This report provides an assessment of the Board of Inquiry’s report on a proposed national policy statement on electricity transmission consistent with section 32 of the RMA. Because of the high level guidance given by such an NPS, it is not feasible to quantify its costs and benefits with precision, but broad conclusions can be drawn.
The evaluation of the status quo confirms that the first three issues identified in the reference group report:
the national benefits of transmission
the effects of activities on the transmission network
the efficient operation and maintenance of the existing network
are undoubtedly resource management issues for which consideration of alternatives to the status quo is warranted.
The costs of the status quo are likely to escalate in future years as demands on the electricity system grow and require further upgrades and extensions of the transmission network. Pressures arise from the growth in population, economic activity, and demand for electricity, the need to find new sources of electricity generation and connect them to their markets, and the increased interest in renewable generation arising from international commitments over greenhouse gas emissions. The benefits of ironing out any undue impediments and costs from the environmental management issues around the transmission grid will increase in future years and remain over the life of the grid.
The benefits of the NPS stem largely from the long-term cost savings for Transpower, which should avoid some of its current costs of plan advocacy and, in the longer term, reduce conflicts with other activities. Some of this benefit may be passed on to electricity consumers as improved efficiency and improvements in network security and operation. Benefits could also accrue nationally if grid capacity improvements facilitated by the NPS also encouraged the development of low-cost renewable energy generation, subject to the grid improvement itself passing a benefit–cost test.
Costs are likely to stem largely from the costs for local government in changing plans to recognise the NPS and ensuring that NPS provisions are carried out, central government in implementing the NPS, and land owners adjoining the transmission network who may have their activities curtailed by Policies 1, 2, 3, 5, 10 and 11.
The effectiveness of the objective in the NPS appears largely appropriate, particularly since it recognises the importance of dealing with national benefits.
Further, the two bullets points in the objective managing:
- the adverse environmental effects of the network and
- the adverse effects of other activities on the network
give adequate protection against substantial environmental losses (Policies 4, 6, 7 and 8) and for maintaining the integrity of the electricity transmission network (Policies 10 and 11).
With regard to the efficiency of the policies in relation to the objective, there is a potential net benefit of approximately $3.0 million (Table 16). The costs associated with the policies are substantial, immediate and mainly occur in the short term to medium term as councils and land owners become familiar with the regulations associated with the NPS (first 10 years). The benefits, while being substantial, last over the lifetime of the transmission assets – although they do taper off towards the end of the 30-year period.
The important costs and benefits are:
the large (transaction and consequential) costs incurred by land owners as they are required to change their behaviour and types of activities around transmission lines (Policies 10 and 11)
the gains (transaction and real costs) to Transpower with the recognition of electricity transmission as a national benefit (Policies 1, 2 and 3), and further protection of transmission grid assets (Policies 10, 11 and 12)
the large net losses to local councils (transaction costs) because of their increased role in administering policies and particularly the costs associated with plan changes.
Areas of uncertainty or limited information have also been identified during the evaluations. There are:
the potential costs to third parties from the implementation of Policy 11 for both land owners and local councils
how local authorities will give effect to the NPS, ie, in several instances, local authorities would retain significant discretion in relation to how they give effect to the NPS
the uncertainty of some of the definitions, such as ‘minor upgrades’ and ‘operational requirements’, since they have a potentially large 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 the NPS on electricity transmission and to the costs and benefits of the NPS, it is considered that this risk is adequately mitigated.