28.1. The terms of reference invite the Commission to consider what governance and institutional arrangements and funding responsibilities are required
to ensure the effective, efficient, and sustainable provision of public infrastructure, services, and facilities to support and enhance—28.2. Secure energy supply is essential for Auckland’s well-being and economic performance. Families and businesses rely on there being a dependable electricity supply. And in a city that is planning for growth, Aucklanders need to be confident that its future capacity requirements are being met.
28.3. In 1998, Auckland’s central business district was brought to its knees by an extraordinary chain of cable failures within Auckland’s distribution network, causing six weeks of outages and disruptions. The economic cost was high. Long-term economic losses to New Zealand were estimated at 0.1%–0.3% of gross domestic product. The crisis forced the vacation of 54% of premises in the affected area and had an impact on 70,000 workers and 7,500 residents. Hundreds of businesses had to close temporarily, with major loss of income and production.2 The crisis has left a perception that security of electricity supply is a problem for Auckland, representing a risk consideration for international companies looking to establish operations in the city.
28.4. In 2006, extreme weather events caused a failure at Transpower’s Otahuhu substation, disrupting power supplies to large areas of Auckland for some days. In 2003 and 2008, Auckland, along with the rest of New Zealand, experienced security of supply issues caused (in 2003) by a prolonged drought, declining Maui gas reserves and an insufficient coal stockpile at Huntly. In 2008, in addition to drought, the sudden and unexpected closure of the gas-fired New Plymouth power station and one half of the Cook Strait high-voltage direct current link caused supply shortages.
28.5. In February 2009, further electricity disruptions affected Auckland’s eastern suburbs after the failure of a transformer during routine maintenance of Transpower’s Penrose substation, causing sewage overflows into the Waitemata Harbour and widespread economic and social disruption. In the main, these series of events over the past 11 years were caused by transmission events rather than a shortage in generation capacity.
28.6. These ongoing disruptions clearly represent a significant economic risk for Auckland. The lack of official mechanisms for local government to manage this risk, to advocate for Auckland’s needs, and to ensure there is an internationally acceptable security of energy supply for Auckland provides a case for strong leadership for the city to advocate in respect of these issues.
28.7. The Auckland region is, like all major cities, reliant on energy sourced from outside the region, which requires a strong transmission grid capable of withstanding one or two contingencies without blackout. It also requires a strong distribution network with multiple connections to the grid, and the capability for rapid reconfiguration in the event of more than one problem.
28.8. This chapter summarises the electricity supply issues for Auckland, what needs to be done to address those issues, and how the governance arrangements proposed by the Commission should work to help reduce electricity supply risks for the city.
28.9. Auckland demand is forecast to increase from around 6,900 gigawatt hours in 2007 to over 13,000 gigawatt hours by 2036.3 This represents an increase in overall share of national gigawatt hours for Auckland from 18.3% (2007) to 24.1% (2036).
28.10. It is not just residential and commercial markets that rely on electricity. The city’s public utility infrastructure depends on continuous electricity supply to run essential services. Auckland’s water and wastewater treatment and reticulation systems, its hospitals, schools, and its ports are already heavily reliant on electricity for effective operation. Without electricity, environmental and public health requirements, and the safety and security of Auckland residents, are seriously compromised. Within five years Auckland’s increasingly important commuter rail services will be electrified. Given their partial ownership of the rail infrastructure, Auckland’s local government is set to become a very large electricity consumer in its own right.
28.11. Recognising the strategic importance of electricity to the city, the Auckland Regional Council is developing Auckland’s first regional energy strategy, for completion in November 2009, as part of the regional policy statement.4 The Commission considers that the two core planning questions for Auckland are
28.12. The Commission notes that achieving long-term continuous and reliable electricity supply for Auckland is a major challenge. There have been a number of plans and initiatives to diversify Auckland’s supply points and transmission capacity going as far back as 1981, but their lack of progress has made Auckland dependent on the Otahuhu substation with the passage of time. This is unacceptable, given that the Otahuhu substation has known design deficiencies, which cannot be rectified quickly.5
28.13. Added to the Otahuhu shortcomings, a further challenge to security of supply is the under-investment in upgrading the national grid, which is in a “catch-up” position. This position is illustrated in the Transpower chart of Figure 28.1, which shows how few transmission lines have been built during a period of steeply rising demand.6
28.14. This under-investment is placing increasing stress on the national grid, which is becoming “less tolerant of faults”.7 The transmission risks have prompted a number of initiatives to increase local generation capacity. Over 70% of Auckland’s peak electricity demand is supplied by generation located south of the Bombay Hills. The Auckland region’s current local generation capacity is 652 megawatts (MW), provided mainly by Contact Energy’s 380 MW combined-cycle plant at Otahuhu and Mighty River Power’s 175 MW Southdown gas-fired, co-generation facility. Further, smaller co-generation sites are connected to Vector Limited’s electricity distribution network including Auckland Hospital and Greenmount, Rosedale, Redvale, and Whitford Landfill Power Stations.
28.15. Several preliminary investigations are under way, including proposals for wind farming around Kaipara. An expansion of the Ngāwhā (Kaikohe) geothermal power station from 15 MW to 25 MW was completed in late 2008. The only sizeable development on the horizon is Genesis Energy’s proposed new 480 MW power station planned for construction midway between Helensville and Kaukapakapa. The station will run gas and steam turbines (relying on a gas pipeline sourced south of the Bombay Hills). Applications for required planning changes and statutory consents have been lodged and heard.8
28.16. In future, distributed generation in Auckland is likely to include more industrial co-generation, wind farms, landfill-gas generation, small geothermal power plants, small diesel and gas generation, and solar power. Collectively these sources are not enough to supply the substantial load needs in the region, and the economic viability of local, large-scale electricity generation is questionable. For a long time into the future, Auckland will rely on generation from the south with all the resulting supply risks.
28.17. In the 10 years since Auckland’s major power crisis, some steps have been taken to improve the security of transmission supply. Common planning standards for a city such as Auckland would require a very robust security standard of N minus 1 or even N minus 2.9 This means that Auckland would not lose any supply in the event of the worst credible single failure, or the worst two credible failures.
28.18. Transpower, the national grid operator, has acknowledged that the N minus 1 planning standard needs to be met by the grid in order to provide greater diversity and security of supply to Auckland.10 The company has initiated a number of future investment plans to address the issues of diversity and security of supply. Transpower, together with Vector and Counties Power (which manage Auckland’s network distribution system), have completed several key initiatives to address security of supply issues, including finishing the Penrose-Central Business District power supply tunnel, the 22 kilovolt (kV) CBD backbone network, the sub-transmission reinforcement to key areas within Auckland, and the commissioning of a new substation at Ōhinewai.
28.19. Transpower’s Auckland Regional Plan has been prepared with a number of projects planned, including the installation of a new cross-harbour cable between Penrose and Albany and reinforcement of circuitry between Henderson and Penrose.11 The Electricity Commission has recently given notice, however, that it intends to decline Transpower’s proposal to upgrade the transmission grid from Auckland to Albany (which includes the cross-harbour cable) on the grounds that uncertainty over the proposed Genesis Energy power station at Rodney made it inappropriate to approve the proposal at this stage.12 The critical 400 kV national grid upgrade from the central North Island to Auckland and the Otahuhu substation upgrade have been approved by the Electricity Commission with both projects at the consenting stage.13
28.20. Vector’s asset management plan outlines its demand forecast, comparative regional growth trends, reliability performance, and service levels for distribution within the region. The plan sets out the company’s response to the challenge of meeting Auckland’s network requirements over the next 10 years, including projects such as substation upgrades and cable reinforcements.14 Further, by the terms of an agreement between Vector and its majority shareholder (the Auckland Energy Consumer Trust), Vector must provide an annual report to that shareholder from an independent expert on a number of network security of supply matters.15 The report addresses
A certain number of Auckland councils are potential capital beneficiaries when the Auckland Energy Consumer Trust is wound up in 2073. However, these potential beneficial interests do not give Auckland councils influence over Vector’s operations or standards, nor does Vector fall within the scope of a council organisation under the Local Government Act 2002.
28.21. Notwithstanding these projects and controls, growth in demand from Auckland is continuing to place pressure on the overall national electricity supply system. A number of issues around the reliability, capacity, and overloading of transmission, generation, and distribution remain unresolved. With separate electricity companies involved in supplying different aspects of Auckland’s needs, planning is undertaken in distinct silos without consolidated master planning and/or formal (and combined) consultation processes with key Auckland stakeholders.
28.22. The “big moves” in terms of planning electricity infrastructure are for the Government and the electricity sector to make. Nevertheless, the Commission considers local government has an important advocacy role to play, particularly at the regional level, in defining and assessing security of supply and the risks associated with failure to perform, and then in promoting Auckland city’s electricity infrastructure and service requirements. Part of this is about the planning and advocacy undertaken by local government for the greater Auckland region. The other part is about drawing together the fragmented fields of electricity planning and then “getting out of the way”, so that progress on critical transmission and distribution infrastructure can happen.
28.23. A number of submitters made the point that the consent process needed to be improved to allow significant investment in transmission and generation to happen. There is the often-cited concern by the utilities that planning permissions for electricity infrastructure can be protracted, adding to project costs and timelines because of the need to obtain consents from several councils.16 Central government has responded to these concerns with the introduction (in 2008) of a national policy statement on electricity transmission. The statement recognises the significance of New Zealand’s national grid in Resource Management Act plans and local government decision making. The national policy statement is supported by the proposed introduction of national environmental standards for electricity transmission (both these initiatives are through the Ministry for the Environment). The statement is designed to help local authorities remove regulatory and policy inconsistencies, which often do not give weight to central government policy in decision making.17
28.24. Local authorities have a mandate to be involved in energy efficiency through the Local Government Act 2002. They also have an express responsibility to promote sustainable energy management under the Resource Management Act 1991, and to take account of the National Energy Efficiency and Conservation Strategy (2001) in developing their land transport programmes. In particular, new and important responsibilities flow from the Resource Management (Energy and Climate Change) Amendment Act 200418. This Act requires local authorities, when exercising functions and responsibilities under the Resource Management Act, to have particular regard to the
Councils are working closely with Government to implement the New Zealand Energy Efficiency and Conservation Strategy (2007), which replaces the 2001 national strategy. For example, a number of councils are helping Government deliver the Energywise home grants programme19 and many councils are promoting a reduction in energy consumption through high-quality urban design and improving their own facilities.20
28.25. The Commission expects that the proposed Auckland Council will provide ongoing monitoring of the impact of electricity infrastructure investment and the gaps in the various operators’ plans, and be proactive in advocating Auckland’s energy needs. The Commission considers that the Auckland Council should be responsible for
28.2. The region has a strategic stake in all electricity planning for Auckland. The city is in for a prolonged period of risk to secur6ity of supply, which will have significant consequences for Auckland residents and businesses. Security of supply needs to be placed high on the regional planning agenda. To achieve strong grid and distribution reliability Auckland requires a long-term (25-year) city-wide strategy for maintaining, ahead of growth, a robust security standard. To deliver this strategy will require the Auckland industry players to collectively plan for transmission corridors and distribution
28.27. connections, and achieve an appropriate common security of supply standard for Auckland. The Auckland Council must have the capacity to monitor the organisations and their plan and enable the plan’s delivery to ensure Auckland’s needs are being met.
28.28. The Commission is of the view that Auckland needs a collective “voice” to advocate the region’s needs to the electricity suppliers and regulators. The Auckland Council should work closely with consumers, the industry, and central government agencies to develop a climate change and energy strategy for the region. It should, from time to time, retain its own expertise to review the performance of the various organisations including Transpower, Vector, and the Electricity Commission, to ensure security of supply.
28A The Auckland Council should work closely with consumers, the industry, and central government agencies to develop a climate change and energy strategy for the region, including monitoring and reviewing electricity security of supply performance, and industry planning and regulation impacting the Auckland region.
1 See Appendix A: Terms of Reference.
2 See Auckland Regional Council website, “Civil Defence Emergency Management, Technological (man-made) hazards, Infrastructure failure” (available at www.arc.govt.nz, accessed February 2009), and New Zealand Herald, 20 February 1998.
3 Electricity Commission, 2008 Statement of Opportunities, August 2008, pp. 179–182 (available at www.electricitycommission.govt.nz, accessed February 2009). It should be noted that there are a number of demand forecasts for Auckland with no formal process for agreeing a common methodology and demand range across the industry
4 See Auckland Regional Council website, “Sustainability” (available at www.arc.govt.nz, accessed February 2009).
5 “Connell Wagner Review of Report on Auckland Transmission Outage of 12 June 2006”, Ministry of Economic Development, July 2006, p. 1 (available at www.med.govt.nz, accessed February 2009).
6 Strange, Dr Patrick, The State of the National Grid, Transpower New Zealand Ltd presentation at 10th Annual New Zealand Energy Summit, 15 September 2008, p. 8 (available at www.transpower.co.nz, accessed February 2009).
7 Ibid., p. 19.
8 See Rodney District Council website, “Planning and Development” (available at www.rodney.govt.nz, accessed February 2009).
9 “N minus 1” refers to an operational engineering standard. In a paper on Electrical Energy Security (2002), the Regulatory Assistance Project explains: “The electric grid has generally been constructed and operated under a standard to maintain uninterrupted operations, even with the loss of the largest single resource on the system (generation, a substation, or a transmission line). This is the N minus 1 standard, where N represents the sub-parts of the whole system and minus 1 represents the loss of the largest single resource (contingency) on the system.” (available at www.raponline.org, accessed February 2009)
10 Chairman, Transpower “Transpower’s response to Connell Wagner Recommendations” 21 July 2006, p. 3 (available at www.med.govt.nz, accessed February 2009).
11 Transpower Limited, Annual Planning Report 2008, March 2008, pp. 147–171 (available at www.gridnewzealand.co.nz, accessed February 2009). Note: the Auckland Region does not include Waitakere, North Shore or Rodney. These areas come within Transpower’s Northland Region.
12 Electricity Commission, “Electricity Commission announces intention to decline NAaN proposal”, media statement, 19 December 2008 (available at www.electricitycommission.govt.nz, accessed February 2009).
13 Transpower, Annual Planning Report 2008, p. i.
14 Vector Limited, 2007 Asset Management Plan, 2007, pp. 83–102 (available at www.vector.co.nz, accessed February 2009).
15 Pursuant to the “New Deed Recording Essential Operating Requirements” dated June 2005. The annual report is available on the Auckland Energy Consumer Trust’s website (see www.aect.co.nz/aect/PDF/Siemens_Network_Report_Aug08.pdf).
16 Submission to the Royal Commission on Auckland Governance from Genesis Energy, p. 2. (All submissions are available at www.royalcommission.govt.nz.)
17 Ministry for the Environment, National Policy Statement on Electricity Transmission (available at www.mfe.govt.nz, accessed February 2009).
18 Resource Management (Energy and Climate Change) Amendment Act 2004, section 5 amended the Resource Management Act 1991 by adding sections 7(ba), 7(i), and 7(j).
19 Energywise funding delivery partners (available at www.energywise.govt.nz, accessed February 2009).
20 Ministry for the Environment, “Urban Design Case Studies: Local Government” (available at www.mfe.govt.nz, accessed February 2009).
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