RCP2 Project Overview Document

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1 RCP2 Project Overview Document Project: Expenditure Class: Base Capex Expenditure Category: Grid - Enhancement & Development As at date: 15 November 2013 Expenditure Forecast Real 2012/13 NZ$ (m) Total CAPEX Need Identification Describe the reason for proposing a project ( i.e. need or trigger) What is the timing of the need and the confidence level that issue(s) will eventuate There is one 220/110 kv interconnecting transformer at Stratford (T10) and one at New Plymouth (T8) (rated at 100 MVA and 200 MVA respectively) supplying Taranaki s 110 kv load. When the New Plymouth T8 interconnecting transformer is out of service: the loading on the Stratford T10 interconnecting transformer can exceed its steady state capacity; the 110 kv Carrington Street Stratford circuit can exceed its thermal capacity; and the Huirangi 33 kv supply bus can experience low voltage. The Electricity Industry Participation Code (Code) defines Stratford, New Plymouth and Carrington Street as part of the core grid. The 220/110 kv interconnecting transformers at Stratford and New Plymouth are core grid assets. The outage of one of these interconnecting transformers is a single credible contingency event for which no asset should be unacceptably overloaded or voltages outage the acceptable range. These criteria will not be met from the later part of RCP2 due to increasing demand growth on the 110 kv network. The existing interconnecting transformers at Stratford and New Plymouth are scheduled for replacement early in RCP3. The replacement of these units will require extended outages to remove the old transformer, redo the foundations, and install the new transformer. The addition of a second transformer at Stratford prior to this will enable security to be maintained during the construction outages. It will also ensure sufficient North Taranaki interconnection capacity is available to meet system demand over the next 30 years, and increase Stratford interconnection capacity. The AM09 - Annual Planning Report (APR) 2013 prudent demand forecast indicates the need date of this project is between 2017 and We have a moderate level of confidence that this work will be undertaken during RCP2. The need date will shift for a change in demand forecast and for new 110 kv connected generation or changed 110 kv generation dispatch in the Taranaki region. 1

2 Generic assumptions underpinning the need including any modelling used The power system simulation tool DigSilent (version ) was used to study the power system. Planning assumptions included the following: the APR 2013 demand forecast (prudent regional peak demand) was used to identify the need date for the interconnecting transformer and circuit thermal capacity upgrade. See AM09 - APR 2013, Chapter 4 for the demand forecast methodology; no new generation connection in the Taranaki region apart from that which is already committed. See AM09 - Annual Planning Report 2013, Chapter 5 for the generation assumptions; and varied generation dispatch for generators connected to the Taranaki 110 kv region (McKee, Whareroa, and Patea generation). Long list of options and high level assessment Option Type Option Fit Feasible Practical GEIP Security Cost Short list Demand side a) Demand side response (DSR) b) Fuel switching potential in industrial process to reduce demand c) Energy efficiency by promoting and installing energy efficient heating, motors and appliances d) Price/security signals to encourage commercial and industrial customers to install peak lopping diesel generation sets Supply side e) New generation connection to the Taranaki 110 kv network f) Taranaki 110 kv generation run-up scheme g) Taranaki 110 kv generation grid support contract Transmission options h) Special Protection Scheme (SPS) i) Thermal upgrades of transmission lines j) Dynamic line rating on transmission lines k) Reconductoring existing lines l) New circuit m) Stratford T10 interconnecting transformer capacity upgrade n) New interconnecting transformer at either New Plymouth or Stratford o) New 220/110 kv interconnection at Carrington St and diversion of the 220 kv New Plymouth Stratford line to Carrington St p) System Operator intervention/operational measures Fit for purpose will meet the transmission need. Technical feasibility complexity of solution; reliability, availability and maintainability of the solution; future flexibility Grid Development Strategy. Practicality of implementation Solution implementable by required date (probability of proceeding); property and environmental risks; implementation risks. 2

3 Good electricity industry practice (GEIP) consistent with good international practice; ensure safety and environmental protection; accounts for relative size, duty, age and technological status. System security (additional benefit resulting from an economic investment) improved system security; system operator benefits (controllability); Dynamic benefits (modulation features and improved system stability). Indicative cost whether an option will clearly be more expensive than another option with similar or greater benefits. Short list of options Option 1 New ICT at Stratford (and retain T10 at Stratford) Plymouth (and retain T10 at Stratford) (i.e. replace T10) Option 4 Demand side response or grid support contract A new 220/110 kv 200 MVA interconnecting transformer at Stratford in The development path for this option is to then replace Stratford T10 in 2023 with a transformer of the same capacity and impedance. New Plymouth T8 will be decommissioned when it reaches the end of its life. A new 220/110 kv 200 MVA interconnecting transformer at New Plymouth in The development path for this option is to then replace Stratford T10 in 2023 with a 220/110 kv 200 MVA transformer. New Plymouth T8 will be decommissioned when it reaches the end of its life. Replace the existing 100 MVA Stratford T10 interconnecting transformer with a 250 MVA transformer. The development path for this option is to then install a similar transformer at Stratford in New Plymouth T8 will then be decommissioned rather than replaced. Procure DSR or grid support on the 110 kv network. P50 option costs Brief description of the approach used to estimate capex, and, if applicable, opex A desk-top assessment of the high level scope for each option and building block cost was used to estimate the cost for each option and determine the preferred option. Following this, the initial cost estimate for the preferred option was substituted with a site specific estimate. The approach and key assumptions used to compile the preferred option estimate are: the project scope and likely location of the new assets have been determined from a desktop review of aerial photographs, site layout drawings, underground services drawings, and available cable ducts the scope assessments have been used to estimate materials and work quantities the component costs for material and work quantities have been taken from TEES (cost estimation software) material and plant costs have been determined with reference to period supply contracts currently in place and historic installation costs respectively civil and earthworks costs have been extrapolated from historic costs; and installation costs are informed by similar historic projects and or current quotes from service providers and applied based on the requirements of the site. 3

4 The total option costs are consistent with similar projects completed in the recent past. Option 1 New ICT at Stratford Plymouth Option 4 Demand side response or generation support $8.5m. We would expect variance of +/- 50%. The additional cost (above replacement with like-for-like of the existing transformers due in RCP3) is $2.8m. $7.0m. We would expect variance of +/- 50%. In addition, these costs do include property costs Port Taranaki may place a high premium on land at the New Plymouth station as it has alternative uses for the land. $5.7m. We would expect variance of +/- 50%. The cost of DSR or grid support is unknown at this stage. A grid support contract with Taranaki 110 kv generation would only become necessary if local generation elected to opt out of the wholesale electricity market. Net benefits and outputs Common benefits All options meet the grid reliability standards (GRS). All options make maintenance outages easier to schedule allowing maintenance costs to be reduced. Option 1 New ICT at Stratford This option is robust to changes at New Plymouth station 1 and is straightforward to implement compared to options 2 and 3. Plymouth Option 4 Demand side response or generation support Refer common benefits. Refer common benefits. The key benefit of this approach is to defer capital expenditure. Option risk assessment Common risks The common risk for options 1, 2, and 3 is that changes in the demand forecast and/or new generation injection in the Taranaki 110 kv region shift the need date, i.e. there is a risk of an investment being made too early or not able to meet the need date. 1 Ownership of the New Plymouth power station site has passed to Port of Taranaki who has indicated a strong desire that we remove all its assets on the site. We have rights under the Electricity Act to retain our assets but will be looking at options for relocation. With only a small load at New Plymouth and no real prospect of large scale generation connecting there, our site strategy involves rationalising our assets at the site over time. 4

5 Option 1 New ICT at Stratford Plymouth Option 4 - Demand side response or generation support Refer common risks. Ownership of the New Plymouth power station site has passed to Port of Taranaki who has indicated a strong desire that we remove all our assets on the site. We have rights under the Electricity Act to retain our assets in-situ but will be looking at options for relocation. With only a small load at New Plymouth and no real prospect of connection of large scale generation, we will be rationalising our assets at the site over time. Port of Taranaki may be willing to pay us to leave the site earlier. There is limited space to install another interconnecting transformer at New Plymouth power station. A longer construction outage window will be required (take the old transformer out of service, redo the foundation to accommodate a bigger size transformer, install the new transformer, test and commission). There will be reduced security in Taranaki and or requirement for regional generation during construction. If we are required to shift our assets from New Plymouth station, an additional transformer will be required at Stratford. DSR is a new product and there is no guarantee that it will be offered in sufficient quantity to meet future need. New generation is being built on the 110 kv network. The willingness of that generation to commit to generating at times of system peak has yet to be confirmed. Preferred option(s) What is the currently preferred option / sequence of options / or short-listed options? Set out the reasons for choosing the preferred option(s). List key assumptions used in determining the preferred option(s). List any interdependencies which the preferred option is reliant upon for a successful outcome. Option 4 (Demand side response or generation support) to manage risk until Option 1 (to install a second 220/110 kv 200 MVA interconnecting transformer at Stratford) can be implemented. Option 1 provides more flexibility for replacing Stratford T10. This option is a long term solution that is robust against changes at the New Plymouth site. It has much shorter construction outage windows than option 3. The assumptions underlying the preferred solution are the supply and demand forecasts, and the approach to cost estimation, set out above. The ability to obtain sufficient outages, in both number and duration, to carry out the work are important for a successful outcome. 5

6 Steps to completion What are the next step(s) in choosing the solution When did / will the steps in the internal approval process occur / take place and where were / will they be documented and described Identify the key services and assets that will need to be procured to complete the preferred option Identify the key delivery risks This project is currently at the BC1 stage which is identified need and entry into the integration and approval system (as per section of the AM03 - Planning Lifecycle Strategy). At this stage, a preliminary assessment has been carried out to identify long and short lists of options to resolve the need and determine a preferred option. The following step will be the BC2 investigation to finalise the preferred solution. We intend to start work on this in Q In accordance with our business case process (as described in section of our AM03 - Planning Lifecycle Strategy) the next steps will be to: carry out a detailed investigation (BC2) to formally select the preferred option; and obtain internal Transpower approval to proceed with the project (BC3). The anticipated timeline is: BC2 investigation will be conducted around Q to confirm the preferred solution. Consultation with affected stakeholders will be concluded around Q The preferred solution will be submitted for Board approval around Q BC3 for project execution will be completed around Q Expected commissioning date is Depending on the preferred solution identified in the detailed assessment (BC2) phase, key assets that will need to be procured may be all associated equipment to install a new 220/110 kv 200 MVA interconnecting transformer at Stratford, associated buswork, and civil and foundation works. We expect to outsource the detailed design services for the preferred solution. In accordance with our Procurement Policy, we will ensure that a robust and auditable purchase decision-making process is followed. We will complete a Procurement Plan to document the procurement process and for audit purposes. The plan helps us to plan for the external procurement of goods and services in a way that ensures we are making the most appropriate purchasing decision for our stakeholders. Projects not properly scoped can lead to cost overruns and not meeting deadlines. During the planning process, we will ensure project scope is adequately defined and it can be implemented within the required timeframe and cost. We will ensure the project is designed to its specification, the appropriate design reviews are completed and detailed factory inspections are carried out to manage risks. In the process of procurement, it is essential that we select a supplier that is able to consistently meet quality requirements. Quality must not be compromised in favour of other factors because of the critical influence of quality on risk to safety and the network. If applicable, we will standardise specifications and procurement of primary equipment to limit diversity and increase inter-changeability. This also allows procurement efficiencies to be attained. 6

7 Safety is paramount, the design of all equipment installed must be safe to operate and maintain without compromising performance. Vendors are selected with great care to ensure safe installation and commissioning work and full compliance with all our safety requirements and expectations. All works required on site will be carried out in full compliance with all of our safety requirements and expectations. Supporting Documents and Models List of all relevant documents (including relevant policies and consultant reports) taken into account in estimating project costs and describing anticipated deliverability. Provide a schedule of any models used (including descriptions of model operation and scope). AM09 - Annual Planning Report 2013, refer: Chapter 4, Demand Forecasting Methodology Chapter 5, Generation Assumptions Chapter 12, Taranaki region AM03 - Planning Lifecycle Strategy DigSilent version