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National Policy Statement on Electricity Transmission

National Policy Statement on Electricity Transmission

Executive Summary

1. Introduction

2. Status Quo

3. Problem Statement

4 Alternatives to the Status Quo

5. National Policy Statement Evaluation

6 Conclusions

Appendix A: Estimates of Costs

Glossary

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

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

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.

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