BUNNYTHORPE-WILTON (JUDGEFORD TO WILTON … · The crossing over the State Highway 1 Johnsonville to Porirua motorway and the ... The unquantified assessment further strengthened

Bunnythorpe-Wilton (Judgeford to Wilton Section) Reconductoring Investigation © Transpower New Zealand Limited

2007. All rights reserved. i

BUNNYTHORPE-WILTON (JUDGEFORD TO WILTON SECTION) RECONDUCTORING INVESTIGATION

CONSULTATION ON PREFERRED REPLACEMENT OPTION AND

APPLICATION OF THE INVESTMENT TEST

Transpower New Zealand Limited

March 2018

Bunnythorpe-Wilton (Judgeford to Wilton Section) Reconductoring Investigation © Transpower New Zealand Limited. All rights reserved.

2

Table of Contents

Glossary ...................................................................................................................... 4

Executive Summary .................................................................................................... 6

The purpose of this document ..................................................................................... 6

The need for investigation ........................................................................................... 6

Option assessment ..................................................................................................... 6

Application to the Commerce Commission .................................................................. 8

1 Option Assessment Approach ........................................................................ 10

2 Need verification and assessment level .......................................................... 11

2.1 Background ................................................................................................. 11

2.2 Need ........................................................................................................... 13

2.2.1 Asset condition ..................................................................................... 13

2.2.2 Safety................................................................................................... 15

2.2.3 Criticality .............................................................................................. 15

2.3 Determine assessment level ....................................................................... 16

3 Identify options ............................................................................................... 17

4 Assess options ............................................................................................... 20

4.1 The short-list ............................................................................................... 20

4.2 The Base Case option ................................................................................. 21

4.3 Costs ........................................................................................................... 21

4.3.1 Capital expenditure .............................................................................. 21

4.3.2 Operating expenditure .......................................................................... 22

4.3.3 Total present value costs ..................................................................... 23

4.4 Economic assumptions ............................................................................... 23

4.5 Benefits ....................................................................................................... 23

4.5.1 System dispatch benefits: .................................................................... 23

4.5.2 Reliability benefits: ............................................................................... 24

4.5.3 Loss benefits ........................................................................................ 25

4.5.4 Expected net electricity market benefit ................................................. 27

4.5.5 Robustness of the results ..................................................................... 28

4.6 Unquantified benefits: ................................................................................. 28

5 Identify solution ............................................................................................... 31

6 Consultation to date ........................................................................................ 32

1 Option Assessment Approach

Bunnythorpe-Wilton (Judgeford to Wilton Section) Reconductoring Investigation © Transpower New Zealand Limited.

All rights reserved. 3

7 Application to the Commerce Commission ..................................................... 32

7.1 Draft proposal ............................................................................................. 34

7.2 Pricing implications ..................................................................................... 35

8 Feedback requested ....................................................................................... 37

A.1 Capex IM requirements .................................................................................. 38

A.2 Short-listed conductors ................................................................................... 39

A.3 September 2016 stakeholder consultation: summary of submissions with

Transpower responses .............................................................................................. 40

A.4 Consultation questions in this document ......................................................... 44


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Glossary

AAAC All aluminium alloy conductor

ACOT Avoided cost of transmission

ACSR Aluminium conductor steel reinforced

AoB Area of benefit

Authority Electricity Authority

Blow-out allowance

Wire reference wind deflection limit

Capex IM Capital Expenditure Input Methodology Determination, New Zealand Commerce Commission1

Code Electricity Industry Participation Code 2010

DGPP Distributed generation pricing principles

EDGS Electricity Demand and Generation Scenarios

GDP Gross domestic product

GSC Grid support contract, used for non-transmission solutions

GUP Grid upgrade plan

GXP Grid exit point

Long-list consultation

Transpower’s consultation document titled Bunnythorpe-Wilton (JFD-WIL) Reconductoring, Long-list Consultation

LRMC Long run marginal cost

MBIE Ministry of Business, Innovation and Employment

MWh Megawatt hour of electrical energy

N-1 A security standard described that maintains the supply of electricity following a contingent event (e.g. a circuit outage).

Present Value

Future costs discounted to a present value using an assumed discount rate.

Rankine A type of coal/gas plant owned and operated by Genesis Energy at Huntly

RCPD Regional coincident peak demand (of the TPM)

RFP Request for proposal

1 See http://www.comcom.govt.nz/regulated-industries/electricity/electricity-transmission/

https://www.transpower.co.nz/sites/default/files/projects/resources/Bunnythorpe-Wilton%20%28JFD-WIL%29%20Reconductoring%20Long-list%20Consultation_1.pdf


http://www.comcom.govt.nz/regulated-industries/electricity/electricity-transmission/




SDDP Stochastic Dual Dynamic Programming – a market dispatch model used to determine the optimal dispatch of hydro, thermal and other renewable generation.

TPM Transmission pricing methodology, defined in Schedule 12.4 of the Code

Transpower Transpower New Zealand Limited, owner and operator of New Zealand’s high-voltage electricity network (the national grid)


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Executive Summary

The purpose of this document

We are consulting on our preferred solution for reconductoring the Judgeford to Wilton

section of the Bunnythorpe to Wilton A line, and our cost-benefit analysis used to

determine the preferred solution. Our preferred option is to replace the existing Zebra

conductor with a new simplex Chukar conductor and reconfigure both circuits at the

Judgeford deviation to create a ‘double tee’ connection. It has an approximate cost of

$44 million. Subject to feedback from this consultation, we intend to apply to the

Commerce Commission to increase our Regulatory Control Period 2 funding baseline

to account for the portion of this work that we expect to commission before 1 July

2020.

The need for investigation

The Bunnythorpe to Wilton A line consists of two circuits that supply Central

Wellington load via the Wilton substation and provide interconnection to transport

South Island generation to load in the North Island. Under typical conditions, energy

travels from the northern end of the HVDC link at Haywards to Wilton on the

Haywards-Wilton-1 circuit and from Wilton to Bunnythorpe in the Central North Island

on the Bunnythorpe-Wilton-1 circuit.

Conductor condition assessment has shown that the Judgeford to Wilton section of

the line has reached end-of-life and requires replacement within the next 3-4 years. If

a conductor failed due to its poor condition, it is likely to fall onto the ground,

potentially causing damage to property below and creating a significant safety risk.

The crossing over the State Highway 1 Johnsonville to Porirua motorway and the

electrified North Island Main Trunk Railway at span 314A poses a considerable safety

risk. A conductor failure would also cause an unplanned outage, potentially

constraining generation dispatch until repairs could be undertaken. While not usually

resulting in a loss of supply2, an outage3 would reduce transmission capacity between

Haywards and Bunnythorpe to a level that could constrain South Island generation in

order to maintain N-1 transmission security. This could result in increased generation

cost to consumers in the North Island. Repairs may take some time as the terrain

between Wilton and Judgeford is difficult. We believe it is prudent to replace this

section of conductor as soon as possible.

Option assessment

We considered a variety of options to address the condition of the existing conductor.

Our preferred solution is to reconductor the Judgeford to Wilton section with Chukar

2 If a conductor failed where the Bunnythorpe–Wilton line crosses the HVDC line, both HVDC poles would

trip. At medium to high HVDC transfer this would cause a widespread loss of supply due to Automatic

Under Frequency Load Shedding (AUFLS).

3 In this context an “outage” refers to a circuit being out of service. It does not necessarily mean there will

be a power outage. We use the term “interruption” to refer to power outages e.g. an interruption to our

service.




conductor in a simplex configuration with a new ‘double tee’ connection at Judgeford

(the rest of the line will remain duplex Zebra). The upfront costs for this option are

similar to a like-for-like replacement as the savings in reconductoring are offset by

increases in protection, substation and SPS modification costs. However, there are

significant loss benefits associated with the double tee configuration that give it the

highest net benefit. Options 2-7 all have a significant reliability benefit over

dismantling the line, as a dismantling option would materially reduce reliability in the

Wellington region. Our analysis is illustrated in Table 1 below.

Table 1 Cost-benefit analysis of options, 2017 dollars

Option 1 Dismantle WIL-JFD section

Option 2 Duplex Zebra @65°C


Option 4 Duplex Goat @94°C

Option 5 Duplex Selenium @70°C

Option 6 Duplex Sulphur @57°C

Option 7 Double Tee Simplex Chukar @65°C

Capital Cost $ - $ 33.1m $ 33.1m $ 31.2m $ 33.0m $ 34.0m $ 34.2m

Operating Cost $ 8.2m $ 7.6m $ 7.6m $ 7.6m $ 7.6m $ 7.6m $ 7.6m

Total Cost $ 8.2m $ 40.7m $ 40.7m $ 38.8m $ 40.6m $ 41.6m $ 41.8m

Loss Benefit $ - $ 0.8m $ 0.8m -$ 0.9m $ 1.4m $ 2.7m $ 6.2m

Reliability Benefit $ - $ 75.9m $ 75.9m $ 75.9m $ 75.9m $ 75.9m $ 75.9m

Total Benefit $ - $ 76.7m $ 76.7m $ 75.0m $ 77.3m $ 78.6m $ 82.0m

Net Benefit -$ 8.2m $ 36.0m $ 36.0m $ 36.2m $ 36.7m $ 37.0m $ 40.2m

Due to the similarity4 in net benefit of Options 5, 6, and 7, an assessment of

unquantified benefits was performed as required by the Investment Test defined in the

Capex IM. The unquantified benefits considered included electrical field and audible

noise, conductor blow-out allowance, certainty around construction and maintenance

costs and option value.

The unquantified assessment further strengthened the case for Option 7 over Option 5

or Option 6. There is little difference in unquantified benefits other than some

potentially significant issues with Options 5 and 6 related to the AAAC conductors.

Therefore, we consider Option 7 – a double tee at Judgeford and reconductoring the

Judgeford to Wilton section with simplex Chukar – to be the preferred solution.

4 Two options are considered similar in the Capex IM if the difference in net benefit is less than 10% of

the total project cost of the option with the highest net benefit.


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Application to the Commerce Commission

This reconductoring project was identified as a “listed project” in the Commerce

Commission’s Transpower Individual Price Quality Determination 20155. As a listed

project, we are required to apply to the Commission for an increase to our capex

funding baseline6 to recover the costs of this project.

The primary driver for this work is the condition of the conductor between Judgeford

and Wilton. Despite our preferred option not being a like-for-like replacement, the

service potential of these assets will not be increased under the preferred option.

That means the preferred option is a base capex project and a listed project, not a

major capex project. The preferred option also provides a small increase in network

capacity due to a reconfiguration that allows us to reduce the capacity of the

Judgeford-Wilton section. However, this increase in network capacity is a side-benefit

of the preferred option and does not drive the economics, which are based on capital

costs and loss benefits.

We expect the cost of the reconductoring and reconfiguration of the Judgeford to

Wilton section of the Bunnythorpe to Wilton line will be $44m including interest during

construction and inflation. We are still refining our estimate of the total cost of this

work and the volume of work that can be completed in this regulatory period before

our application to the Commerce Commission.

However, we only expect to commission $8.9m in our current regulatory period so we

intend to apply for an increase in our funding baseline of $8.9m in our current

regulatory period (referred to as Regulatory Control Period 2, RCP2). The remainder

of the cost will be recovered through Base Capex in RCP3. Table 2 shows how we

arrived at our $8.9m estimate. We are currently undertaking further work to refine this

cost and will apply to the Commerce Commission to recover the confirmed cost.

We are targeting making our application in June 2018. Unless the confirmed cost is

significantly different (more than 30% greater) we do not intend to consult further on

this project before making an application.

5 http://www.comcom.govt.nz/dmsdocument/14912

6 We use the term ‘funding baselines’ to refer to base capex allowances. This terminology better reflects

the operation of our regulatory arrangements (i.e. the allowances are incentive baselines rather than

limits).

http://www.comcom.govt.nz/dmsdocument/14912




Table 2 Listed project capital allowance application

Cost distribution

Range of distribution

Point selected within distribution (probability)

Cost applied for ($000)

Capex (real 2017$) Triangle +30% / -30% P50 8,675

Inflation 190

Exchange rates -

IDC 30

Total LPCA (2020$) 8,894

Proposal at a Glance

What: Replace the existing conductors on the Judgeford to Wilton section of the Bunnythorpe to Wilton line with simplex Chukar, and reconfiguration to a ‘double tee’ connection at Judgeford.

When: Commence work in Q4 2019 and complete by Q4 2021

How much: Transpower is seeking approval to add $8.9 million to our base capex funding baseline for RCP2 to reflect the cost of assets commissioned before 1 July 2020. The remaining cost will be included as base capex in our RCP3 funding application.


10


Below we outline how we have arrived at our preferred option and the options and

process that we used. We have followed our internal Option Assessment Approach.

This involves four key stages of investigation designed to systematically identify the

best option, as illustrated below:

Figure 1 Option Assessment Approach Stages

Verify Need and Determine Assessment level – This step focuses on confirming the

need for the project and determining an appropriate level of assessment given its

complexity and cost.

Identify Options – This step involves defining a long-list of potential solutions to the

identified need, and then reducing this to a short-list for further analysis. For this

project, we consulted on both the need and our long-list in September 20167 (long-list

consultation).

Assess Options – In this step we analyse the short-listed options and quantify costs

and benefits, and unquantified benefits.

Identify Solution – In this stage we identify, based on our analysis, our preferred

solution.

We outline each of these stages in relation to this project in the following sections.

7 https://www.transpower.co.nz/sites/default/files/projects/resources/Bunnythorpe-Wilton %28JFD-

WIL%29 Reconductoring Long-list Consultation_1.pdf

Verify Need and Determine

Assessment levelIdentify Options Assess Options Identify Solution



2 Need verification and assessment level




2.1 Background

The Bunnythorpe to Wilton line (BPE-WIL A line) carries two of the four 220 kV circuits

connecting the Wellington region and Bunnythorpe. It carries two 220 kV circuits to

our Wilton substation, which is a major supply point for all of Central Wellington. The

220 kV line runs from Bunnythorpe to Wilton via Judgeford (east of Whitby).

One circuit of the BPE-WIL-A line (BPE-WIL-1) connects to Bunnythorpe via Linton

and the other (HAY-WIL-1) turns to the south-east at Judgeford to connect to

Bunnythorpe via Haywards. The 28 km section of line between Judgeford and Wilton

is in a very severe corrosive environment, particularly through the airborne salts from

the nearby coast.

The Judgeford to Wilton section of the line is indicated in orange in Figure 2 below,

with the existing network configuration shown in Figure 3.


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Figure 2 - Judgeford to Wilton section in the Wellington network




Figure 3 - Existing BPE-WIL Configuration

2.2 Need

The need to replace the existing conductor is driven by three factors:

• Asset condition

• Safety

• Criticality

2.2.1 Asset condition

As we explained in our long-list consultation, inspection and testing to date has

identified a number of conductor defects approaching Transpower replacement criteria

and general conductor degradation, which indicates that accelerated corrosion is likely

to be occurring on many spans in this line section.

Recent conductor condition assessment has shown that this section of the line has

now reached replacement criteria and requires replacement within the next 3-4 years,

with localised corrosion defects already exceeding replacement criteria. The severity

and number of defects found on this line section is such that continuing to manage

issues with inspection and corrective maintenance will not adequately address the risk

of conductor failure.

The photographs below show corrosion of the Bunnythorpe to Wilton A conductor and

degradation of the ACSR conductor.


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Figure 4: Example of corrosion bulge close to repair sleeve (since repaired)

Figure 5 - Dismantling of conductor bulges in 2011




On-going repairs and inspections will be required to ensure the risk of a conductor

failure is appropriately managed until the Zebra conductor is replaced. This is likely to

be in the form of conductor defect removal and regular close aerial inspections.

Patching is not a practical long-term solution as the conductor condition worsens and

repair costs increase. Additionally, the large number of deteriorated sections pose a

risk of conductor drop that is too high for safety and system security. Conductor repair

is very difficult and costly due to the terrain traversed by sections of this line, thus

poses additional risks when handling defective conductor.

Other more northern sections of the line however are installed in less corrosive

environments and are not expected to require replacement until between 2020 and

2030. Further work will be undertaken as part of a separate investigation closer to the

need date.

2.2.2 Safety

As the conductor continues to deteriorate, our ability to effectively maintain it will

reduce over time, to a point where it is no longer safe or cost effective to do so.

Conductor deterioration will ultimately reduce contractor safety during future

reconductoring activities. If no action is taken, this ongoing deterioration will increase

the risk of conductor failure.

If a conductor failed due to poor condition, it is likely to fall onto the ground below.

Potential consequences associated with such an event include fire to vegetation and

property, electrocution, or harm from physical impact. Most of the line section passes

over reserve or farmland with no spans passing particularly near to urban areas

except at Wilton. The crossing over the State Highway 1 Johnsonville to Porirua

motorway and the electrified North Island Main Trunk Railway at span 314A poses a

potential safety risk in the event of a conductor drop. There are also several instances

where the Bunnythorpe–Wilton A line crosses over other transmission assets, which

would create additional safety risk and system consequences following a conductor

drop. While the likelihood of failure is low at present, it will increase over time.

2.2.3 Criticality

The BPE-WIL A line consists of two 694/762 MVA (summer/winter) circuits that supply

Central Wellington load via the Wilton substation and provides interconnection to

transport South Island generation to load in the North Island. Under typical conditions,

energy travels from the northern end of the HVDC link at Haywards to Wilton on the

HAY-WIL-1 circuit and from Wilton to Bunnythorpe in the Central North Island on the

BPE-WIL-1 circuit.

An unplanned outage on one circuit would not result in loss of supply but could

constrain generation dispatch until repairs could be undertaken. Following an outage,

transmission capacity between Haywards and Bunnythorpe would be reduced to a

level that could constrain South Island generation in order to maintain N-1

transmission security. This could result in increased generation cost to consumers in


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the North Island. Repairs could take some time as the terrain between Wilton and

Judgeford is difficult.

Permanent removal of the Judgeford to Wilton section of both circuits would leave all

Central Wellington load supplied only from the two 110 kV circuits from Takapu Road

to Wilton. This reduction in security to a large residential load (approximately

250 MW) and the increased loss cost was considered in this investigation and found

to be uneconomic.

2.3 Determine assessment level

We have undertaken a detailed investigation and modelling of generation dispatch

costs because:

• the need to replace the conductor is imminent;

• the conductor is part of a critical piece of equipment;

• the cost of investment is significant; and

• regulatory approval is required for this project.

Question 1: Are there any other considerations relating to the need that we

should incorporate into this project?

3 Identify options



3 Identify options

In September 2016 we consulted on a draft long-list of options in our long-list

consultation. We have subsequently confirmed the long-list of options and reduced

the long-list to a short-list using the following short-listing criteria that we also

consulted on:

1. Fit for purpose 2. Technical feasibility 3. Practicability of implementing the option 4. Good electricity industry practice (GEIP) 5. System security (additional benefit resulting from an economic investment) 6. Indicative cost

The following table outlines our long-list options and our assessment of whether an

option is shortlisted. Options considered in the short-list are marked with a ✓. This

indicates the option forms part of a short-listed plan. It may not be the entire plan in

the short-list, i.e. a long-list option being short-listed does not mean it can by itself

completely resolve the need.

Table 3 Long-list Assessment

Longlist options Short-list?

Comments

Non-transmission options: Demand side

Load shedding SPS – post contingency

Fails criterion 1 – not fit for purpose. This component does not address the poor condition of the assets and does not present an entire solution. However, this could be used to defer investment in combination with other long-list components.

Load shifting Fails criterion 1 – not fit for purpose. As above

Demand Side Response (DSR) – pre contingency

Fails criterion 1 – not fit for purpose. As above

Non-transmission options: Supply side

New generation Fails criterion 1 – not fit for purpose. There is no indication from industry this is imminent. A range of generation scenarios will be considered in the options assessment.

Generation re-dispatch

Fails criterion 1 – not fit for purpose. This component does not address the poor condition of the assets and does not present an entire solution. This component is implicitly included in the short-list as it is covered in the Stochastic Dual Dynamic Programming (SDDP) analysis.

New distributed generation

Fails criterion 1 – not fit for purpose. There is no indication from industry this is imminent. A range of generation scenarios will be considered in the options assessment.

Transmission options - new assets: New circuit


18

Longlist options Short-list?

Comments

New double circuit line

Fails criterion 1 – not fit for purpose. There is considerable spare capacity on the existing line so doubling circuit is not necessary.

New underground cable

Fails Criterion 6 – indicative cost. Undergrounding a large line through poor terrain will be prohibitively expensive.

Transmission options - new assets: New switching station

New switching station

Fails Criterion 1 – not fit for purpose. Does not address the poor condition of the assets.

Transmission options - new assets: New grid exit point

New grid exit point Fails Criterion 1 – not fit for purpose. Does not address the poor condition of the assets.

Transmission options – existing assets: Grid reconfiguration

Double tee connection

Short-listed. The Judgeford double tee option converts the loop-in, loop-out connection to Haywards and Wilton into a double tee at Judgeford.

HVDC runback This component does not address the poor condition of the assets and does not present an entire solution. This component is implicitly included in all development plans.

Transmission options – existing assets: Reconductor Judgeford-Wilton

Keep exiting rating Short-listed

Increase circuit ratings

Fails criterion 1 – not fit for purpose. The circuit is currently under-utilised so additional capacity is not required.

Simplex: lower rated circuits

Fails criterion 1 – not fit for purpose. Configuring a Simplex circuit over the length of line involved will result in prohibitively high impedance. However, Simplex may be utilised in small sections of the line.

Duplex: lower rated circuits

Short-listed

Transmission options – existing assets: Maintain existing assets

Patch fix Fails criterion 1 – not fit for purpose. The large amount of patch fixes required means the activity will be impractical to implement and prohibitively expensive. This could be used to defer investment in combination with other long-list components.

Dismantling Judgeford-Wilton

Short-listed

If we were to dismantle the JFD-WIL section of the line, load at WIL, CPK, KWA, TKR, and PNI would be supplied solely from the 110 kV double-circuit HAY-TKR-WIL line. A double circuit outage (planned or unplanned) would mean that any load at these GXPs could not be supplied. This option is short-listed to provide a reference point from which system benefits for other options are relative.

3 Identify options



Question 2: Do you agree with our assessment of the long-list?


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4 Assess options

4.1 The short-list

Options 3 – 6 in the table below explore different conductor technologies and sizes

while maintaining the same rating as the existing design. Different conductor sizes

were selected to compare the wind loadings, operating temperatures, and the cost of

structure and clearance modifications required.

Option 2 is like-for-like conductor with a reduced rating to investigate possible cost

savings.

Option 1 is significantly different in that it requires the dismantling of the existing circuit

(and continuing power system operations in its absence permanently).

Option 7 is significantly different again as it changes the circuits to a double tee

connection, improving the distribution of power across the circuits. This option would

utilise a simplex conductor configuration as opposed to the existing duplex conductor

configuration.

Table 4 Short-list of options

Option

#

Option Description

1 Dismantling JFD-WIL and create a 2nd BPE-LTN-HAY circuit

• Remove JFD-WIL section of circuits and jumper across at Judgeford

2 Duplex Zebra ACSR Option A - Reduced rating

• Replace assets with modern equivalent of the existing Duplex Zebra ACSR/AC

• 65°C (reduced rating)

3 Duplex Zebra ACSR Option B - Existing rating

• Replace assets with modern equivalent of the existing Duplex Zebra ACSR/AC

• 75°C (existing rating)

4 Duplex Goat ACSR Existing rating

• Replace assets with Duplex Goat ACSR/AC

• 94°C ( existing rating)

5 Duplex Selenium AAAC Existing rating

• Replace assets with Duplex Selenium AAAC


6 Duplex Sulphur AAAC Existing rating

• Replace assets with Duplex Sulphur AAAC


7 Double tee connection • Reconfigure circuits at the Judgeford deviation to create a ‘double tee’ connection at Judgeford and reconductor the JFD-WIL section with simplex Chukar. See Figure 6 below.

4 Assess options



Figure 6 - Option 7: Double tee

4.2 The base case option

Dismantling of the Judgeford to Wilton section (Option 1) is our base case option.

This option provides a basis to justify retaining the section of line, and is a reference

point for relative system benefits of each of the other short-listed options.

4.3 Costs

4.3.1 Capital expenditure

In our analysis of the short-list we have included both capital and operational costs.

Our capital costs were derived from a high-level desk top study, with an uncertainty

range of -50%/+50% for lines-related costs. The capital costs include:

• investigation and design;

• materials (conductors, insulators & hardware);

• construction (conductors, structures, foundations, access and property); and

• protection systems (duplicate line protection, SPS and runback

modifications).

For Option 1, there is little capital expenditure as no new assets are required, and

dismantling costs fall under operating expenditure.

For Options 2 - 6, the primary cost difference occurs in conductor materials, with other

cost differences in structure and foundation strengthening. Option 7 requires a new


22

220 kV bay at Linton and protection upgrades at several substations and these costs

are included.

In Table 5 the capital cost differences between options are related to the conductor

material, clearance rectification and structural / foundation works required. We

consider that this approach reasonably assesses the cost differences between

options.

Table 5 Capital costs (real 2017, 000’s)

Capex, $,000’s Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7

Reconductoring, foundation and tower strengthening, and protection work

N/A 40,500 40,500 38,200 40,400 41,600 41,900

P50 capex N/A 40,500 40,500 38,200 40,400 41,600 41,900

4.3.2 Operating expenditure

We have assumed operating costs of $650k per annum, which includes all expected

maintenance spend on this section of the line. We don’t expect there to be any

material differences in the operating costs across the short-list options that retain the

JFD-WIL section of the line.

4 Assess options



4.3.3 Total present value costs

The following table summarises the capital and operating costs in nominal terms, and

also shows the total present value (PV) of these costs.

Table 6 Cost of Options $000 (2017 $ excluding IDC)

$,000’s Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7

Capital cost N/A 40,500 40,500 38,200 40,400 41,600 41,900

Annual opex (over life of asset)

0 650 650 650 650 650 650

Dismantling cost 10,700 N/A N/A N/A N/A N/A N/A

Total present value (PV) cost $ 8,200 $ 40,700 $ 40,700 $ 38,800 $ 40,600 $ 41,600 $ 41,800

4.4 Economic assumptions

The assumptions used in this analysis are consistent with our long-list consultation:

• We used a 7% pre-tax real discount rate as outlined in the Capex IM.

• Value of Lost Load (VoLL): $25,300/MWh based on the Code8-defined as

$20k/MWh in 2004 and inflated at CPI to 2017 dollars.

• We used a 40 year analysis period (2020-2060) for valuing losses, given the

long life of the asset.

• Our generation plant assumptions are consistent with MBIE’s Electricity

Demand and Generation Scenarios (EDGS).

• Our energy demand forecast is based on Transpower’s 2016 Transmission

Planning Report (TPR). The demand forecast also incorporates electric

vehicle and solar photovoltaic uptake assumptions which are consistent with

MBIE’s EDGS.

• We assumed that replacement of the conductor takes place in in 2020.

4.5 Benefits

4.5.1 System dispatch benefits

All short-list options being considered provide enough capacity to meet the expected

grid flows without constraining dispatch. Therefore, no significant difference in

dispatch costs exists between the options. Option 1 dismantles the JFD-WIL section

but retains the remainder of the BPE-WIL line, so it also realises the same dispatch

and deficit benefits as the other options.

8 Electricity Industry Participation Code


24

4.5.2 Reliability benefits

We considered the reliability benefits of retaining a 220 kV connection to Wilton to

compare dismantling the JFD-WIL section of BPE-WIL with the other short-listed

options.

If we were to dismantle the JFD-WIL section of the line, load at Wilton, Central Park,

Kaiwharawhara, Takapu Road, and Pauahatanui would be supplied solely from the

110 kV double-circuit HAY-TKR-WIL line. A double circuit outage (planned or

unplanned) would result in a loss of supply to these GXPs (much of Wellington City

load).

The HAY-TKR and TKR-WIL circuits are strung on double circuit towers meaning that

outages of the two circuits cannot be treated as independent. Planned and unplanned

outages are both more likely to impact both circuits when they are on a single tower.

Inspection of historical outages of these lines found that 28% of outages were double-

circuit outages.

We expect that generation connected in the affected area (West Wind and Mill Creek)

would not remain connected following a double circuit outage.

As all short-list options (except the base case dismantle option) provide a second

distinct connection into Wilton, they share the same reliability benefits to supply

Wellington City.

4 Assess options



4.5.3 Loss benefits

There are differences in the losses from each of the conductors. Larger conductors

that run at lower temperatures will result in lower electrical losses.

Loss benefits were modelled using SDDP9, a hydrothermal dispatch optimisation

package. SDDP considers the future value of water to the electricity system to

establish a water-value function then simulates least-cost dispatch across 78 historic

hydro inflow sequences.

We considered five market development scenarios (GS 1-5) based on the Ministry of

Business, Innovation and Employment’s (MBIE’s) draft Electricity Demand and

Generation Scenarios (EDGS)10. Use of market development scenarios enables us to

capture a range of possible future states of the electricity system to ensure the

economic test is robust. All fuel, carbon, and variable plant costs are as defined in the

draft EDGS as are plant specifications.

The EDGS scenarios are:

• Mixed Renewables: a mixture of geothermal and wind plant is built to meet an

average of 1% annual electricity load growth. This scenario reflects moderate

GDP, population, carbon and fuel cost, and technology uptake assumptions.

• High Grid: higher GDP growth results in 1.3% annual electricity load growth

and higher levels of gas exploration results in more gas availability.

• Global Low Carbon: higher carbon price leads to more grid-connected

renewable build and higher uptake of petrol-electric hybrid vehicles and

residential solar PV. Energy efficiency measures also result in flat electricity

demand per household.

• Disruptive: reduced technology costs result in rapid uptake of residential and

commercial solar PV and pure electric vehicles. Batteries facilitate load-

shifting resulting in a less peaky daily load profile.

• Tiwai Off: Tiwai shuts at the start of 2018 resulting in the retirement of more

thermal generation. Lower GDP growth results in lower annual electricity load

growth of 0.4%.

The scenarios presented in the EDGS were modified to reflect updated demand

forecasts and ensure that there is adequate diversity with respect to the investment

being considered. To that end, we have ensured that there is diversity in the

commissioning of new generation in the Wellington region.

9 Stochastic Dual Dynamic Programming

10 http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-

modelling/modelling/electricity-demand-and-generation-scenarios/draft-edgs-2015

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/modelling/electricity-demand-and-generation-scenarios/draft-edgs-2015

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/modelling/electricity-demand-and-generation-scenarios/draft-edgs-2015


26

The table below presents the expansion of generation in the Wellington region in each

scenario.

Table 7 Generation expansion in Wellington region by scenario

Mixed Renewables

High grid Global low Carbon

Disruptive Tiwai Off

2020

Turitea (183 MW)

2021

2022 Turitea (183 MW)

Turitea (183 MW)

2023

GWindS1 (68 MW)

GWindS1 (68 MW)

2024

Castle Hill stage 1 (200 MW)

2025 GWindS1 (68 MW)



2026



2027 Castle Hill stage 1 (200 MW)

Puketoi (159 MW)

Turitea (183 MW)

2028

2029

Turitea (183 MW)

2030

GWindL1_stage 1 (250 MW)

2031

2032

2033


2034 GWindL1_stage 1 (250 MW)


2035

2036


2037

2038



2039

GWindS1 (68 MW)

2040

2041

2042

2043


2044 GWindL1_stage 2 (250 MW)


2045


Puketoi (159 MW)

2046

Puketoi (159 MW)

2047


2048

2049 Puketoi (159 MW)

GWindS1 (68 MW)

2050

4 Assess options



The table below shows the relative loss benefit between options (when averaged

across the five EDGS scenarios), using a 7% pa discount rate. The expected life of

the asset was assumed to be 40 years for valuing the losses.

Table 8 Loss benefits relative to Option 1 - 2021-2060 (PV 2017 dollars)

Option # Option Relative Loss Benefit

1 Dismantling JFD-WIL $ 0

2 Duplex Zebra A Reduced circuit rating

$ 0.8m

3 Duplex Zebra B Existing circuit rating

$ 0.8m

4 Duplex Goat -$ 0.9m

5 Duplex Selenium $ 1.4m

6 Duplex Sulphur $ 2.7m

7 Double tee $ 6.2m

4.5.4 Expected net electricity market benefit

Table 9 shows the net market benefits for each short-list option. This quantified

assessment shows that the double tee connection option has the highest net benefit

given the total cost of the project. This is due to a decrease in losses relative to the

Options 2 – 6 as the reconfigured circuit provides a shorter path for energy flowing

between Haywards and Bunnythorpe.

The AAAC conductor options – Sulphur and Selenium – have the second and third

highest net benefit by a small margin given the total cost of the project. The benefit of

the AAAC conductor is due to a decrease in losses relative to the ACSR options.

Given the similarity in the quantified differences between the conductor options, we

consider unquantified benefits should be considered when selecting the preferred

solution. Unquantified benefits are discussed in later in this document.

Table 9 Net benefit test (PV 2017 dollars) – all benefits relative to Option 1

Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7

Capital Cost $ - $ 33.1m $ 33.1m $ 31.2m $ 33.0m $ 34.0m $ 34.2m

Operating Cost $ 8.2m $ 7.6m $ 7.6m $ 7.6m $ 7.6m $ 7.6m $ 7.6m

Total Cost $ 8.2m $ 40.7m $ 40.7m $ 38.8m $ 40.6m $ 41.6m $ 41.8m

Loss Benefit $ - $ 0.8m $ 0.8m -$ 0.9m $ 1.4m $ 2.7m $ 6.2m

Reliability Benefit $ - $ 75.9m $ 75.9m $ 75.9m $ 75.9m $ 75.9m $ 75.9m

Total Benefit $ - $ 76.7m $ 76.7m $ 75.0m $ 77.3m $ 78.6m $ 82.0m

Net Benefit -$ 8.2m $ 36.0m $ 36.0m $ 36.2m $ 36.7m $ 37.0m $ 40.2m


28

4.5.5 Robustness of the results

We undertook sensitivity analysis to determine the robustness of our quantified option

assessment. The below table shows the net benefit / (cost) relative to our base case

(dismantle). It shows the difference in the present values of each option under low

and high sensitivities:

• Costs: -30% / +30%

• Losses: -25% / +25%

• Discount rate: +4% / + 10%

• Reliability: +25%

• VoLL: -50% / +50%

Each row shows the impact from changing only that single cost driver.

Table 10 Sensitivity analysis - Net Benefit (PV 2017 dollars)

Option 1 Dismantle WIL-JFD section



Option 4 Duplex Goat

@94°C

Option 5 Duplex

Selenium @70°C

Option 6 Duplex Sulphur @57°C

Option 7 Double Tee

Simplex Chukar @65°C

Base scenario

-$ 8.2m $ 36.0m $ 36.0m $ 36.2m $ 36.7m $ 37.0m $ 40.2m

Discount Rate 4%

-$ 9.1m $ 83.1m $ 83.1m $ 82.3m $ 84.1m $ 85.0m $ 91.4m

Discount Rate 10%

-$ 7.3m $ 13.6m $ 13.6m $ 14.2m $ 14.1m $ 14.0m $ 15.8m

Capital Cost - 30%

-$ 8.2m $ 46.0m $ 46.0m $ 45.5m $ 46.6m $ 47.2m $ 50.5m

Capital Cost + 30%

-$ 8.2m $ 26.1m $ 26.1m $ 26.8m $ 26.8m $ 26.8m $ 29.9m

Loss Benefit -25 %

-$ 8.2m $ 39.1m $ 39.1m $ 39.6m $ 39.6m $ 39.5m $ 41.9m

Loss Benefit + 25 %

-$ 8.2m $ 36.2m $ 36.2m $ 35.9m $ 37.1m $ 37.7m $ 41.7m

Reliability + 25%

-$ 8.2m $ 17.1m $ 17.1m $ 17.2m $ 17.8m $ 18.0m $ 21.2m

VoLL -50%

-$ 8.2m -$ 1.9m -$ 1.9m -$ 1.8m -$ 1.2m -$ 0.9m $ 2.3m

VoLL +50%

-$ 8.2m $ 74.0m $ 74.0m $ 74.1m $ 74.7m $ 74.9m $ 78.1m

Option 7 remains has the highest net benefit in all sensitivity cases. Therefore, we

consider this result robust to sensitivity analysis.

4.6 Unquantified benefits

We have further assessed the suitability of the short-list options against each other

using a variety of other considerations. To do this we have used a tick box analysis,

with options with three ticks seen as providing a high level of benefit. This is shown in

the table below.

4 Assess options



The primary purpose of the unquantified assessment is to determine whether there

are material unquantified benefits associated with options that have similar net

benefits to the option with the highest net benefit – Option 7 in the previous section.

The Investment Test defines two options as similar if the difference in quantified net

electricity market benefit is less than 10% of the capital cost for the option with the

highest net benefit - $4m in this case. So, Options 5 and 6 are similar to Option 7.

Therefore, the unquantified benefits assessment below should be considered in the

context of the options that are similar – shown in bold below. Unquantified benefits

associated with options that are not similar in the quantified assessment are included

for context but do not affect the preferred option.

There are two significant outcomes from our unquantified assessment:

1. There is very little difference in unquantified benefits between any of the short-

listed options.

2. Option 7 – Double Tee – is preferred to the similar options (Options 5 and 6) in

unquantified terms.

Table 11 Unquantified assessment of benefits

Item

Op

tio

n 1

Dis

man

tle

WIL

-JFD

sect

ion

O

pti

on

2

Du

ple

x Ze

bra

@6

5°C

Op

tio

n 3

Du

ple

x Ze

bra

@7

5°C

Op

tio

n 4

Du

ple

x G

oat

@9

4°C

Op

tio

n 5

Du

ple

x

Sele

niu

m@

7

0°C

O

pti

on

6

Du

ple

x

Sulp

hu

r

@5

7°C

O

pti

on

7

Do

ub

le T

ee

Electrical field and audible noise

✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓ ✓✓✓

Conductor blow-out allowance ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓ ✓✓ ✓✓✓

Certainty construction costs ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓ ✓✓ ✓✓

Certainty maintenance costs ✓✓✓ ✓✓ ✓✓ ✓✓ ✓✓ ✓✓ ✓✓

Option value ✓ ✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓✓ ✓✓

Total ticks 13 13 14 14 11 11 12

Unquantified benefits (UQB) ranking:

3= 3= 1= 1= 6= 6= 5

Electromagnetic fields and audible noise

All options are within acceptable tolerances for magnetic field, audible noise

and radio frequency interference limits. Option 6 (Duplex Sulphur) exceeds

the electrical field compliance levels in post-contingent state.

Conductor blow-out allowance

Blow-out allowance, containing the conductor within the same width of a

reference position (e.g. when blown in the wind), is a factor when considering

alternative conductor options. The magnitude of blow-out magnitude


30

(conductor displacement due to wind) is a function of conductor weight

(restraining movement), conductor diameter (defining wind area) and stringing

tension (restraining conductor) which is related to conductor strength, structure

strength and vibration susceptibility.

Exceeding the blow-out allowance would require an investigation into acquiring

additional property rights from landowners.

• AAAC conductors are significantly lighter, and strung with lower

tensions than the ACSR, resulting in blow-out that exceeds the

conductor allowance.

• ACSR conductors satisfy the conductor blow-out allowance.

Certainty – Construction costs

AAAC type conductors move more in wind which increases risks during

construction (over ACSR). Work will be undertaken with one circuit live,

replacing with AAAC will significantly reduce electrical risk during construction

(over ACSR).

Certainty – Maintenance costs

All reconductoring options have similar maintenance costs. Option 1

(dismantle) has no associated maintenance costs.

Option value

Retaining the JFD-WIL section in some shape or form significantly increases

flexibility to match future build plans to needs. While the existing capacity is

not fully utilised, our analysis suggests that reducing the capacity will not

significantly reduce the cost of this project for any of the conductor options.

Options that retain the existing capacity are scored more highly for this benefit

(compared to option that reduce capacity).

Option 1 (dismantling) has the lowest option value as it entails full dismantling

and removal of the circuit. Options 2-7 all have similar option value, as they all

retain the JFD-WIL circuit. Those with higher ratings have higher option value.

Overall our assessment is that options 3 and 4 have the most unquantified benefits.

However, as all options have very similar benefits, when determining the preferred

solution, unquantified benefits have a lower weighting.

.

Question 3: Do you have any comments on our analysis of costs and

benefits for this project?

5 Identify solution



5 Identify solution

In this stage of the Option Assessment Approach we consider both our quantified and

unquantified analysis.

As discussed above, the Investment Test, defined in the Capex IM, says that options

that have an expected net electricity market benefit within 10% of the cost of the

option with the highest net expected electricity market benefit, are considered similar,

and unquantified benefits can be considered in determining the best option. In this

case the present value of Options 5 and 6 (Selenium or Sulphur duplex respectively)

is just 8% less than the option with the highest net benefit (Option 7 – double tee).

The below table summarises the quantitative and qualitative analysis. Although

Option 7 has the highest net benefit, it has lower unquantified benefits than options 3

and 4. However, this difference in unquantified benefits is not significant enough for

these options to be preferred. We therefore consider Option 7 to have the best overall

ranking and to be our preferred solution.

Table 12 Quantitative and Qualitative ranking of options

Item

Op

tio

n 1

D

ism

antl

e

WIL

-JFD

se

ctio

n

Op

tio

n 2

Du

ple

x Ze

bra

@

65

°C

Op

tio

n 3

D

up

lex

Zeb

ra

@7

5°C

Op

tio

n 4

D

up

lex

Go

at

@9

4°C

Op

tio

n 5

Du

ple

x Se

len

ium

@

70

°C

Op

tio

n 6

D

up

lex

Sulp

hu

r @

57

°C

Op

tio

n 7

D

ou

ble

Te

e

Total cost (PV 2017 $) $ 8.2m $ 40.7m $ 40.7m $ 38.8m $ 40.6m $ 41.6m $ 41.8m

Expected Net Electricity Market Benefit (PV 2017 $) -$ 8.2m $ 36.0m $ 36.0m $ 36.2m $ 36.7m $ 37.0m $ 40.2m

Ranking based on quantified benefits (QB)

7 3= 3= 3= 3= 2 1

Ranking based on unquantified benefits (UQB):

3= 3= 1= 1= 6= 6= 5

Overall ranking QB and UQB

7 5 2 6 3 4 1

Question 4: Do you agree with our assessment of the preferred solution and

our application of the Investment Test?


32

6 Consultation to date

In September 2016 we published our long-list consultation document11 entitled Long-

list: Bunnythorpe to Wilton line (Judgeford to Wilton section) reconductoring. In the

appendices, we provide Transpower’s responses to the feedback received from this

consultation.

The two submitters were supportive of the need for the reconductoring work to be

carried out. The first submission inquired as to the construction timeline (for

consideration in proposing a non-transmission solution) and queried inputs to the

options assessment. The second submission’s intention was “to ensure the next

phase of analysing a short-list of options and a draft application of the Investment Test

is robust.”

7 Application to the Commerce Commission

This project is a listed project within the Capex IM as stated in Transpower Individual

Price-Quality Determination 201512 for Regulatory Control Period 2 from 2015-2020

(RCP2). The listed project status means that we need to submit an application to the

Commerce Commission seeking approval to add to our base capex funding baseline13

(i.e. base capex14) to account for this work. Listed projects are large projects that had

uncertain scope and cost at the time of our RCP2 application. The listed project

mechanism was developed to allow our base capex funding baseline to be amended

when the scope and cost of these projects was more certain. We are also required to

consult on our application of the Investment Test set out in the Capex IM, which we

are fulfilling with this document.

The primary driver for this work is the condition of the conductor between Judgeford

and Wilton. Despite our preferred option not being a like-for-like replacement, the

service potential of these assets will not be increased under the preferred option.

That means the preferred option is base capex project and a listed project, not a major

capex project. The preferred option also provides a small increase in network

capacity due to a reconfiguration that allows us to reduce the capacity of the

Judgeford-Wilton section. However, this increase in network capacity is a side-benefit

of the preferred option and does not drive the economics, which are based on capital

costs and loss benefits.

11 The consultation paper, the non-confidential submissions and this document are available at

https://www.transpower.co.nz/bunnythorpe-wilton-reconductoring-investigation

12 See schedule I in http://www.comcom.govt.nz/dmsdocument/12769.

13 We use the term ‘funding baselines’ to refer to base capex allowances. This terminology better reflects

the operation of our regulatory arrangements (i.e. the allowances are incentive baselines rather than

limits).

14 Defined in the Capex IM.


http://www.comcom.govt.nz/dmsdocument/12769




The Bunnythorpe to Judgeford section of the Bunnythorpe to Wilton A line is an

interconnection asset so the cost of reconductoring would be recovered from all

connected parties and allocated according to the TPM.


34

7.1 Draft proposal

Based on our analysis we intend to develop an application to the Commerce

Commission for:

Proposal at a Glance

What: Replace the existing conductors on the Judgeford to Wilton section of the Bunnythorpe to Wilton line with simplex Chukar, and reconfiguration to a ‘double tee’ connection at Judgeford.

When: Commence work in Q4 2019 and complete by Q4 2021

How much: Transpower is seeking approval for up to $8.9m additional base capex in RCP2 to cover the cost of assets commissioned before 1 July 2020. The remainder of the project cost will be included as base capex in our RCP3 funding application

Grid Outputs Replace the existing conductors on the Judgeford to Wilton section of the Bunnythorpe to Wilton line with simplex Chukar, and reconfiguration to a ‘double tee’ connection at Judgeford, and associated works. Obtaining property rights and environmental approvals as required.

Our cost estimate for the project, while we consider appropriate for option analysis, is

currently being further refined through additional investigation. Assuming the updated

cost does not change our conclusions, we intend to make our application to the

Commerce Commission. We are targeting making an application in June 2018 and do

not intend to consult further on this project before our application.

Table 13 summarises our Listed Project Capital Allowance application of $8.9m

million. Note that this figure covers only the portion of the project commissioned in

RCP2. The remainder of the capital will be recovered through RCP3 base capex.

Table 13 Listed project capital allowance application

Cost distribution Range of

distribution Point selected within distribution (probability)

Cost applied for ($000)

Capex (real 2017$) Triangle +30% / -30% P50 8,675

Inflation 190

Exchange rates -

IDC 30

Total LPCA (2021$)

8,894

The table below provides an indicative timing of the total capital spend over the

project. We will refine these timings and include confirmed schedules in our

submission to the Commerce Commission.




Table 14 List project capital allowance, annual costs

Cost by year 2018/2019 2019/2020 2020/202115

Capex (real 2017$) 868 7,808 33,260

Inflation 9 180 1,644

Exchange rates 1 28 257

IDC 878 8,016 35,160

Total LPCA (2020$) 868 7,808 33,260

7.2 Pricing implications

The costs of the preferred solution will be added to the Regulated Asset Base (RAB)

for RCP2, leading to an increase in transmission charges.

For illustrative purposes, we show in Table 15 the potential impact on transmission

charges. These transmission charge increases would be expected to reduce in time

as the asset is depreciated.

15 The cost of assets commissioned after 30 June 2020 will be recovered through base capex in RCP3

Question 5: What would you consider a material change in cost?


36

Table 16 shows the resulting increase on an “average” consumer bill in 2028. We

define an “average” consumer as a household using 7,600 kWh per annum. The high

and low scenarios show the transmission costs if the re-conductoring capex is +/- 30%

of Option 7 (P50).

Table 15 Impact on transmission charges

Year Interconnection rate increase $/kW

Interconnection rate increase %

Consumers bill c/kWh

2019/20 0.06 0.05% 0.0009

2020/21 0.27 0.24% 0.0043

2021/22 0.46 0.41% 0.0074

2022/23 0.48 0.42% 0.0076

2023/24 0.49 0.43% 0.0078

2024/25 0.50 0.44% 0.0080

2025/26 0.51 0.45% 0.0081

2026/27 0.52 0.45% 0.0082

2027/28 0.52 0.46% 0.0083

2028/29 0.52 0.46% 0.0083

2029/2030 0.53 0.46% 0.0084




Table 16 Increase in 2028 consumer cost (cents per annum)

2028 consumer bill, cents pa Base case (P50)

High (+30%)

Low (-30%)

An “average” consumer (7,600 kWh) 63.65c 44.56 cc 82.75 c


38

8 Feedback requested

We seek your feedback on our assessment of options, application of the Investment

Test, and potential application to the Commerce Commission relating to this project.

We have asked a number of questions throughout this document. These are

summarised in the Appendix Section A.4. They are intended to aid your response.

You are not obliged to answer all or any of these questions and are welcome to raise

other issues which you believe might be relevant.

If you have questions during the consultation period you may email them to

[email protected] and we will attempt to answer them within one

week of receipt. If you could put “BPE-WIL consultation” in the subject line that would

be helpful.

We seek written feedback by 5pm on the 17th of April 2018. Responses should be in

electronic form, in either Microsoft Word or PDF format, and emailed to

[email protected]

Our intent is to publish all submissions and further information on Transpower’s

website, at https://www.transpower.co.nz/bunnythorpe-wilton-reconductoring-

investigation

If there is any aspect of your submission that is confidential, please:

• clearly mark the sections you consider confidential and indicate why

• indicate whether we can share the confidential information with the Commerce

Commission

Transparency is important in this process and we may not be able to rely on

confidential information to justify an investment proposal. Further, you should be

aware that both Transpower and the Commerce Commission are subject to the

provisions of the Official Information Act 1982.

We will acknowledge all submissions. Please note that late submissions may not be

considered.

Following consultation, we will consider feedback received in submissions. Based on

the information received, we will prepare an application to the Commerce Commission

to seek approval to increase our base capex funding baseline for RCP2 to account for

this work. Our intent, at this stage is to make this application in June 2018.

Thank you in advance for your assistance with this project.

mailto:[email protected]

mailto:[email protected]






A.1 Capex IM requirements

In the below table we outline how this proposal meets the requirements to be

approved by the Commerce Commission under the Capex IM.

Table 17 - Capex IM checklist

Capex IM section Report cross reference

2.2.3 Listed Project

(2) Listed project definition (a) (i) capex > $20 million

(ii) to be commissioned in the regulatory period (b) replacement/ refurbishment (c) commencement date within the regulatory period (d) not already in base capex

4.3 Costs

3.2.4 Approval of base capex in addition to the base capex allowance

(1) Due by June twenty-two months before the end of a regulatory period

Submission expected in June 2018 (due before Aug 2018)

(2)(a) reason for project, technical evidence 2.2 Need

(2)(b) options considered 3 Identify options

(2)(c) scope and grid outputs 2 Need verification and assessment level

(2)(d) technical and costing info & risks 4.3 Costs

(2)(e) costs by year and assumptions To be completed for final consultation

(2)(f) cost-benefit and sensitivity 4.5.4 Expected net electricity market benefit 4.5.5 Robustness of the results

(2)(g) consultation 6 Consultation to date A.3 September 2016 stakeholder consultation

(2)(h) Board and CEO sign-off To be completed for final consultation

(4)(a) consultation process as per base capex (publish / X-subs,etc) Appendix 3 (consultation responses)

(4)(b) evaluated as per base capex criteria, including Schedule A where relevant: - follow Transpower policies and planning standards for grid / base capex; - cost-effective; - reasonable assumptions (method); - risk-based good asset management, - grid output dependencies - deliverability; - reasonable asset replacement models (inputs & method); - reasonable demand forecasts (inputs & method); - scope for efficiency gains

2.2 Need 4.4 Economic assumptions

(5)(a) forecast CPI used for base capex in regulatory period; (b) forecast FX rates used for base capex for regulatory period; (c) percentage of foreign capex

To be completed for final consultation

Bunnythorpe- Wilton (Judgeford to Wilton Section) Reconductoring Investigation © Transpower New Zealand Limited. All rights reserved. 40

A.2 Short-listed conductors In the below table we summarise the reconductoring options that were considered in order to derive our short-list.

Conductor Meets load growth scenarios

Future upgrade possible and reasonable

Property rights infringement and environmental impacts

Engineering issues Preferred conductor for JFD-WIL section

Zebra duplex ACSR/AC (@65°C)

Yes Yes, but at unnecessary expense if de-rated now

Will maintain the status quo Straight forward delivery.

Zebra duplex ACSR/AC (@75°C)

Yes Yes Will maintain the status quo Straight forward delivery.

Goat duplex ACSR/AC (@94°C)

Yes No, may anneal and mechanically damage the conductor

Will maintain the status quo Reasonably straight forward delivery. Dissimilar conductor requires more attention during construction.

Selenium duplex AAAC (@70°C)

Yes No, clearance rectifications would not be reasonable

Exceeds existing conductor envelope, risk many property infringements. Some clearance rectifications may require consents.

Some under-clearances may not have feasible mitigations. Reasonably straight forward wiring, dissimilar conductor requires more attention during construction.

Sulphur duplex AAAC (@57°C)

Yes No, clearance rectifications would not be reasonable

Exceeds existing conductor envelope, risk of many property infringements not covered in cost assessment, many assessments to be undertaken

Some under-clearances and structure overloads may not have feasible mitigations. Reasonably straight forward wiring, dissimilar conductor requires more attention during construction.

Chukar simplex (with circuit reconfiguration) ACSR/AC (@65°C)

Yes Yes Will maintain the status quo. Consent and property rights required at JFD Tee site

Duplex --> Simplex requires more attention and management methods during construction. Substation works impose moderate programme dependencies and additional design work-streams (costs included).

✓


Bunnythorpe-Wilton (Judgeford to Wilton Section) Reconductoring Investigation © Transpower New Zealand Limited. All rights

reserved. 41

A.3 September 2016 stakeholder consultation: summary

of submissions with Transpower responses

This section summarises submissions received on our long-list consultation paper

Bunnythorpe to Wilton line (Judgeford to Wilton section) reconductoring of September 2016

(long-list consultation)16. Below we have endeavoured to summarise submitter’s key points

briefly: please refer to their submissions for further detail.

Submissions were received from:

• Major Electricity Users Group (MEUG)

• Contact Energy Limited

We include the submitters’ comments against the 11 specific questions asked in the

consultation report, plus any general comments of relevance to specific questions. We also

provide our response to each issue raised.

Our questions, and additional questions from submitters, are listed under the relevant

subject heading from the long-list consultation report.

A.3.1 Need and project scope

Q1 Are there any other considerations relating to the need that we should incorporate into this project?

MEUG responded that Transpower should incorporate an assessment of the exacerbators

and beneficiaries of the preferred solution and the incremental cost they will pay versus the

benefit they will receive.

Transpower response:

We have not estimated the cost that proposed changes to the Transmission Pricing Methodology might impose on specific customers.

Contact Question

Is the higher North Island price (identified as a result of the HAY-BPE constraints) considered in the option analysis, i.e. the option that would have the least construction time and therefore lower exposure to the pricing risk?


The duration of construction has not been considered in our options assessment. However, we do not consider it material to our option assessment for this project. The preferred option requires less tower and foundation strengthening than the other reconductoring options considered. Also, after the Judgeford tee is commissioned at the beginning of the second year of work, generation constraints during most construction will be similar to the existing system with all circuits in service as the BPE-WIL circuit will be disconnected at the tee point (JFD). Therefore, outages on the JFD-WIL section will have little impact on HAY-

16 The consultation paper, the non-confidential submissions and this document are available at




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BPE capacity. There will be some outages equivalent to taking HAY-LTN out of service in the present system to commission the double tee and complete the associated protection work.

Contact Question

If a decision to shut or reduce demand at Tiwai is made then would this project be expedited so that it occurs prior to this demand reduction occurring to minimise the pricing risk due to higher DC north flow?


We intend to proceed with delivery as soon as we obtain regulatory approval, therefore there is not an opportunity to expedite commissioning of the project.

A.3.2 Long-list of options

Q2 Is our long-list of options reasonable? Should any other options be added to the list?

No responses received.

A.3.3 Non-transmission solution information

Q3 Do you have any suggestions or proposals for non-transmission solutions to meet the need? If so, please provide the information requested (in section 5.4) so that we can apply a high-level assessment against our short-listing criteria?

Contact has responded with a battery storage non-transmission solution to address the

reduction in security during construction. Further details of this solution can be found in

Contact’s submission on the project website16.

Contact Question

It is mentioned that a Non-Transmission Solution (NTS) is likely to be required during the construction phase to mitigate the risk of reduced security. What is the timeframe of this construction phase and scale of NTS required?


There will be little or no reduction in security, so non-transmission solutions will not be required. We identified that there may be a role for non-transmission solutions to mitigate any potential reduction in security to Wellington during construction. However, we have now confirmed that the value of any such mitigation would be very low to zero.

A.3.4 Short-listing criteria

Q4 Do you agree with our criteria for short-listing? If not, which criteria should we modify, include or remove, and why?

MEUG agreed with the criteria for short-listing.



reserved. 43

A.3.5 Peak demand assumptions

Q5 Are our demand forecast assumptions appropriate for this investigation? If not, please outline any significant (>5 MW) increases or decreases in load you expect to occur in the Wellington region.

MEUG is unsure whether the use of a one-size fits all P90 forecast is appropriate. They

suggest a lower percentile forecast in the near term where there are maintenance or other

options available allowing deferral of high cost decisions.


This option assessment is based on expected (P50) forecasts and a range of market development scenarios. Transpower uses our prudent (P90) forecast to identify future needs that are driven by load growth to ensure that the needs are identified early. All economic assessments are undertaken using the expected forecast.

A.3.6 Market development scenarios

Q6 Are these market development scenarios appropriate for this investigation? If not, we welcome specific information regarding changes.

No responses received.

A.3.7 Analysis period

Q7 Do you consider the proposed calculation period of 40 years appropriate for the Bunnythorpe to Wilton A (Judgeford to Wilton Section) Line Reconductoring investigation?

MEUG responded “yes”, and also suggested to test a scenario with a 20-year horizon as

defined in the Capex IM.

A.3.8 Value of expected unserved energy

Q8 Do you consider this VoLL ($25,300/MWh) appropriate for valuing unserved energy?

MEUG responded that Transpower should consider the more recent analysis by the

Electricity Authority (Investigation into the Value to Lost Load in New Zealand – Report on

methodology and key findings, 23rd July 2013).


We note the caveats included in the EA’s report regarding the applicably of the published VoLL figures to the general population. As such, we consider the report a valuable start to a comprehensive VoLL review, but insufficient justification to change the VoLL figures at this time. We have undertaken sensitivity analysis to ensure our results are not sensitive to this figure.


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Q9 Do you consider this VoLL appropriate for valuing lost load for your business? If, not, what alternative VoLL would you recommend and what evidence are you able to provide to support your recommendation?

MEUG responded that Transpower should consider the more recent analysis by the

Electricity Authority (Investigation into the Value to Lost Load in New Zealand – Report on

methodology and key findings, 23rd July 2013).


See our comments above.

A.3.9 Discount rate

Q10 Do you consider a discount rate of 7% appropriate for this investigation?

MEUG pointed to the Capex IM review in 2017 which might specify the discount rate to be

applied.

Transpower

response:

Transpower will adopt the discount rate as suggested by the Capex IM.

A.3.10 Expected Net Electricity Market Benefit

Q11 Are there other market costs or benefits which should be reflected in the analysis?

No responses were received.



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A.4 Consultation questions in this document

Question 3: Do you have any comments on our analysis of costs and

benefits for this project?

Question 4: Do you agree with our assessment of the preferred solution and

our application of the Investment Test?

Question 2: Do you agree with our assessment of the long-list?

Question 5: What would you consider a material change in cost?

Question 1: Are there any other considerations relating to the need that we

should incorporate into this project?

BUNNYTHORPE-WILTON (JUDGEFORD TO WILTON … · The crossing over the State Highway 1 Johnsonville to Porirua motorway and the ... The unquantified assessment further strengthened

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