4. NPS Evaluation

4.1 Overview and introduction

• recognition of the importance and benefits of electricity transmission
• providing for electricity transmission activities
• managing the effects of electricity transmission activities.

The NPS contains a sole objective to achieve these outcomes. Under the objective are six policies directing councils to undertake action. It is expected that councils will also alter or develop rules in their plans to give effect to the objective and policies of the NPS.

The main intention of the objective, and its policies, is to establish electricity transmission as a matter of national significance, and to direct local authorities and decision-makers to recognise the national benefits produced by electricity transmission. Accompanying policies require local authorities to provide for the operational needs of the electricity transmission network, manage the effects of electricity transmission and manage activities that may disrupt electricity transmission.

The following evaluation is broken into six sub-sections, covering the objective and the six policies included in the NPS. The discussion focuses on the appropriateness of the objective and policies, and their efficiency, effectiveness, costs and benefits.

Note that for the purposes of a section 32 evaluation under the RMA, the terms 'costs' and 'benefits' take broad meanings and include environmental, social and economic matters.

4.2 Evaluation of the objective

Objective: "To recognise the national significance of the electricity transmission network". [The NPS defines the 'electricity transmission network' and 'electricity transmission' as the national grid of transmission lines and cables (aerial, underground and undersea, including the high voltage direct current link), stations and substations and other works used to connect grid injection points and grid exit points to convey electricity throughout the North and South Islands of New Zealand.]

4.2.1 Summary of the evaluation

In general terms, this is considered to be an appropriate objective in terms of the purpose of the RMA given the value of the national grid to the nation. As the Reference Group report notes, the Environment Court has recognised [Genesis Power Ltd v Franklin District Council, 2005, A148/05.] that electricity is a vital resource and that there could not be sustainable management of natural and physical resources without energy, of which electricity is a major component.

4.2.2 Detailed evaluation

The transmission network's national significance stems from its being a large, attenuated network of infrastructure that traverses all but one of New Zealand's local council territories. [The exception is the Chatham Islands.] It connects the areas of growing electricity demand (mostly in the North Island) with locations of excess electricity supply and hydro-storage capacity (mostly in the South Island), and provides a vital link for smoothing out variations in the availability and price of electricity in different parts of the country that would occur with less interconnected systems.

All localities benefit from the integrated grid in that it relieves them of the risk of relying on their own local power sources. This applies as much to areas with supply in excess of demand as for areas with demand in excess of supply, because even areas with normally plentiful supplies suffer shortages (eg, in dry years), when local supply needs to be supplemented by supplies from elsewhere. It is not in the interests of electricity consumers (which includes people and industries in all territorial authorities) to delay maintenance to or improvement in the integrity of the network.

Given the elongated, cross-boundary characteristics of the network, there is a high potential for 'externality' effects (ie, actions in one locality having implications elsewhere). These can arise from:

• process delays in one location prolonging the time before the benefits from improved transmission are realised elsewhere
• network effects, whereby the integrity of aspects of network operation are only as strong as those in the weakest link in the network
• cost shifting, because the time and costs required to resolve planning processes in one district are spread over power consumers in all other districts through the charging regime, which averages system-wide costs across all electricity users
• transmission system failures caused by planning-induced delay in making necessary adjustments, which can have high costs for consumers outside the district: the default value for lost load is $20,000 per MWh in the Electricity Commission's Grid Investment Test, although this is an average value and for some uses the value of losing power for even a short period is very much higher
• the potential losses from transmission failures, which may be large, but the probability is very low so the expected value of such losses in any one year is low, but not zero.

A common recognition of these nationwide benefits and a common approach to providing for them in local planning processes is economically worthwhile if it:

• reduces the costs of carrying out necessary works on the network while meeting the requirements of sustainable management
• reduces uncertainty about the outcome of particular planning provisions, which can disrupt investments patterns
• reduces the cost of lobbying to make plan provisions more amenable to transmission needs, and the cost of legal challenges for plans and their interpretation
• reduces the consequential costs of any work deferred due to the uncertainties of delays caused by the planning process.

A further externality is the potential influence that grid capacity and location have on the type and location of new electricity generation. Constrained grid capacity increases the risk that generation from cheaper (often renewable) sources will be displaced in favour of accepting generation from higher-cost sources. That risk influences generator decisions about new investments. This potential constraint problem has to be balanced against the frequency with which the constraint actually occurs, since the costs of easing the constraint might outweigh the benefit when the constraint occurs infrequently.

If the grid constraint problem is important, then an NPS that facilitates greater input of new renewable sources of generation into the transmission system would potentially have national benefits, including:

• lower-cost electricity supplied to the market, enhancing the economic surpluses for both producers (generators and retailers) and consumers
• a reduction in carbon dioxide equivalent emissions, aiding the achievement of national Kyoto targets
• increased long term sustainability of generation.

Without an NPS recognising the national significance of transmission, variable provision for transmission activities around the country increases uncertainty about what can be done and where. This generates transaction costs associated with interpreting and resolving various planning provisions, and increases the risk of costs being externalised until the uncertainty is resolved. With an NPS, all these costs are likely to be reduced rather than leaving councils to implement policy in their own way, which perpetuates variability.

It is a clear intention of the NPS to increase recognition of the benefits of the transmission network. To the extent that achieving this outcome requires decision-makers to weigh such benefits against the potential adverse environmental effects of the transmission network, it is likely that as an outcome of the NPS decision-makers will place greater weight on the benefits than is currently the case.

The assessment of the status quo showed that the current practice in RMA planning documents is to provide little or no recognition of the national benefits, as opposed to the local or regional adverse effects, of transmission. This lack of recognition has implications for decisions on individual proposals, in that local interests tend to be given greater weight than national interests.

This lack of recognition also appears to have implications in relation to the need for resource consent. There are a number of categories of transmission work where consents must be applied for, and which are the subject of a range of consent categories (ie, controlled, discretionary and non-complying activities). Comments from both Transpower and local authorities indicate that these consents are nearly always granted and rarely with any conditions attached. This suggests that current consent requirements are perhaps overly cautious, incur costs for no significant environmental benefit, and do not recognise the positive national benefit of electricity transmission.

Given these points, and the value of the national grid, it is considered appropriate that the NPS provide for the benefits of the network and in doing so provide direction for regional and local decision-makers to do the same.

4.3 Evaluation of Policies 1 and 2

Policy 1

The benefits of sustainable, secure and efficient electricity transmission relevant to any development of the electricity transmission network may include:

1. improved security of supply of electricity
2. improved efficiencies in the supply of electricity
3. the facilitation of new and existing renewable electricity generation
4. lower overall environmental costs from the generation of electricity.

Policy 2

The electricity transmission network should be operated, maintained and upgraded efficiently.

Overall it is considered that both policies are generally appropriate, and will generally be effective in achieving the outcome sought in the objective. The policies will influence the full range of functions exercised by local authorities under the RMA, and by doing so should ensure that local authorities have regard to the benefits of electricity transmission in their decision-making.

Policies 1 and 2 propose two different, but complementary, approaches to achieving the outcome sought in the objective. The first more generally requires local authorities to have regard to the benefits of the network when exercising a range of functions under the RMA. The second directs local authorities to include provisions in their plans which provide for the efficient management of the transmission network.

The costs of Policy 2 (which seeks to direct the content of district and regional plans) will fall largely on local authorities and their ratepayers, and will be associated with amendments to those plans necessary to give effect to it. Policy 1 will also need to be given effect through amendments to plans. In particular, councils would need to consider whether proposed district and regional plan rules (particularly relevant controlled and restricted discretionary activity rules) enable consideration of the benefits identified in Policy 2.

However, because these amendments are likely to be part of a larger policy statement or plan change to give effect to the NPS in its entirety, the additional cost of giving effect to Policies 1 and 2 by themselves is not likely to be significant. Further, given that most policy statements and plans already contain provisions that provide for network utilities generally, these plans are unlikely to require major amendment to 'give effect to' Policies 1 and 2 of the NPS.

However, the costs of policy and plan changes will be significant if local authorities are challenged through the Environment Court over how they choose to give effect to these policies. It is considered that all parties to such appeals will incur reasonably significant costs. Ensuring that the direction provided to local authorities by the NPS is as clear as possible will reduce the risk of such costs.

In addition to the costs associated with policy and plan changes, Policy 1 will impose costs more broadly across the RMA decision-making processes. There will be some cost to Transpower in preparing the necessary information on the benefits of transmission as part of these decision-making processes. However, as the Reference Group report notes, these costs are likely to be low because Transpower already gathers this information for other purposes.

Policy 1 may also result in costs to councils associated with reviewing the information on benefits presented by Transpower. As this information is likely to be additional to what is currently reviewed, this will be a new cost. It is unlikely that councils will have the expertise to review this material in-house and will therefore need to engage a consultant to do so on their behalf. The Reference Group report suggests that the cost of this additional work for large projects could be in the order of $10,000 to $20,000. It notes that this cost will be passed on to Transpower as part of the processing fee associated with the resource consent application or the notice of requirement.

The Reference Group report also notes the potential for environmental costs associated with balancing the stated benefits against adverse environmental effects. In other words, the report suggests that local environmental values may be traded away in the process of having regard to the benefits identified. The NPS focus on the benefits of electricity transmission, including this policy, could lead to local authorities altering the balance in their decisions in favour of the benefits of transmission, which may result in environmental costs.

Whether or not Policies 1 and 2 result in such costs will not be able to be fully determined until the NPS is operative, local rules are developed, individual proposals are considered under it and decision-makers are confronted with the need to weigh the benefits of transmission with any adverse environmental effects. However, the combination of Part 2 of the RMA and the significant body of existing policy that addresses the management of the adverse effects of activities is likely to ensure that decision-makers continue to manage adverse environmental costs appropriately, and therefore significant adverse environmental effects should not result from the application of Policies 1 and 2.

The benefits of both Policies 1 and 2 will result from the increased certainty that the benefits of transmission will be taken into account by local authorities as part of decision-making under the RMA. Transpower indicates that it currently spends significant time advocating for plan provisions that provide for and recognise the benefit provided by the transmission network. Equally, Transpower spends significant time challenging those plan provisions that take a very localised view of the transmission network (eg, provisions requiring lines to be underground). The cost of Transpower's plan advocacy activities is likely to be reduced by the introduction of Policies 1 and 2, which will legitimise the arguments currently being made.

In relation to specific proposals, the benefit of Policies 1 and 2 is likely to be increasingly important over the next 10 years as Transpower seeks to undertake the major works necessary to provide for the nation's growing energy demands. The increased certainty that the benefits of electricity transmission will be considered as part of RMA decision-making will not only benefit Transpower, but can also be viewed as a benefit to end users and generators, who will be able to take advantage of the transmission network.

4.4 Evaluation of Policy 3

Policy 3

Corridors and sites should be located and other activities associated with the electricity transmission network should be undertaken in a way that avoids, remedies, or mitigates any adverse effects on matters of national importance.

An analysis of the status quo shows that a significant body of policy addressing the environmental effects of activities (including those of the transmission network) already exists and covers a broad range of environmental issues. Overall, it is considered that Policy 3 is generally appropriate and will generally be effective in achieving the outcome sought in the objective.

Policy 3 seeks to direct decision-making in relation to resource consent applications and notices of requirements. The additional cost of these policies to Transpower and local authorities is likely to be negligible as the matters addressed in NPS policy are all very likely to be considered as part of current decision-making processes.

Another specific element of Policy 3 that has the potential to add costs over those experienced under the status quo relates to the potential inconsistency with the New Zealand Coastal Policy Statement (NZCPS). As currently drafted, Policy 3 is not consistent with corresponding provisions in the NZCPS. For example Policy 1.1.2 of the NZCPS states that:

It is a national priority for the preservation of the natural character of the coastal environment to protect areas of significant indigenous vegetation and significant habitats of indigenous fauna in that environment by:

1. avoiding any actual or potential adverse effects of activities on the following areas or habitats:

1. areas and habitats important to the continued survival of any indigenous species; and
2. areas containing nationally vulnerable species or nationally outstanding examples of indigenous community types ...

By using the word 'avoid' the NZCPS applies a high and absolute threshold in addressing the effects of activities, including electricity transmission, on areas of significant indigenous vegetation and significant habitats of indigenous fauna. In contrast, Policy 3 of the NPS requires any adverse effect to be avoided, remedied or mitigated.

Within the coastal environment, both the existing NZCPS and the NPS for electricity transmission would apply. If these two NPS provide inconsistent direction to decision-makers, then resolving the resulting uncertainty would represent a cost, both as part of changing regional policy statements and regional and district plans, and as part of resource consent and notice of requirement proceedings.

Overall, given the existing significant body of policy that already addresses the adverse effects of activities (including those associated with the transmission network), it is considered that Policy 3 would result in relatively low benefits.

4.5 Evaluation of Policy 4

Policy 4

Any new development that is sensitive to the effects of the electricity transmission network should be managed in a way that it does not compromise the efficient operation of the electricity transmission network.

There is potential for Policy 4 to generate small additional costs to resource consent and notice of requirement proceedings by virtue of any uncertainty they may cause.

However, there is uncertainty about what constitutes a sensitive activity and at what point the activity is sensitive to electricity transmission. For example, the term could cover residential activities, tourism activities and/or farming activities. As a result, this clause has the potential to generate costs as parties to resource consent and notice of requirement processes attempt to resolve the uncertainty.

Policy 4 highlights the potentially significant adverse effects to the transmission network. It also has the potential to generate costs that would be additional to those experienced under the status quo. However, a specific definition of sensitive activities is not considered appropriate because this is likely to vary depending on local circumstances.

Policy 4 directs the content of plans, so it would generate costs through the need to change plans to give it effect. These costs would fall to local authorities and landowners affected by the provisions. However, in all cases the cost in addition to that experienced under the status quo is likely to be marginal at most.

Depending on how local authorities give effect to Policy 4, it may also have costs for landowners in the vicinity of substations. For example, if local authorities choose to use rules to require noise attenuation for sensitive activities, then the cost may be significant. However, if they choose to implement the policy through advocacy, the cost to landowners will be substantially less.

Policy 4 would result in benefit to the efficient operation of the transmission network. Transpower notes that it is currently spending an increasing amount of time addressing reverse sensitivity issues as new, potentially sensitive urban activities encroach on previously rural or industrial areas. This effort takes the form of both submissions on plan changes adjacent to substations and also lodging submissions on third-party resource consent applications.

In addition to advocacy costs, reverse sensitivity issues have cost implications for the physical operation of the network. For example, where existing substations become surrounded by sensitive development, and consequently an adequate buffer of land is not retained, options for upgrading these facilities become constrained. In these locations upgrades can only take place if low-noise transformers are used (adding significantly to the cost), or if noise barriers are installed. This latter solution itself creates operational problems in relation to access for maintenance contractors and maintaining electrical safe clearance distances.

For example, in 1997, when Transpower sought to roll-over the designation at Wilton substation (in Wellington, established in the mid-1960s), neighbouring residents (who had built or bought subsequent to the substation being established) complained about the noise. Transpower had to install noise barriers at several hundreds of thousands of dollars cost (the specific figure is not available) to meet the noise condition imposed on the designation.

Transpower notes that community awareness of noise issues is likely to increase as substations are upgraded (ie, over the next decade). While these upgrades may involve the replacement of older, noisier plant with newer, quieter plant, Transpower is concerned that without national guidance, inappropriate conditions may be placed on designations or consents in response to community concerns.

Ultimately, the extent of the benefit to the operation of the network will be determined by how councils give effect to the policy. If local authorities give effect to it through the use of rules, this may mean the ongoing operation of substations is less affected. However, an advocacy-based approach may have little such benefit.

Overall, it is considered that the relative costs and benefits of Policy 4 will be largely determined by how individual local authorities choose to give effect to it.

4.6 Evaluation of Policy 5

Policy 5

Where maps are included in a plan, these should identify the existing electricity transmission network, whether or not it is designated.

Policy 5 seeks to ensure that the transmission network is marked on maps included in local authority plans, whether or not the network is designated. This is considered to be an appropriate means of achieving the outcome sought in the objective. The reasons for this finding are as follows.

• The inclusion of the transmission network on all plan maps should increase awareness of the location of the network for prospective purchasers of land, and also for local authority staff who may be considering proposals for building, land-use activities and/or subdivision within the vicinity of the network. As a consequence, the potential for disruption to the efficient operation of the network should be reduced, so the policy would be effective in assisting to achieve the objective.
• Although some local authorities will be required to change their plans to give effect to the policy, the cost of doing so is expected to be relatively low. This conclusion is based on the fact that changes to most plans would be required to give effect to the NPS in its entirety, and that within this total cost the costs specifically associated with this policy will be small. Also, Transpower should be able to provide the data necessary for the map changes relatively easily.

4.7 Evaluation of Policy 6

Policy 6

Provisions dealing with electric and magnetic fields (EMF) associated with the electricity transmission network should be based on the ICNIRP guidelines.

Policy 6 seeks to ensure that where electric and magnetic fields (EMF) are provided for in association with the transmission network, they are based on the guidelines endorsed by the Government − the ICNIRP guidelines. [International Commission on Non-Ionizing Radiation Protection (ICNIRP). Guidelines for limiting exposure to time-varying electric, magnetic and electromagnetic fields (up to 300 GHz).Health Physics 1998, 74(4): 494−522.] This is considered to be an appropriate way to achieve the outcome sought in the objective: to enable the efficient and effective operation of the network and achieve a consistent approach. The reasons for this finding are as follows.

• EMF issues are often raised as a health concern by the public when there is a development or upgrade to the electricity transmission network. The ICNIRP guidelines are well established and widely recognised. The guidelines provide a basis that will give confidence to the public, and ensure that decision-making is consistent and based on recognised science.
• Although local authorities may be required to change their plans to give effect to the Policy, the cost of doing so is expected to be relatively low. Most of the cost of implementing the policy will probably fall to Transpower. However, councils and Transpower may also enjoy a benefit because of the certainty the Policy achieves.