Electricity Asset Management Plan 2019-2029
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PHYSICAL IMPACTS OF CLIMATE CHANGE Vector’s approach to sustainability recognises that climate change poses a risk to our assets and operation, and the reliability of services we provide to our customers. The evidence of this could be seen in the April 2018 storm where the level of damage across our network was unprecedented and offered a stark insight into the type of event that may become more frequent with climate change, and that could threaten the reliability of electricity networks in the future. In 2017 and 2018, Vector commissioned research from Ernst & Young (EY) to better understand how climate change could impact on our electricity network out to 2050. The climate model developed suggests that occurrences of high-wind speeds are likely to increase significantly, putting Auckland’s energy distribution network increasingly at risk unless adaptive and remedial action is taken. The network is also expected to continue to be at potential risk from flooding (including coastal flooding), landslides and soil erosion. In the longer term, sea level rise, particularly in combination with storm surges, will impact on assets in coastal areas both in terms of direct, physical risk, and in changing availability of finance and insurance that could lead to stranded assets. These findings confirm that our approach to ensuring network resilience, both now and into the future, is appropriate. The EY research provided a firm base from which to further develop and articulate our understanding of the relationship between the electricity network and changing climatic parameters. Over the course of this AMP period, we will build on this base to develop this understanding further, including broader modelling and granularity of impact. Beyond distribution related impacts Auckland runs on imported power from a variety of geothermal and hydro power stations that means it is exposed to supply and pricing risks. Climate change may create uncertainty for New Zealand’s current centralised sources of generation, particularly hydro-electricity with its reliance on precipitation and snow-melt filling the lakes at certain times of the year. This is another reason the popularity of DERs discussed above are expected to increase over the coming years – diversification of generation and greater resilience for Auckland consumers. The policy changes that may be put in place to move the country towards becoming a low emissions economy will also affect the electricity system. The speed and level of uptake of electrified transport, particularly an increase in light vehicles switching over to EVs is likely to be the most relevant to our current asset management plan. A separate EY report says while EV numbers are currently low, exponential growth is expected, driven by both the price of carbon increasing and expected price parity with WORKING TOWARD A NET-ZERO EMISSIONS ECONOMY
internal combustion engine (ICE) vehicles within the next five to 10 years. The expected growth in EV numbers forms a key part of demand-modelling in New Zealand and overseas. This information feeds into the broader scenario modelling Vector does for potential future outcomes discussed further below. We have set our own target of net zero emissions by 2030 to ensure we play our part in transitioning to a low carbon economy. This will provide visibility of carbon as part of our management of assets, shining a different light on where there may be inefficiencies or waste in the network that can be removed leading to a number of direct cost savings. This approach supports the international aim of holding global warming to less than two degrees centigrade relative to pre-industrial levels. It is a goal Vector has committed to support. In 2017, New Zealand ratified the Paris Climate Agreement. New Zealand’s related Zero Carbon Bill is currently making its way through parliament – with new carbon targets expected to be set into law by 2020. However, like most industrialised countries, New Zealand’s emissions profile is still trending upwards. The curve needs to trend downwards, but the only effective way to do this is through an economic lever – such as carbon pricing. Soon, New Zealand under its Climate Commission will set five-year carbon budgets that will gradually cause the price of carbon to increase. Carbon pricing extends into the supply chain also, and embodied carbon in goods such as steel and concrete will flow into Vector’s network construction and maintenance costs. CIRCULAR ECONOMY As part of our commitment to sustainability, we are taking steps to improve our understanding of what goes into any new energy technology and all other products in use across our business, so we can understand their social and environmental impacts. An example of this effort can be seen in Vector’s recent move to establish the Battery Leaders Group. Consisting of local and international businesses, the Group aims to find circular economy solutions for the batteries that are used in electric vehicles, and in networks for shaving demand peaks. Eventually, these batteries will reach end of life and the question of repurposing or recycling them will become important for the industry to understand. The Battery Leaders Group has committed to researching the market with a view to developing formal recommendations on how a future product stewardship scheme could be implemented.
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