The commission’s approval covered the first stage of a two-stage upgrade plan that would increase interisland capacity from 1200 megawatts (MW) to 1400MW, he said.
“The cost of the infrastructure will be added to Transpower’s regulated asset base and recovered over the life of the equipment.
“Under the benefits-based pricing method, those costs will be shared by the electricity consumers and generators that benefit from the HVDC (High-Voltage Direct Current) link.”
The investment would allow better use of renewable generation, especially in the South Island, which could help to reduce wholesale electricity prices over time, Strong said.
A $1.1 billion plan by Transpower to upgrade the three ageing Cook Strait cables, and add a fourth, has been approved by the Commerce Commission. Workers are pictured in 2005 repairing one of the cables.
Stakeholders “broadly supported” the commission’s draft decision, and installing the fourth cable as part of the initial upgrade would maximise benefits and avoid higher costs later.
“The project would also improve resilience and system security, including upgrades to withstand seismic risks and reduce the likelihood and impact of outages.”
The commission was satisfied the investment met the multiple stringent regulatory tests and was in the long-term interests of electricity consumers, he said.
‘Link of national importance’
Today’s decision meant New Zealand would be able to rely on the “link of national importance” – which includes an overhead line as well as the undersea cables – into the future as electricity use continued to grow, Transpower chief executive James Kilty said.
“[The link] allows Kiwis to access the lowest-cost electricity around New Zealand each day … it plays an important role in keeping the power system stable – including helping us manage the more variable power flows from wind and solar, and finally it contributes to energy resilience by linking businesses and communities to many sources of electricity generation.”
Transpower appreciated the commission’s “timely consideration of this major capex proposal”, with undersea cables in high demand globally as many countries increased their electrification, Kilty said.
“Having this decision now, with a good lead-in time, means we will be able to confirm a contract with the manufacturer of the new cables in time for them to be delivered and installed in the early 2030s when replacement is due.
“This reduces the risk of unplanned outages as the existing cables age.”
A major investment plan in New Zealand’s electricity infrastructure has been announced today.
The investment approved today was stage one of a wider HVDC link upgrade programme, he said.
Transpower was expected to consult on a stage two proposal to the commission for a new IT system that controlled the operation of the link at the end of this year.
The state-owned enterprise was also considering what happened to the existing cables once the new ones were installed, Kilty said.
“Further work will be undertaken closer to the time the cables are decommissioned to better understand the potential effects of leaving or removing the cables, and the cost of removal work.”
Transpower owns and operates the national electricity grid.
The Commerce Commission has regulated it under the Commerce Act since 2011, with Transpower able to ask the commission at any time to approve spending on major infrastructure projects.
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