$5b cost to replace or add to Cook Strait power cables
Transpower says the ageing power cables underneath Cook Strait that carry electricity between the north and south islands will probably to need to be replaced by the early 2030s.
It put the estimated cost at up to $5 billion if it put in an additional, completely new system to increase its capacity and improve resilience, but said there were cheaper options.
The cost of any work would ultimately fall on consumers and businesses, through their power bills.
The state-owned enterprise said the existing cables, which were laid in 1991, were anticipated to have “a useful life of about 40 years”.
The last major upgrades of the link were carried out in 2013, at a cost of $600 million.
“Our ongoing health assessment of the existing cables suggests ... there will be an increased probability of needing replacement in the early 2030s,” Transpower said in a discussion document published yesterday. “We are currently preparing an investment case ... to enable replacement of the cables by 2032.”
It suggested it could at the same time improve the reliability and resilience of the cables to help support the broader electrification of industry and transport.
This meant there were some “significant investment choices” to be considered, it said.
If it was to enable South Island hydro to play a larger role in meeting peak demand in the North Island, and lay a “second link” to improve the resilience of the existing connection, the bill could come to between $3b and $5b, Transpower said.
That would be at least equal to the estimated cost of Kiwirail’s Project Irex Cook Strait ferry replacement project, before it was shelved by the Government in December.
Transpower cautioned in its discussion document that a cable fault could take between six and 18 months to repair, and that it might take “seven to 10 years to procure and install” a new cable.
Giacomo Caleffi — who is spearheading a joint venture that is investigating the possibility of building a $5b wind farm offshore from Taranaki — cautioned in September that the time needed for repairs raised the prospect of a prolonged period of power cuts in the North Island when the Trans-Alpine fault next ruptured.
While canvassing a completely new system as an option, Transpower said it did not see a justification for that level of spending.
It has also floated an alternative of doing away with the Cook Strait connection altogether, and the power industry instead investing enough in electricity generation in the north and south islands to ensure both were self-sufficient “if the link is not there”.
Another option, which was not costed in the document, was simply to replace the cables to maintain the link’s current “business as usual” role at a much lower cost of $400m to $500m.
Under Transpower’s regulatory regime, the Commerce Commission needs to approve its capital spending. This is to reflect the fact that it is monopoly whose costs ultimately fall on its customers.