Commission Sees Consumer Benefit In Transpower’s Proposed $393m Spend On The Grid, But Questions Timing Of HVDC Upgrade

The Commerce Commission has issued its draft decision approving Transpower’s proposed $392.9 million investment in the electricity transmission grid based on the benefit to Kiwi electricity consumers.

Transpower’s proposal, known as Net-Zero Grid Pathways Phase One (NZGP1) comprises a series of investments upgrading transmission network capacity with the objective of: “Enhancing the existing grid backbone between now and 2035”. It was initially submitted to the Commission in December 2022 and an updated proposal was received in September 2023 following the discovery of costing errors.

Commissioner Vhari McWha says the Commission has completed its evaluation of the proposal and is satisfied that Transpower’s capital expenditure on three key projects will get more out of existing grid assets in the central North Island and around the Wairakei area – and that this will support a secure and reliable power system and help enable the increasing reliance on electricity of New Zealand households, businesses and industry.

“While we are conscious of the cost that will flow through over time to electricity bills, we are satisfied that Transpower’s proposed investments will deliver net benefits to electricity consumers,” Ms McWha says.

Transpower’s Net Zero Grid Pathways programme of work comprises the large projects it sees as key to delivering the transmission system New Zealand needs to electrify the economy and meet decarbonisation targets, such as net zero emissions by 2050.

Ms McWha says: “The Commission’s analysis indicates that the spend on Central North Island and Wairakei projects is well justified given the likely development of new renewable generation that will need to access the grid in the near future.”

However, Ms McWha says the $103 million proposed investment in the High Voltage Direct Current (HVDC) link between the North and South Islands did not appear to have immediate benefit to consumers.

She says the Commission’s draft decision approved this component on the basis of firm assurance from Transpower to manage the timing risks.

“Given the importance of the HVDC link to Aotearoa’s electricity system and the long delivery timeframes associated with HVDC equipment, Transpower, in consultation with its customers, is best placed to manage the timing risks so that consumers benefit from the investment,” Ms McWha says.

The Commission is inviting stakeholders to submit feedback on its draft decision with initial submissions due by 5pm, on Thursday, 14 December 2023. Cross-submissions on matters raised by other parties are due by 5pm, on Thursday, 25 January 2024. Submissions should be emailed to infrastructure.regulation@comcom.govt.nz.

The Commission expects to release its final decision in February 2024.

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