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3. Problem Statement

3.1 Problem definition

Based on this assessment of the status quo, it is considered that the problem confronting development of the transmission network has three components.

The first is the national significance of the network as a physical resource. The second is inconsistent cross-border treatment under the RMA that impacts on the efficiency of the grid. The third is the lack of consideration given to the specific resource management issues associated with the network within RMA plans and policy statements. These are addressed in turn.

3.1.1 National significance

The transmission network’s national significance as a physical resource stems from it being an attenuated network of infrastructure that traverses all of New Zealand’s local council territories,14 connecting areas of growing electricity demand (mostly in the North Island) with areas of excess electricity supply and hydro-storage capacity (mostly in the South Island). It provides a vital link that smoothes out variations in availability and the price of electricity in different parts of the country that would occur with less inter-connected systems, benefiting all localities.

Demand for electricity is increasing with population growth, rising incomes and new technology powered by electricity. Electricity is subject to variation and demand peaking that can only be met by providing excess local capacity in generation that gets utilised infrequently, or by utilising spare capacity nationwide through effective transmission.

A further factor in the significance of the network is that New Zealand’s ratification of the Kyoto Protocol15 and international commitment to restrain carbon emissions have increased interest in new kinds of power generation from renewable sources (hydro, wind, geothermal). These sources of generation are often located a long way from metropolitan areas. In many cases, these necessitate new lines and connections to the transmission grid.

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 transmission system.

3.1.2 Inconsistent resource management

The transmission grid is subject to inconsistent treatment under the RMA. While such inconsistency is not uncommon under the RMA, and is an appropriate outcome of the principles of devolution included in the Act, the characteristics of the transmission network mean that the implications on the efficiency of this important physical resource are significant. 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 can arise from:

  • hold-ups of process in one location prolonging the interval before realisation of benefits from improved transmission elsewhere

  • network effects, whereby the integrity of aspects of network operation are only as strong as those in the weakest link in the network, (eg, failure to manage third-party effects on the network in one district may effect security of supply in another)

  • cost shifting, because time and costs required to resolve planning processes in one district are spread over power consumers in all other districts through the charging regime, which averages system-wide costs across all electricity users

  • transmission system failures caused by planning-induced delay in making necessary adjustments that can have high costs for consumers outside the district: the default value for lost load is $20,000 per MWh in the Electricity Commission’s Grid Investment Test, but this is an average value and, for some users, the value of losing power for even a short period is much higher.

The potential losses from transmission failures may be large, but the probability is very low, so the expected value of such losses in any one year is low, but not zero.

It is considered that the inconsistent treatment of the network results from the following limitations:

  • variable recognition / consideration of the national benefits of transmission

  • the lack of recognition / consideration of the significance of the externalities caused by inconsistent treatment of the network

  • ultimately, the lack of national level direction regarding the sustainable management of the network.

3.1.3 Variable consideration

With regard to the consideration of the network, the Reference Group report (2006) identified the following issues as being central to the current ‘problem’:

  • the consideration given to the national benefits of transmission in RMA decision-making (in addition to local costs)

  • the management of the effects of activities on the transmission network

  • provision for the efficient operation and maintenance of the existing network

  • the management of certain adverse effects of transmission.

With respect to these issues, the evaluation of the status quo above finds the following.

  • A central element of the status quo is that in most planning documents the transmission network is prima facie considered as having adverse effects – without any balancing recognition of its national benefits. There is therefore a question of balance in the status quo.

  • Currently, Transpower’s ability to protect the transmission network from the effects of third-party activities is limited to situations where the consent is notified or the local authority requires the applicant to obtain Transpower’s written approval.

  • There is significant variation in relation to how different district plans provide for the operation, maintenance, and upgrade of the existing network.

  • There is significant material already included in policy statements and plans regarding the potential adverse effects of the transmission network.

14 Except for the Chatham Islands.

15  The Kyoto Protocol to the United Nations Framework Convention on Climate Change is an amendment to the international treaty on climate change, assigning mandatory targets for the reduction of greenhouse gas emissions (including those produced by burning fossil fuels) to signatory nations.