PART A - The Proposal...IV PART B Justification Introduction...1

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2 Contents TABLE OF CONTENTS PART A - The Proposal...IV PART B Justification Introduction Purpose Background to the Proposals Document structure Glossary/terminology Needs Assessment and Type of Investment Proposal Power System Analysis Analysis results and constraints on the existing system Conclusion Type of investment Identification and Consideration of Options Proposal Requirements under the Rules Option identification Detailed Description of Short List Options Selecting a proposed investment Proposal Reflection of Good Electricity Industry Practice in meeting the Grid Reliability Standards Compliance with the Grid Investment Test Other Factors The Proposal meets the Rule requirements Proposal Reflection of Good Electricity industry Practice in meeting the Grid Reliability Standards Compliance with the Rules process Satisfaction of the Grid Investment Test The Proposal is appropriately timed Proposal Appropriate Timing Timing of the Proposal Justification and Type of Investment Proposal Government Policy Statement Adequate security of supply Prudent planning Industry feedback Conclusion Type of Investment Identification and Consideration of Options Proposal Requirements under the Rules...5 Grid Upgrade Plan 2007 Instalment 1, Part III North Auckland and Northland Investment Proposal Transpower New I

3 Contents 8.2 Option identification Detailed Description of Options Proposal Selecting a Proposed Investment - Proposal Reflection of Good Electricity Industry Practice in meeting the Grid Reliability Standards Compliance with the Grid Investment Test The Proposal meets the Rule requirements Proposal Reflection of Good Electricity industry Practice in meeting the Grid Reliability Standards Compliance with the Rules process Satisfaction of the Grid Investment Test The Proposals are consistent with wider policy objectives The purpose of Part F The Government Policy Statement (GPS) The Electricity Commission s objectives and outcomes Recommendation Post Approval Construction Programme Management of Capital Costs...5 Appendix A Glossary...5 Appendix B Amendments...5 Attachments Ref Title A Economic Report B Technical Report C Vector s Network D Assumptions E Assessment of Options F Capital Cost Estimates for Alternatives G Request for Information H Summary of Public Workshop held 13 July 2007 I High Temperature Conductor, 220 kv HEN OTA A line J High Temperature Conductor, 110 kv lines L Project Timing Grid Upgrade Plan 2007 Instalment 1, Part III North Auckland and Northland Investment Proposal Transpower New II

4 Contents Revision Date Clarification or amendment 1 Reasons and main areas of revision described in: Original September 2007 Revision 1 May 2008 Amendment *Further analysis of technical need date, leading to amendment to Attachment B Technical Report, and addition of section 6 to Part B of the GUP and addition of Attachment L Project Timing. *Costs of section of PEN-HOB route calculated as if installed in the DBD tunnel owned by Vector Limited leading to amendment to Part A of GUP and Attachment A Economic Report. 1 Amendment: An amendment includes a change to the physical scope of works in Part A and/or an increase in the costs in Part A for which approval is sought. Clarification: A clarification includes any changes that do not constitute an amendment It is in essence a clarification of the justification given in Part B for the physical scope of works, a change in timing that does not increase the costs for which approval is sought, or a reduction of the costs for which approval is sought. Grid Upgrade Plan 2007 Instalment 1, Part III North Auckland and Northland Investment Proposal Transpower New III

5 PART A - The Proposal PART A - The Proposal This document represents Transpower s North Auckland and Northland Grid Upgrade Investment Proposals. Transpower s North Auckland and Northland Grid Upgrade Proposal 1: Transpower is seeking Electricity Commission approval to recover the full costs associated with implementing the following: Proposal 1 Procuring, constructing, commissioning and operating a connection between Pakuranga and Penrose substations that: is capable of 220 kv operation; and has a winter cyclic rating of around 600 MVA. Procuring, constructing, commissioning and operating a connection between Penrose substation, Hobson Street substation, Wairau Road substation and Albany substation that: is capable of 220 kv operation; and has a winter cyclic rating of around 600 MVA. Procuring, constructing, commissioning and operating substation facilities at Pakuranga, Penrose and Albany substations to facilitate the above connections. Procuring, constructing, commissioning and operating substation / grid exit point facilities at Vector s Hobson Street and Wairau zone substations to facilitate the above connections. Dismantling components of existing connections and substations made redundant by these works. Obtaining designations, easements, resource consents and property purchases for these works. Any additional minor works and activities required to facilitate the above or manage the reliability risks of higher than expected demand or longer than expected construction times. Timing Transpower will continue to work towards a commissioning date for Proposal 1 of Mid For the avoidance of doubt, some minor works at Penrose substation are planned for commissioning in Costs Following approval of Proposal 1, Transpower will recover the full costs associated with implementing Proposal 1 up to an amount of $577 million. This amount is the current estimate of the P90 level of costs to implement Proposal 1. It is expressed in 2013 New Zealand dollars exclusive of GST. Grid Upgrade Plan 2007 Instalment 1, Part III North Auckland and Northland Investment Proposal Transpower New IV

6 Transpower s North Auckland and Northland Grid Upgrade Proposal 2: If the Electricity Commission approves Proposal 1, Transpower is seeking Electricity Commission approval to recover the full costs associated with implementing the following: Proposal 2 Obtaining designations, easements, resource consents and property purchases concerning the existing CBD cable tunnel between Penrose and Hobson substations to facilitate the possible installation in the future of an additional connection between Penrose and Albany substations. Any additional minor works and activities required to facilitate the above. Timing Transpower will continue to work towards obtaining rights associated with Proposal 2 at a time commensurate with obtaining rights for Proposal 1. Costs Following approval of Proposal 2, Transpower will recover the full costs associated with implementing Proposal 2 up to an amount of $12.9 million. This amount is the current estimate of the P90 level of costs for Proposal 2. It is expressed in 2009 New Zealand dollars exclusive of GST. Grid Upgrade Plan 2007 Instalment 1, Part III North Auckland and Northland Investment Proposal Transpower New V

7 PART B Justification PART B Justification 1 Introduction 1.1 Purpose The purpose of the North Auckland and Northland Grid Upgrade Proposals, submitted as part of Transpower s 2007 Grid Upgrade Plan, is to obtain Electricity Commission approval to recover the costs associated with implementing a solution to ensure reliable electricity supply to the North Auckland and Northland area beyond The purpose of Part B of this document is to provide information for: affected parties. (The Electricity Governance Rules (Rules) require that persons who are representative of the interests of persons who are likely to be substantially affected by the Proposals and the content of this Grid Upgrade Plan to be provided an opportunity to provide feedback to the Electricity Commission on the Proposals); designated transmission customers. (The Rules require that designated transmission customers may provide written comments to the Electricity Commission on the Proposals and, if desired, request the Electricity Commission to consider alternatives to the Proposals); and the Electricity Commission to approve the Proposals. 1.2 Background to the Proposals The North Auckland and Northland area does not contain any appreciable generation. In addition, it is connected to the remainder of New Zealand via the Greater Auckland area, which itself is located on a narrow land isthmus. Therefore, nearly all of the electricity used in the North Auckland and Northland area is transported by transmission lines that run through Auckland and that carry electricity from generators in the south. Transpower has been aware of impending cross-auckland transmission issues for some time. In May 2006, Transpower issued a request for information (RFI) seeking ideas for nontransmission options that may address an impending transmission shortfall. In June 2007, Transpower held a workshop on options, providing feedback on the RFI and informing about the short list of options that Transpower would be considering as part of the project. An interim work phase (IWP) was established with the Electricity Commission in May The RFI, workshop and IWP culminate in these North Auckland and Northland Grid Upgrade Proposals forming Part III of Instalment 1 of Transpower s Grid Upgrade Plan Document structure Grid Upgrade Plan This document forms Part III of Transpower s Grid Upgrade Plan 2007 which also includes Part I the comprehensive plan for asset management, and Part II investment contracts, as required under Rule 12.3, Section III of Part F of the Rules North Auckland and Northland Grid Upgrade Project Investment Proposal Part A of this document contains two separate investment proposals: Proposal 1 is for investment in transmission into the North Auckland and Northland area. Proposal 2 is for investment in securing part of a route for further transmission into the North Auckland and Northland area. 1

8 Proposal 1 stands independently of Proposal 2. However, consideration of Proposal 2 is contingent on Transpower gaining approval from the Electricity Commission to recover the costs associated with implementing Proposal 1. Part B of this document describes the processes followed and information analysed by Transpower in reaching its decision to seek approval from the Electricity Commission to recover the costs associated with implementing the Part A Proposals. Accordingly, Part B of this document is not part of the Proposals, but contains justification for the Proposals. Part B of this document contains, for each of Proposal 1 and Proposal 2: Transpower s assessment of the need for investment; discussion of which type of investment under the Rules, i.e. reliability or economic; the process Transpower undertook and the information analysed to identify and consider all options with a view to producing a short list of options; the process Transpower undertook and the information analysed to select the Proposals; illustration of how the Proposals meet the requirements of the Rules; consideration of timing of the Proposals; illustration of how the Proposals meet the wider policy objectives of the Government and Electricity Commission for transmission in New Zealand; a recommendation to the Electricity Commission to approve the Proposals; and discussion of how, post-approval, Transpower intends to manage the capital costs associated with implementing the Proposals. 1.4 Glossary/terminology A glossary of terms and acronyms used in this document is included in Appendix B. All references to Rules in this document refer to those in Part F of the Electricity Governance Rules 2003 unless otherwise specified. 2 Needs Assessment and Type of Investment Proposal Power System Analysis Analysis of the New Zealand transmission system is routinely carried out by the Grid Investment group at Transpower. Broadly speaking, the power system analysis forecasts the National Grid s capacity to transmit power throughout New Zealand under a range of future conditions. Analysis includes: power flow analysis to identify thermal constraints (the point at which assets become overloaded due to system contingency events); and voltage stability analysis to identify voltage collapse constraints. In undertaking any power system analysis, Transpower considers and incorporates the following: assets comprising the transmission network; transmission upgrade projects being implemented; assumptions regarding future supply and demand; grid reliability standards that specify the minimum required level of supply security and reliability for the purposes of transmission planning and real-time system operation; and 2

9 Needs Assessment and Type of Investment Proposal 1 other relevant matters, which in this case included the ancillary requirements of Vector to reinforce two of Vector s major substations in the Greater Auckland area. These factors were used in power system analysis for the North Auckland and Northland area to identify any potential future power supply constraints Assets comprising the transmission network The North Auckland and Northland area is defined as the area north of and including Transpower's Hepburn Road substation. It includes all of the North Shore, West Auckland and Northland. North Auckland and Northland Area Geographical At present, the only significant electricity transmission into the North Auckland and Northland area is through the existing 220 kv Henderson Otahuhu double circuit line. The 110 kv lines that run next to the 220 kv Henderson Otahuhu line are of relatively low capacity and sections of them are nearly fully utilised. These 110 kv lines are not presently configured to carry power to the North Auckland and Northland area. 3

10 Needs Assessment and Type of Investment Proposal kv Double Circuit O/H Line Albany 220 kv Single Circuit O/H Line 110 kv Double Circuit O/H Line Henderson Mt Roskill Penrose Pakuranga Mangere Otahuhu Existing transmission system into the North Auckland and Northland area Transmission upgrade projects The power system analysis included a number of transmission upgrade projects presently being implemented in the North Auckland and Northland area. These transmission upgrade projects maximise the utilisation of the existing transmission assets so as to extend the operational capacity of the existing system. The projects include: increasing the thermal operating limit of the 220 kv Henderson Otahuhu A line from 765/695 MVA to 986/938 MVA 2 ; increasing the thermal operating limit of the 220 kv Otahuhu Penrose C line from 347/382 MVA to 469/492 MVA; closing the 110 kv system split between Mt Roskill substation and Hepburn Road substation; installing a number of additional capacitor banks and other reactive power support devices in the Auckland and Northland area to improve the region s voltage stability; and The North Island Grid Upgrade project. This is assumed to be complete by 2011 as per the Amended Proposal that has recently been approved by the Electricity Commission. 2 Resource consent has been obtained to allow the use of this capacity on the Henderson Otahuhu line during forced outages, however an appeal is due to be heard in the Environment Court.. The appeal date has not yet been set.. 4

11 Needs Assessment and Type of Investment Proposal Assumptions The power system analysis requires the use of various assumptions, including forecasts for future supply and demand. Supply Forecast The only significant generation in the North Auckland and Northland area is located at Ngawha, near Kaikohe. This is a 10 MW output geothermal plant owned by Top Energy which is presently seeking resource consent to increase its output to 25 MW. At 25 MW, this geothermal plant will account for approximately 3% of the peak load in the North Auckland and Northland area in 2010, and so is considered largely insignificant. Transpower is also aware of the following two significant generation projects proposed as possible options for the North Auckland and Northland area: Rodney power station estimated at 240 MW output; and Marsden power station estimated at 300 MW output. At the time of the power system analysis, these projects were not committed projects as defined under the Rules 3. To be a committed project under the Rules a project must be reasonably likely to proceed in a similar timeframe, regardless of whether any other investment proceeds and must have: all required planning consents, construction approvals and licences in place; fulfilled any regulatory requirements required to be met prior to construction; commenced, or have a firm commencement date, for construction; land acquired or an executed agreement in place to acquire or lease the land for construction; contracts for supply and construction of the major components of the plant and equipment; and finance agreements in place. Neither of the two generation projects proposed for the North Auckland and Northland area meets the requirements above. At the time of undertaking the power system analysis, the proposed Rodney power station was in the proposal stage and had not satisfied any of the requirements to be a committed project under the Rules. At the time of undertaking the power system analysis, Mighty River Power was considering consent conditions that had been placed on the operation of Marsden power station. Since then, Mighty River Power has officially stated that it will not pursue this project further. Accordingly, Transpower used the 2007 Grid Planning Assumptions supply forecasts, downloaded from the Electricity Commission website in May 2007 without amendment. These were the most up to date supply assumptions available and are provided in Attachment D Assumptions. Demand forecast The demand forecast that Transpower uses in its power system analysis is pivotal in identifying if, and when, transmission investment is likely to be required. Accordingly, Transpower utilises various sources of information to ensure its load forecasts are as accurate as possible, including: historical demand growth data; national and regional population forecasts from Statistics New Zealand; gross domestic product forecasts from the New Zealand Institute of Economic Research; 3 Clause 21 of Schedule F4 of the rules. 5

12 Needs Assessment and Type of Investment Proposal 1 feedback from large electricity companies and local electricity distributors about where and how they expect demand growth to occur in the future. The information obtained from these sources is combined with Transpower s data to form an initial demand forecast. Transpower compared the initial demand forecast for the North Auckland and Northland area with the load forecast set by the Electricity Commission in its 2005 National Energy consumption 40 year forecast allocated to regions based on data from Statistics New Zealand. Once allocated to regions, Transpower converted the regional energy consumption forecasts to peak MW demand forecasts (assuming peak demand growth rate matches the rate of growth in energy MW demand) at each grid exit point to produce a final after diversity maximum demand (ADMD) forecast. ADMD is the amount forecast for a specific area or grid exit point at the time of system peak demand. Transpower further refined the ADMD forecast for the North Auckland and Northland area by: adding 15 MW to the base demand scenario ADMD forecast to allow for the effect of seasonal demand fluctuations from the baseline forecast; and applying the regional average power factor of No further refinement to the ADMD forecast was required to differentiate between metered demand and actual demand as the network across Auckland is limited by thermal capacity rather than voltage stability. The demand forecast generated by Transpower did not differ appreciably from the prudent forecast derived by the Electricity Commission as part of the Electricity Commission s 2007 Grid Planning Assumptions. Accordingly, Transpower used the 2007 Grid Planning Assumptions demand forecasts, downloaded from the Electricity Commission website in May 2007 without amendment. These were the most up to date demand assumptions available and they are provided in Attachment B Technical Report. Transmission System Load limit The transmission system load limit used by Transpower in the power system analysis for North Auckland and Northland is based on: the thermal capacity of the 220 kv Henderson Otahuhu line at 120 C; a regional power factor of 0.98; all transmission circuits and capacitors being in service; and the 25 MW Ngawha generator being out of service (see discussion in section 2.1.4) Other assumptions - Modelled projects In addition, Transpower used the modelled projects generated and included in the North Island Grid Upgrade Project (NIGU) in its power system analysis. A list of these projects is provided in Attachment B Technical Report. These modelled projects are commensurate with the 2008 Annual Planning Review undertaken by Transpower. A full list of the assumptions used by Transpower in the power system analysis for the North Auckland and Northland area are set out in Attachment B Technical Report and Attachment D Assumptions Grid reliability standards The grid reliability standards specify the minimum level of supply reliability required for supplying load. The grid reliability standards are used to compare the transmission network capability against forecast demand to establish whether it is likely that any gap in supply will occur in the future. 6

13 Needs Assessment and Type of Investment Proposal 1 The main interconnected transmission system supplying the North Auckland and Northland area that forms the basis of these proposals is core grid as defined in Schedule F3A of the Rules. Accordingly, in order to meet the grid reliability standard, the grid for the North Auckland and Northland area must meet the following: the power system is reasonably expected to achieve a level of reliability at or above the level that would be achieved if all economic reliability investments were to be implemented (clause 4.1 of Schedule F3); and with all assets that are reasonably expected to be in service, the power system would remain in a satisfactory state during and following any single credible contingency event occurring on the core grid (clause 4.2 of Schedule F3). A satisfactory state is defined under Part A of the Rules as meaning none of the following occur on the power system: insufficient supply of electricity to satisfy demand for electricity at any grid exit point; unacceptable overloading of any primary transmission equipment; unacceptable voltage conditions; and system instability. The definition of a single credible contingency event includes the failure of assets which form part of the grid and also generating assets. The expected level of reliability and the state of the power system must be assessed using the range of relevant operating conditions that could reasonably be expected, having regard to possible future scenarios as set out in the Electricity Commission s statement of opportunities (clause 6). Clause 4.2 imposes an operational reliability test involving an assessment of the power system s ability to withstand a single credible contingency event in certain operating circumstances. It requires consideration on a two stage basis: (1) determine all the assets that are reasonably expected to be in service; and (2) given the above, assess if the power system would remain in a satisfactory state during and following any single credible contingency event. In order to assess what assets are reasonably expected to be in service, Transpower has considered the availability of relevant assets, including assessing the general reliability of various assets (such as generators and reactive plant) given historic availability and taking into account a realistic range of operating conditions that might be expected to occur. Transpower believes it is both reasonable and prudent to plan on being able to maintain n-1 security when, in terms of the assets which constitute the operating system in North Auckland and Northland, a generating unit is out of service. Generating units are regularly out of service and therefore such an event is clearly foreseeable. Transpower does not contend that a generating unit will always be out of service, but that planning around maintaining appropriate levels of reliability when a generating unit is out of service is reasonably expected from a skilled and experienced asset owner engaged in the management of a transmission network. Consequently, Transpower interprets clause 4.2 of Schedule F3 as requiring it to plan for the contingency safety net, meaning planning to a standard where the power system would remain in a satisfactory state during, and following, any single credible contingency event occurring on the core grid with a generator out of service. 7

14 Needs Assessment and Type of Investment Proposal 1 Accordingly, in terms of the North Auckland and Northland transmission network, Transpower has planned on the basis that reliability must be able to be maintained when the largest generation unit is out of service. That generation unit is at Ngawha. Transpower believes that this interpretation is consistent with good electricity industry practice given the degree of skill, diligence, prudence, foresight and economic management reasonably expected of a skilled and experienced asset owner responsible for planning the Auckland and Northland transmission network and with reference to international practice. In this instance, as the generation asset at Ngawha is relatively small, an n-g-1 analysis will result in the same development plan as an n-1 analysis. Thus, Transpower used an n-g-1 security standard in the power system analysis for the North Auckland and Northland area, which would be commensurate with an n-1 analysis Other relevant matters Vector s network Vector has highlighted its need to reinforce two of its major zone substations in the Greater Auckland area, namely Wairau Road (North Shore) and Hobson Street (CBD). Vector has advised that in order to meet its network security standards, reinforcement of supply to its substations at Wairau Road and Hobson Street will be required in 2010 and 2013 respectively. Options that have been identified for addressing these issues include: installing a new 110 kv feeder cable from existing Transpower substations; and creating new GXPs at Wairau Road and Hobson Street by tapping off Transpower s 220 kv circuit. This option is contingent on a suitable 220 kv circuit being available near the Wairau Road and Hobson Street substations. Details of Vector's network and the options they have identified for reinforcement are provided in Attachment C Vector s Network. As certain options for transmission investment into the North Auckland and Northland area will result in a suitable 220 kv connection point being available adjacent to Vector s two substations, Vector s reinforcement decisions are contingent on the outcome of any investment as part of the North Auckland and Northland Grid Upgrade project. For example, if Vector decides to invest in an 110 kv cable option, then the installation of a 220 kv connection point at a later point in time may result in the stranding of Vector s new 110 kv cable assets. These considerations have been taken into account in the analysis of alternatives. 2.2 Analysis results and constraints on the existing system The analysis presented in Attachment B Technical Report shows that with all of the transmission upgrade projects listed in section in place, the transmission capacity limit into the North Auckland and Northland area is 1110 MVA. Based on Transpower s power system analysis, supply problems into the North Auckland and Northland area are likely to be experienced from the winter of 2016 if there is no new investment in transmission, generation or demand-side alternatives. Demand in the North Auckland and Northland area will exceed supply: based on ADMD analysis using prudent demand forecast from winter of 2016; and during peak load on winter days some time after These issues are likely to increase in severity with increasing demand in the North Auckland and Northland area. This is illustrated by the following table showing that, from 2016 onwards, the ADMD prudent demand forecast for the North Auckland and Northland area exceeds the transmission network load limit (i.e MVA) of the existing transmission system. 8

15 Needs Assessment and Type of Investment Proposal 1 Table 2-1: North Auckland and Northland Area Prudent Demand Forecast (Winter) ADMD Prudent Demand Forecast Year Demand (MVA) The North Auckland and Northland area s peak demand occurs in winter. The daily demand curve in winter is typified by a morning and evening peak with troughs during the late evening and early morning. Figure 2-1 shows typical winter daily profiles of the North Auckland and Northland area s demand (both actual and forecast) against the transmission network capacity limit. Figure 2-1: Projected North Auckland and Northland area Typical Winter Daily Load Demand Profile. Forecast Load Profile - Peak Winter Day North Auckland and Northland Area Load (MVA) Transmission Capacity Limit :00 04:00 08:00 12:00 16:00 20:00 00:00 Time This figure illustrates that shortfalls in capacity, where demand exceeds the transmission network load limit, are initially expected during evening peak demand periods of Assessment of the capacity and energy shortfall is based on maintaining security of supply levels in the North Auckland and Northland area beyond Table 2-2 shows the potential GWh and peak MW shortfall range over and under the range of demand forecast, from low to high demand. 9

16 Needs Assessment and Type of Investment Proposal 1 Table 2-2: Electricity Shortfalls for the North Auckland and Northland Area, Year Additional peak demand requirement range (from low to high demand) above the current maximum secure network capacity. (MW) Additional energy requirement range (from low to high demand) above the current maximum secure network capacity. (GWh) < If any one asset in the North Auckland and Northland transmission system is out of service during winter peak demand periods in 2016 and beyond, demand restrictions may be required to enable the System Operator to cater for any further unplanned outages. The critical contingency will be the loss of a 220 kv Henderson Otahuhu A circuit, leading to thermal overloading of the adjacent remaining circuit. The only way to manage this contingency beyond 2016 with the existing transmission system, would be via load shedding in the North Auckland and Northland area. Full details of Transpower s power system analysis are provided in Attachment B Technical Report. Further details about the above as well as other constraints currently affecting transmission capacity in the North Auckland and Northland area are available in Transpower s latest: Annual Planning Report (March 2008), chapter 9, page 153 Auckland Regional Plan ; and System security forecast (December 2006), part D, Security Analysis Auckland Region. 2.3 Conclusion Based on the power system analysis undertaken by Transpower for the North Auckland and Northland area, a solution must be identified in the near future to ensure reliable electricity supply to the North Auckland and Northland area without needing to restrict demand at times of high system load. Transpower considers that the assumptions underpinning the power system analysis for the North Auckland and Northland area (a prudent demand growth forecast coupled with the availability and reliable operation of key transmission and generation assets) represents a reasonable view of the future. Based on the demand forecast, the technical issues driving the need for investment in the North Auckland and Northland area include: demand in excess of the maximum rating of the existing transmission system between Otahuhu and Henderson beyond 2016; and 10

17 Needs Assessment and Type of Investment Proposal 1 without new investment (in transmission or an acceptable non-transmission alternative solution), the economic cost of not meeting the growth in demand in the North Auckland and Northland area will increase annually as underlying demand grows. 2.4 Type of investment Under the Rules, Transpower may propose an investment that meets a defined need to the Electricity Commission for approval. Those investments are split into two different types - reliability investments and economic investments. Reliability investments are defined under the Rules as follows: investments made by Transpower in the grid, or alternative arrangements by Transpower, the primary effect of which is, or would be, to reduce expected unserved energy. The Rules then provide for a catch-all of economic investment which is defined as any investment in the grid that meets the grid investment test that is not a reliability investment. Accordingly, the first step is to determine whether an investment s primary effect is to reduce expected unserved energy. Expected unserved energy is defined under the Rules as follows: a forecast of the aggregate amount by which the demand for electricity exceeds the supply of electricity at each grid exit point as a result of likely planned and unplanned outages of primary transmission equipment. In turn, primary transmission equipment is defined in the Rules as follows: any plant or equipment forming part of the grid which enables the bulk transfer of electricity, including without limitation transmission circuits, busbars and switchgear. Accordingly, for an investment to be a reliability investment it must pass the following fourlimbed test: it must be an investment made by Transpower in the grid or an alternative arrangement by Transpower; it must have the primary effect of reducing expected unserved energy; the expected unserved energy must result from likely planned or unplanned outages; and the likely planned or unplanned outages must be to primary transmission equipment Investment in the grid The grid is defined in the Rules as: the system of transmission lines, substations and other works, including the HVDC link used to connect the grid injection points and grid exit points to convey electricity throughout the North Island and South Island of New Zealand. Proposal 1 is clearly an investment by Transpower in the grid as it involves procuring, constructing, commissioning and operating transmission lines or cables, substation works and associated works to connect grid injection points and grid exit points Reducing expected unserved energy If demand for electricity exceeds supply of electricity there will be unserved energy (including where energy is available but cannot be transported to where it is required). Transpower s power system analysis has identified that from 2016 the forecast demand for electricity will exceed the forecast supply of electricity in the North Auckland and Northland area. Accordingly, it is expected that, without Proposal 1, unserved energy will arise from

18 Identification and Consideration of Options Proposal Planned or unplanned outages However, for an investment to be a reliability investment, the unserved energy must be as a result of likely planned or unplanned outages. The Electricity Commission has interpreted this to include the situation where increases in demand are likely to result in electricity demand exceeding electricity supply. Accordingly, Proposal 1 meets the third limb of the test Primary transmission equipment Lastly, for an investment to be a reliability investment, the planned or unplanned outage must be to primary transmission equipment. Primary transmission equipment is defined in the Rules as: any plant or equipment forming part of the grid which enables the bulk transfer of electricity, including without limitation transmission circuits, busbars and switchgear. As explained in Attachment B Technical Report, Proposal 1 is required to ensure reliable electricity supply can be maintained to the North Auckland and Northland area given the: demand forecast; and the possibility of an outage on the transmission circuits presently supplying the area. The plant or equipment most likely to have an outage, for which Transpower must prudently plan, is the 220 kv Henderson Otahuhu A line, or the 110 kv lines between Otahuhu and Henderson. This equipment is primary transmission equipment as defined under the Rules. Accordingly, the likely planned or unplanned outages are likely to be to primary transmission equipment and those likely planned or unplanned outages are expected to result in unserved energy. Proposal 1 meets all four limbs of the reliability investment test and is therefore a reliability investment as defined in the Rules. 3 Identification and Consideration of Options Proposal Requirements under the Rules Under the Rules, an investment proposed by Transpower must meet the grid investment test. This requires that the proposed investment (in the case of reliability investments for core grid) maximises the expected net market benefits or minimises the expected net market costs compared with a number of alternative projects. Accordingly, Transpower must identify a number of options that fall within the definition of alternative projects under the Rules. Alternative Projects are defined in the Rules as follows: any alternative transmission augmentation projects and transmission alternatives to the proposed investment, including any variant of the proposed investment that involves a non-negligible change in the timing of that proposed investment, that are: technically feasible; reasonably practicable having regard to the matters set out in clauses 8.1 to 8.4; 12

19 Identification and Consideration of Options Proposal reasonably likely to proceed if neither the proposed investment nor any other alternative project proceeds and unlikely to proceed if the proposed investment does proceed; reasonably expected to provide similar benefits, in type but not necessarily in magnitude, to relevant nodes, as the proposed investment; and reasonably expected to enable the deferment of investment of the type contemplated by the proposed investment for a period of 12 months or more. To assist in identifying both the best solution to form the basis of a proposed investment and all alternative projects, Transpower undertook a process which included the following stages: confirming the need for the investment; identifying all options to address the identified need; identifying criteria to asses all the options; assessing all the options to identify a short list of options; and confirming the short list of options. At each of these stages, Transpower sought industry and public feedback to its approach, the information gathered and identification of a preferred approach. 3.2 Option identification Request for Information In May 2006, Transpower published a request for information entitled Supply Security and Request for Information on Alternatives May 2006 (RFI). The RFI identified the need for investment to maintain reliable power supply in the North Auckland and Northland area. The RFI sought feedback from stakeholders, electricity market participants, affected parties and the general public on how the investment need may best be met including non-transmission options. Transpower received 21 submissions in response to the RFI from a broad range of interested parties including generators, local bodies, network companies and the general public. Broadly speaking, the submissions received included: generation proposals, ranging from a major power station to distributed packaged generation plant; enhancement to the existing ripple control system in the North Shore; confirmation that Transpower should proceed to secure transmission into the North Auckland and Northland area; and encouragement for Transpower to consider undergrounding of existing and new transmission lines. A copy of the RFI and a summary of the submissions received are provided in Attachment G Request for Information and Summary of Submissions Received Long List and Short List of Options Following feedback received in response to the RFI and continued analysis by Transpower, a long list of options for investment in the North Auckland and Northland area was compiled. Transpower then undertook an initial high-level qualitative and quantitative assessment of all long list options against the following criteria: high level estimate of cost; 13

20 Identification and Consideration of Options Proposal 1 reliability; diversity/system security; technology; implementation feasibility; fitness for purpose; availability of a proponent; and capacity. Each option was scored out of five against each criterion, where five provides the highest ranking. A summary of the results of the assessment of all the long list options against the specified criteria is set out in the table below. Table 3-1: High-level option assessment No. Description Type of option Cost ($m) Rating 1 Cross harbour cables and new Pakuranga to Penrose circuits (staged installation) Transmission Increase the capacity of the existing system Transmission Mt Roskill reinforcement Transmission Rodney Power Station Supply side Cross harbour cables and new Pakuranga to Penrose circuits (not staged) Transmission Deep tunnel Hobson Street Albany Transmission Deep tunnel Penrose - Henderson Transmission Central corridor 110 kv to 220 kv line replacement Transmission Distributed generation Supply side Ripple Control Demand side Huntly Huapai cables via harbour Transmission Deep tunnel Hobson Street Henderson Transmission HVDC light from Penrose to Albany (two terminal) HVDC light Pakuranga Penrose Albany (three terminal) Transmission Transmission Huntly Henderson overhead / underground Transmission Huntly to Huapai 220 kv double circuit overhead line Transmission Transpower held a workshop (Options Workshop) with all interested parties on 13 July 2007 to discuss the long list of options, the assessment criteria and the short list of options. Over 40 people attended the Options Workshop representing generators, local and regional councils, the Electricity Commission and members of the general public. The Options Workshop was chaired by Mr Tony Baldwin, an independent expert within the industry. Transpower recorded and transcribed the Options Workshop and has been able to refer back to it for clarification. Based on the assessment criteria, Transpower identified a short list of three options that it considered equally likely to proceed to proposal stage. Those options numbered 5-16 (inclusive) do not qualify as alternative projects. This is because their respective forecast capital costs would mean they: would not meet the requirements of the grid investment test; and are not reasonably likely to proceed if neither the proposed investment nor any other alternative project proceeds and unlikely to proceed if the proposed investment does proceed under clause 19.3 of Schedule F4. 14

21 Identification and Consideration of Options Proposal 1 Accordingly, options 5-16 (inclusive) of the long list of options are not short list options. Transpower has not included the Northern Generation Option, option number 4, as a short list option. However, due to the interest in Genesis Energy s potential investment in generation in the Rodney district, Transpower considered whether to include this option in more detail. A discussion of Transpower s analysis is provided in section below. At the Options Workshop there was general agreement that the option assessment criteria were appropriate and complete, however, one group suggested that more emphasis was required on environmental impact. Transpower explained that environmental impact is addressed under the Resource Management Act processes. No further options were identified for inclusion in the short list of options and there was agreement that the short list of options proposed by Transpower was complete. Accordingly, Transpower identified the following short-listed options: Table 3-2: Short-listed options No. Description Type of option 1 Cross harbour cables and new Pakuranga to Penrose circuits (staged installation) Estimated cost ($m) 1 Transmission Increase the capacity of the existing system Transmission Mt Roskill reinforcement Transmission Rating 1. These estimated costs are taken from Attachment E Assessment of Options. A more detailed summary of the assessment of the long list of options against the specified criteria is provided in Attachment E Assessment of Options. More detail on the findings from the Options Workshop is provided in Attachment H Summary of Public Workshop held 13 July Detailed Description of Short List Options This subsection describes, for each short listed option: the technical details; a high level long-term development plan, based on a purely deterministic analysis using an n-g-1 security criterion, excluding: reactive plant requirements which are given in Attachment B Technical Analysis ; and consideration of economic factors that may alter the timing of the short list option, such as reliability benefits or cost of unserved energy. These factors are considered under the economic analysis of the short list options section; and an initial assessment of relative merits and risks. In addition, the subsection includes a discussion of why Transpower has not included the Northern Generation Option as a short list option Option 1 - Cross Harbour Cable Option This short list option involves: installing a single 220 kv circuit from Pakuranga (PAK) to Albany (ALB); creating new 220 kv grid exit points (GXPs) at Hobson Street (HOB) and Wairau Road (WRU) which are both located close to the Penrose (PEN) ALB cable route; and related substation works. 15

22 Identification and Consideration of Options Proposal 1 Identifying a route In order to provide the level of certainty as to the works required to implement this option and therefore the likely costs involved, Transpower considered various alternate routes for the 220 kv circuit from PAK to ALB. Transpower considered the two components of that route separately, namely a route from PAK to PEN and a route from PEN to ALB. These are discussed separately below. PAK PEN ROUTE The PAK to PEN part of the route is approximately 10 kilometres in length. PAK and PEN are presently connected via a 110 kv bonded double circuit overhead line as illustrated in the map below: Figure 3-2: PAK PEN existing 110 kv line route Section 1 (approximately 3km) of the existing 110 kv double circuit overhead line is located in a transmission corridor along with two other 110 kv lines. The land in this part of the transmission corridor is owned by Transpower. However, that transmission corridor is approximately 40m wide, and the three lines that occupy this part of the transmission corridor occupy the full width of the corridor, i.e. the two outside lines are located against the boundaries of the corridor. Section 2 (approximately 6km) of the existing 110 kv double circuit overhead line is situated over a residential area and the line crosses many buildings including schools. The land under this section of the line is not owned by Transpower and access to the line for maintenance is gained under the existing use rights provision of the Electricity Act Section 3 (approximately 1km) of the existing 110 kv double circuit overhead line is actually constructed for 220 kv operation and is strung with duplex Zebra aluminium conductor steel reinforced (ACSR) conductor. However, it is currently operated at 110 kv. The land under this section of the line is not owned by Transpower and rights to access the line for maintenance are gained under the existing use rights provision of the Electricity Act

23 Identification and Consideration of Options Proposal 1 Several possibilities have been identified for installing a new 220 kv connection between PAK and PEN, including: all overhead; a hybrid of overhead and underground; and all underground These are discussed below. ALL OVERHEAD To facilitate a new 220 kv double circuit overhead line between PAK and PEN will require: replacing the existing 110 kv double circuit overhead line in sections 1 and 2 with a new 220 kv double circuit overhead line following the same, or a similar route; utilising the existing 220 kv double circuit overhead line in section 3; purchasing easements to provide adequate clearance between the new 220 kv double circuit overhead line and the remaining two 110 kv double circuit overhead lines in section 1; finding a suitable route for section 2 of the new 220 kv double circuit overhead line and purchasing easements for it; and purchasing property rights in the land under or adjacent to section 3 and obtaining any resource consent required if it is to be operated at the higher voltage of 220 kv. The cost of purchasing easements, plus the delivery risk associated with building a new 220 kv line (especially through section 2 with the significant residential under-build), make this possibility impracticable and it is not considered further. HYBRID (OVERHEAD / UNDERGROUND COMBINATION) To facilitate a new 220 kv overhead/underground connection between PAK and PEN will require: replacing the existing 110 kv double circuit overhead line in section 1 with a new 220 kv double circuit overhead line following the same, or similar route; removing the existing 110 kv double circuit overhead line in section 2; cabling the line in section 2 through roadways; utilising the existing 220 kv double circuit overhead line in section 3; purchasing easements to provide adequate clearance between the new 220 kv double circuit overhead line and the remaining two 110 kv double circuit overhead lines in section 1; and purchasing property rights in the land under or adjacent to section 3 and obtaining any resource consent required if it is to be operated at the higher voltage of 220 kv. ALL UNDERGROUND To facilitate a new 220 kv connection between PAK and PEN by way of underground cables requires: removing the existing 110 kv double circuit overhead line in sections 1, 2 and 3; installing a 220 kv cable buried in land owned by Transpower in section 1; installing a 220 kv cable direct buried in trenches located under roads and suspended on the underside of bridges for water crossings in sections 2 and 3; and finding a suitable route for trenches in sections 2 and 3 and purchasing easements for them. 17

24 Identification and Consideration of Options Proposal 1 COMPARISON OF POSSIBILITIES A high level capital cost estimation of the "hybrid" and "all underground" possibilities is provided below: Table 3-3: Comparison of capital cost estimates for one 220 kv PAK PEN circuit Component Cost estimate ($m) Hybrid: 6km 220 kv cable - 1 cct 39.6 Property (section 3, 1km long x 65m wide) i 6.7 Property (section 1, 3km long x 32m wide) i km new overhead line (section 1) 6.0 Consenting costs 3.8 Total 66.2 All underground: 10km 220 kv cable - 1 cct 66.0 i. Based on cost estimates obtained for Henderson Otahuhu line, which traverses similar property types The estimates above show that all underground is marginally less costly than hybrid. This coupled with the project timeline risks associated with obtaining consents and property rights for an overhead solution, makes the all underground cable route Transpower s preferred method for a 220 kv connection between PAK and PEN under this short list option. Transpower notes too that the National Policy Statement on Electricity Transmission directs that planning and development of the transmission system should minimise adverse effects on urban amenity, and avoid adverse effects on town centres and existing sensitive activities such as schools and residential buildings (refer Policy 7). This reinforces Transpower s view that the underground option is the preferred option for the PAK-PEN route. However, if after further analysis there is a more effective solution to 220 kv connection between PAK and PEN that meets good electricity industry practice, meets the grid reliability standards and provides the same or more benefits at less cost than the all underground possibility, Transpower will implement that alternate solution. ALB PEN CABLE ROUTE This component of the route is shown in Figure 3-4 below: 18

25 Identification and Consideration of Options Proposal 1 Figure 3-4: ALB PEN route The Penrose to Hobson Street section and the Hobson Street to Wairau Road sections are discussed separately. PENROSE TO HOBSON STREET SECTION Vector Ltd owns a 10km long deep tunnel linking Transpower s Penrose substation to its Hobson Street substation in the CBD. The tunnel is sufficiently sized to accommodate two 220 kv cable circuits of the size and rating required by Transpower for option 1 (the Cross harbour cable option). Transpower has investigated an alternative cable circuit route between Penrose and Hobson Street for the purposes of providing a fallback option should access to the tunnel not be possible. The alternative considered is a road route where the cables would be laid in a trench excavated in local roads between Penrose and Hobson Street. Investigations conclude that a road route is technically feasible however the implications of choosing such a route instead of using the tunnel include: An additional 1500m of 220 kv cable (circuit length) is required; (the tunnel forms a near direct route between Penrose and Hobson Street; by contrast a road route would have to be more circuitous because there are some roads on the route that do not have enough spare room for further services). Exposure to programme delays imposed by restrictions on road access; (Local authorities cannot deny Transpower access to the roads, but affected parties can impose reasonable restrictions to access and construction times) 19

26 Identification and Consideration of Options Proposal 1 Unforeseen construction impediments (e.g. difficult ground conditions); (Auckland City Council recently budgeted $10M for a street widening project in Great South Road. The final cost for the project is likely to be in the order of $26M, partly due to civil contractors encountering unforeseen difficult ground conditions) Significant disruption and annoyance to those on the route (e.g. businesses and residents, some of whom may seek compensation for the disruption) Traffic delays to areas in and adjacent to the works. (In view of where the works would take place, the traffic delays are likely to be significant and widespread) The 90% POE cost estimate for installing cables in the road route is $38M per circuit. This cost is for civil works and additional cable costs only, when compared to the tunnel route. It does not include costs common to both the road and tunnel options, e.g. the majority of the cable, and installation costs. The cost estimates provided in the economic analysis assume that Transpower will be able to secure access rights to Vector s tunnel for $50m per circuit. Transpower has included the tunnel route in the cost estimates (i.e. $50m per circuit) for the North Auckland and Northland project. This decision, regardless of its higher cost, is because of: a significantly lower delivery risk; (The tunnel exists, whereas the road route requires excavation) no risk of cost escalation; and (The price for access to the tunnel will be a fixed sum whereas contracts for civil works would be at unit rates and hence subject to escalation. The risk of escalation is considered to be real in light of Auckland City Councils recent experience in Great South Road, and because of access restrictions that are likely to be imposed on the works) minimal disruption. (Although the parties subject to the disruption are not electricity industry participants, and as such should not be considered when assessing the economics of a grid upgrade plan, Transpower believes that impact merits consideration in light of the unique situation presented here (i.e. the availability of a no disruption tunnel route alternative) Further discussion on the delivery risks associated with installing cables in roads is provided in Attachment L Project Timing. HOBSON STREET TO WAIRAU ROAD SECTION The notable features of the HOB to ALB part of the route are as follows. The route is approximately 17 km in total between Hobson Street and Albany substations. Transpower has already invested some $50m of sunk cost in securing this component of the route, which includes: the installation of two sets of cable ducts in the North Shore busway (between the northern end of the Harbour Bridge and Constellation Drive in the North Shore); the installation of two sets of cable ducts in Fanshaw Street and Westhaven Drive between Hobson Street substation and the southern end of the Harbour Bridge; securing resource consents for the entire route; and agreements with several authorities to install the cable. The installation of cable ducts is presently in progress and is scheduled for completion in The cable ducts are suitable to accommodate two separate 220 kv cable circuits, rated at approximately 650 MVA each. The cable ducts provide access to Vector s Hobson Street and Wairau Road substations, facilitating the provision of GXPs at those two sites. 20

27 Identification and Consideration of Options Proposal 1 As Transpower has already invested $50 million in the HOB to ALB route, no other possible route will be less expensive to obtain and implement a connection through. Therefore, no other possibilities were considered for the cable route. Substation Works To accommodate the new 220 kv circuit between PAK and ALB, works would be required to existing substations at: Pakuranga; Penrose; Albany; and Vector s Hobson Street and Wairau Road substations. PAKURANGA Pakuranga substation will be upgraded to operate at 220 kv as part of the North Island Grid Upgrade project approved by the Electricity Commission. The works required at Pakuranga for this short list option are therefore limited to providing a new 220 kv circuit breaker bay with a suitable cable termination. PENROSE This short list option requires two new 220 kv circuit terminations at Penrose substation, for the new Pakuranga Penrose and Penrose Hobson Street circuits. Free space at Penrose substation to expand the 220 kv switchyard is limited. However, preliminary investigations indicate there is sufficient room to accommodate the additional 220 kv circuit terminations required in the short term through extending the existing bus. It should be noted that a new 220/110 kv transformer will be required at Penrose to provide sufficient interconnection capacity into the 110 kv system following the decommissioning of the 110 kv Arapuni Pakuranga line (part of the North Island Grid Upgrade project) in This is described in more detail in the Technical Report (Attachment B). ALBANY This short list option requires one new 220 kv circuit termination at Albany substation. There is sufficient space at Albany to accommodate a new 220 kv circuit breaker bay and a cable termination in the existing 220 kv switchyard. HOBSON STREET AND WAIRAU ROAD As previously mentioned, this short list option includes the provision of new 220 kv GXPs at both Hobson Street and Wairau Road substations. This requires 220 kv GIS switchgear at each of the substations to allow for the connection of the GXPs. The details of the GXPs themselves are subject to agreement and contract between Vector and Transpower. Provisional arrangements allow for a 220/110 kv transformer connection at Hobson Street substation and a 220/33 kv transformer connection at Wairau Road substation. Vector s costs to undertake these substation works are incurred by Vector in its capacity as an electricity distributor. As such, those costs are included in the application of the grid investment test. In addition, under clause 23 of Schedule F4 of the Rules, when applying the grid investment the period over which costs are calculated is generally 20 years. However, where: significant market benefits and costs are expected to arise from the proposed investment or alternative project after that time, in which case the then-present value of any future costs may also be included in the cost of the proposed investment or alternative project. 21

28 Identification and Consideration of Options Proposal 1 Accordingly, the full market benefits and/or costs, including any substantial benefits or costs after the usual 20 year period, associated with reinforcing Vector s substations at Wairau Road and Hobson Street may be included in the application of the grid investment test for Proposal 1. Development Plan The high level long term development plan for the Cross Harbour Cable Option is shown below. Table 3-4: Development plan for the Cross Harbour Cable Option Year required (prior to winter) Description of works to be commissioned nd 220/110 kv transformer at PEN in parallel with PEN T st PEN-HOB-WRU-ALB cable New HOB and WRU GXPs One 220 kv PAK-PEN circuit 2023 Second supply transformer at HOB nd supply transformer at WRU 2026 Second 220 kv PAK PEN circuit 2028 Series reactors In 220 kv PAK-PEN circuits New 220 kv transformer feeder at ROS (one 220 kv PEN-ROS cable & one ROS 220/110 kv transformer) 2031 Third 220/110 kv transformer at MDN 2036 Second 220 kv ALB PEN cable, (this one not connected into HOB or WRU GXPs) 2038 Upgrade PAK-PEN circuits from 667 MVA to 985 MVA Option 2 - High Temperature Conductor Option This short list option involves upgrading existing transmission assets (in order to delay the requirement to build new assets) by: reconductoring the existing 220 kv HEN OTA A line to increase circuit ratings; reconductoring the existing 110 kv lines between Otahuhu, Penrose, Mt Roskill, Hepburn Road and Henderson substations; reinforcing transmission into Penrose from Pakuranga, by installing a single 220 kv circuit from PAK to PEN; and other substation related works. The existing transmission lines in the Greater Auckland area are shown in Figure 3-6 below. 22

29 Identification and Consideration of Options Proposal 1 Figure 3-6: Transmission lines affected in the Greater Auckland area 220 kv Henderson Otahuhu A Line The 220 kv HEN OTA A line is the major capacity constraint into the North Auckland and Northland area at present, and accordingly, is the first line that would require upgrading under this short list option. Upgrading in this case involves reconductoring the existing line by replacing the existing conductor with a new conductor that can operate at higher temperatures (i.e. above 120 degrees Celsius) without changing the appearance of the line. There are several types of conductor that could achieve this. They are described in Attachment I HTC options for the HEN OTA line. The conductor option preferred by Transpower at this time is the ACSS (54/7) conductor. If installed on the 220 kv HEN OTA A line, the ASCC conductor could operate at a temperature of 200 degrees Celsius (which provides a maximum rating of 1285 MVA per circuit). It should be noted that reconductoring the 220 kv HEN OTA A line does not have resource consent, and Transpower does not currently own easements under the line. Accordingly, reconductoring the 220 kv HEN OTA A line is likely to involve substantial property and consenting costs plus implementation risks associated with obtaining resource consent and the easements under the line. Furthermore, Transpower is aware of extensive under-build along the length of the 220 kv HEN OTA A line. Recent issues in attempting to gain resource consent for a thermal upgrade of this same line have highlighted the sensitivity of these landowners. 110 kv Lines The existing 110 kv lines between Otahuhu, Penrose, Mt Roskill, Hepburn Road and Henderson substations would also require reconductoring under this short list option. Attachment J HTC 110 kv lines describes conductor options for these lines. Again, it should be noted that reconductoring the 110 kv lines does not have resource consent, and Transpower does not currently own the easements under the lines. Accordingly, reconductoring the 110 kv lines is likely to involve substantial property and consenting costs plus implementation risks associated with obtaining resource consent and the easements under the lines. Furthermore, Transpower is aware of extensive under-build 23

30 Identification and Consideration of Options Proposal 1 along the length of the 110 kv lines. Recent issues in attempting to gain resource consent for a thermal upgrade of lines have highlighted the sensitivity of landowners. PAK PEN Reinforcement Reinforcement of Penrose substation will be required under this short list option in order to meet the growing demand of the Auckland CBD. Reinforcement is achieved through installing a new 220 kv connection from Pakuranga substation. This is modelled in preference to upgrading the existing 220 kv OTA PEN line, which would not address security concerns in the Auckland CBD area. 6 The works required to install the new 220 kv PAK PEN circuit are therefore identical to those described in section Substation Works Apart from substations where new circuits are terminated (e.g. Pakuranga and Penrose), there will be limited need to upgrade substations except where higher capacity equipment is required as a result of increasing the ratings of existing transmission circuits. PAKURANGA The works required at Pakuranga substation are the same as those required for the Cross Harbour Cable Option. Pakuranga substation will be upgraded to operate at 220 kv as part of the North Island Grid Upgrade project approved by the Electricity Commission. The works required at Pakuranga for this short list option are therefore limited to providing a new 220 kv circuit breaker bay with a suitable cable termination. PENROSE The works required to terminate the new 220 kv PAK PEN circuit at Penrose are the same as those required for the Cross Harbour Cable Option. This requires two new 220 kv circuit terminations at Penrose substation, namely the installation of a new 220/110 kv interconnecting transformer and a new PAK PEN circuit. Free space at Penrose substation for expansion of the 220 kv switchyard is limited. However, preliminary investigations indicate there is sufficient room to accommodate the additional 220 kv circuit termination through extending the existing bus. It should be noted that a new 220/110 kv transformer at Penrose will be required to provide sufficient interconnection capacity in to the 110 kv system following the decommissioning of the 110 kv Arapuni Pakuranga line (part of the North Island Grid Upgrade project) in This is described in more detail in the Technical Report (Attachment B). HOBSON STREET AND WAIRAU ROAD This short list option would not provide a 220 kv circuit for the creation of new GXPs at Hobson Street or Wairau Road, therefore Vector would have to pursue alternative means of providing the additional capacity that is required into these two substations. This will involve Vector installing new 110 kv cable connections to Hobson Street or Wairau Road from Penrose and Albany respectively. Details of the alternatives Vector is considering are provided in Attachment C Vector s Network. Development Plan The high-level long term development plan for the High Temperature Conductor Option is shown below. 6 The Auckland CBD area presently relies on the existing 220 kv OTA_PEN double circuit line. 24

31 Identification and Consideration of Options Proposal 1 Table 3-5 Development plan for the High Temperature Conductor Option Year required (prior to winter) Description of works to be commissioned nd 220/110 kv transformer at PEN in parallel with PEN T High temperature conductor on 220 kv HEN-OTA circuits One 220 kv PAK-PEN circuit 2018 Upgrade HEN 220/110 kv transformers with 2 x 250 MVA 7% units 2020 Second 220/110 kv transformer at ALB High temperature conductor on 110 kv MNG-ROS circuits Upgrade 200m of ALB-HEN 3 to duplex zebra conductor Third 220/110 kv transformer at OTA in parallel with T3 & T5 High temperature conductor on 110 kv OTA-ROS 1 & High temperature conductor on 110 kv MNG-OTA 1 & High temperature conductor on ALB-HEN-HPI circuits Series reactor on OTA-PEN 2 circuit Third 220/110 kv transformer MDN New 220 kv transformer feeder at ROS (one 220 kv PEN-ROS cable & one ROS 220/110 kv transformer) Series reactors in 110 kv ALB-HEN 1&2 circuits High temperature conductor on HEP-ROS 1&2 circuits 2nd 220 kv PAK-PEN circuit 2040 High temperature conductor on HEN-WEL 1 & 2 circuits Option 3 Roskill Reinforcement Option Mt Roskill substation is located part way along the 110 kv lines that connects the Otahuhu and Henderson substations. The 110 kv transmission system is presently split at Mt Roskill, however, this split is scheduled to close in Closing the 110 kv transmission system split will allow the 110 kv lines to carry a portion of the North Auckland and Northland area load which would otherwise be carried by the 220 kv HEN OTA A line. This transfer of load to the 110 kv lines has the potential to defer the need for major investment into the North Auckland and Northland area by approximately two years. If no other augmentations to the grid occur before 2016, then the increased power flow through the 110 kv transmission system beyond 2016 will require works to reinforce the Mt Roskill substation, including: installing a 220 kv connection between Mt Roskill and Penrose substation; reinforcing Penrose substation from Pakuranga, as illustrated in Figure 3-7; and other substation related works. These works are described below. 25

32 Identification and Consideration of Options Proposal 1 Figure 3-8: Reinforcement of Mt Roskill substation PEN ROS 220 kv Connection A single 220 kv cable circuit between Penrose and Mt Roskill substations of approximately 10km length is required under this short list option. The 220 kv cable circuit would be direct buried in roadways for most of the route, however, cable ducts would be used to cross under the new SH20 extension near Hillsborough Road. These ducts have already been installed by Transpower in anticipation of the requirement to reinforce Mt Roskill substation 7. A short tunnel will be required for the last section of cable as it crosses under SH1 and enters Penrose substation. PAK PEN Reinforcement Reinforcement of Penrose substation will be required under this short list option in order to meet the growing demand of the Auckland CBD. Reinforcement is achieved through installing a new 220 kv connection from Pakuranga substation. This is modelled in preference to upgrading the existing 220 kv OTA PEN line, which would not address security concerns in the CBD area. 8 The works required to install the new 220 kv circuit between Pakuranga and Penrose are therefore identical to those described in section Substation Works Additional works will be required to existing substations at Pakuranga, Penrose and Mt Roskill to accommodate the reinforcement of the Mt Roskill substation. 7 Reinforcement of Mt Roskill substation is required at some point in the future under all of the short list options presented in this document. 8 The CBD area presently relies on the existing 220 kv Otahuhu Penrose double circuit line. 26