased security of supply

Potential benefits cannot be properly costed, but will be small

Others / generators

Some benefit from more timely connection and increased security of supply

Potential benefits cannot be properly costed, but will be small

Costs

Local government

Increase in costs, particularly for those who have to change their plans because of the NPS. There will be increases in transaction costs with land owners. Also there will be Environmental Court costs

Potential costs of $4.0 million

Land owners

Major costs on some land owners. The shift in policy / regulations means that all face transaction costs and some will be required to change behaviour around transmission lines. The costs will mainly fall in the short term

Potential costs of $2.7 million

Government

Minor costs associated with managing the transition process

Potential costs of $0.16 million

Net benefit

 

Potential net benefit of approximately $3.0 million

Source: NZIER

What are the risks of acting or not acting if there is uncertain or insufficient information about the subject matter of the proposed policies?

It is considered that there are four key areas of uncertainty or insufficient information, the implications of which warrant consideration as part of this evaluation. These are:

  • how local authorities will give effect to the NPS, and how land owners will respond, ie, in several instances, local authorities would retain significant discretion in relation to how they give effect to the NPS in its current form, and if land owners resist the introduction of the NPS by taking large numbers of cases to the Environment Court, then the costs to all parties will increase

  • the potential costs to third parties from the implementation of Policy 11 for both land owners and councils

  • the uncertainty of some of the definitions, such as ‘minor upgrades’ and ‘operational requirements’, since they have a bearing on how the costs and benefits fall

  • a detailed assessment of the environmental effects associated with electricity transmission, including the identification of appropriate and practical mitigation methods.

While each of these points presents a risk in relation to the implementation of an NPS on electricity transmission and to the costs and benefits of the NPS, it is considered that this risk is adequately mitigated for the reasons described in section 5 of the present report.

The key area of uncertainty or limited information has been identified as the potential cost to third parties from implementing the NPS. The risks of acting or not acting on this uncertainty, where more or better information might become available, are indeterminate but are expected to be low rather than high.


1 (1) Thepurposeof this Act [the RMA] is… to promote the sustainable management of natural and physical resources.

(2) In this Act, sustainable management means managing the use, development, and protection of natural and physical resources in a way, or a rate, which enables people and communities to provide for their social, economic, and cultural wellbeing and for their health and safety while—

  1. Sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and
  2. Safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
  3. Avoiding, remedying, or mitigating any adverse effects of activities on the environment.