electricity asset management plan update Information disclosure 2020
contents
1 – introduction ............................................................................................................................................................................................ 3 1.1 Regulatory compliance and reliability.................................................................................................................................................................... 3 1.2 Our Symphony Strategy.................................................................................................................................................................................................4 2 – customers, stakeholders and service levels....................................................................................................................................8 2.1 Customer engagement ..................................................................................................................................................................................................8 2.2 Service levels ...................................................................................................................................................................................................................... 10 2.3 Supporting Auckland’s growth.................................................................................................................................................................................. 11 2.4 Better outcomes through regulatory and policy alignment .................................................................................................................... 12 3 – asset management system ................................................................................................................................................................16 3.1 Enabling technologies .................................................................................................................................................................................................. 16 3.2 Maintenance Models...................................................................................................................................................................................................... 17 3.3 Operating model.............................................................................................................................................................................................................. 18 4 – delivering our plan ...............................................................................................................................................................................21 4.1 Drivers for change ........................................................................................................................................................................................................... 21 4.2 Resource requirements and constraints ............................................................................................................................................................ 22 4.3 CAPEX forecast..................................................................................................................................................................................................................23 4.4 OPEX forecast ....................................................................................................................................................................................................................25 5 – appendices ............................................................................................................................................................................................27 5.1 Appendix A – Schedule 11a Forecast Capital Expenditure ......................................................................................................................... 28 5.2 Appendix B – Schedule 11b Forecast Operational Expenditure ...............................................................................................................32 5.3 Appendix C – Schedule 12a Asset Condition ..................................................................................................................................................... 34 5.4 Appendix D – Schedule 12b Forecast Capacity................................................................................................................................................ 36 5.5 Appendix E – Schedule 12c Forecast Network Demand ............................................................................................................................. 39 5.6 Appendix F – Schedule 12d Forecast Interruptions and Duration.........................................................................................................40 5.7 Appendix G – Schedule 14a Mandatory Explanatory Notes on Forecast Information.................................................................. 41 5.8 Appendix H – Schedule 17 Certificate for Year Beginning Disclosures ............................................................................................... 42 5.9 Appendix I – Glossary and terms............................................................................................................................................................................. 43
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Vector Electricity Asset Management Plan Update — Information Disclosure 2020
section 01
introduction
Vector Electricity Asset Management Plan— 2020 Update
1 – introduction
This Asset Management Plan (AMP) update sets out the material changes that have occurred in our Asset Management practices and investment since 31 March 2019, when the last electricity AMP (2019-2029) was published. 1 Where relevant we have also included context and updates on our operating environment and strategic planning; taking into account our updated assessment of the potential for rapid shifts in demand trends driven by uptake and impact of new technology, climate change, changing customer preferences and expectations, and in Auckland particularly, continued and rapid growth, development and urbanisation of the rural fringes. Throughout this AMP we comment on Vector’s Strategic Reliability Management Plan (SRMP) covering the accelerated programmes of work that reflect our commitment to quality compliance. There has been a concerted effort to improve data quality and analyse the root cause of outages and this has confirmed that the big challenge for the business to achieve its quality targets is outage duration. We have updated the 10-year capital and maintenance programmes to reflect ongoing investment in the existing network assets to ensure a safe and reliable network; ongoing evolution of work practices to ensure worker and public safety; and the network development required for the long-term interests of Auckland’s energy consumers. As documented in this AMP update, our asset management and replacement strategies, SRMP initiatives and Health and Safety practices are designed to achieve strengthened network resilience. We have made a number of deviations from our previously published 2019 AMP to bring forward planned reliability improvements that reflects our commitment to achieving regulatory compliance requirements. This focus on regulatory compliance and reliability is further expanded below. For further context, we have also set out Vector’s Symphony group strategy, and how this is applied within the regulated electricity network. During the second part of March 2020, the New Zealand government declared a range of measures in response to the COVID- 19 pandemic. We had already begun planning for what the impacts could be by establishing an incident management team (IMT) to oversee our response to the outbreak, in line with the Vector group’s Crisis Management Framework. Our focus is on the wellbeing of staff and ensuring the electricity network continues to be available for all our customers. The uncertainty and fluidity of the situation means that the impact of this crisis could not be factored into this update. Regulatory compliance and reliability In the context of performance against regulatory quality measures, underlying duration of outages persists as a challenge. Our outage duration performance continues to be impacted by ongoing changes in the operating environment. Further to additional time driven by safety improvements following Health and Safety legislation introduced during the last regulatory period (DPP2), ongoing changes have included customer growth in previously rural areas; congestion caused by infrastructure projects; increases in new connections; substantial increases in the number of vehicles on the roads; reduced road space due to new bus and cycle lanes; and more activity on our network due to increasing expenditure on system growth and relocation works resulting from those large-scale infrastructure projects. Major fault causes such as third-party interference (for example car v pole), vegetation, and overhead and underground faults have been compounded by these changes to Auckland’s operating environment. We have also seen more weather-related major event days (MEDs), which carry an impact on regulatory performance due to the clean-up occurring outside the required event boundaries, and a greater number of high wind days that sit below the MED trigger. Within this context, the activity driven by the RY20 SRMP as part of our ongoing reliability programme was designed to deliver a specific set of initiatives within a twelve-month time frame to provide lasting outage duration reduction. The RY20 SRMP is a further development of our existing reliability programmes undertaken since RY2015-16 and meaningfully accelerates reliability focussed initiatives as part of a progressive work programme that has expanded as we have validated sustained adverse trends. In designing and executing the SRMP for RY20, we took considerable care to ensure each initiative would deliver an enduring reliability benefit in an economically responsible manner, proportionate to the need and with explicit regard to the long-term expectations of our customers. Expenditures originally forecast in later periods of the 2019 AMP have been brought forward to deliver the reliability benefit earlier. Early indications are that the technology being adopted for some of these programmes of work will deliver not only the forecast improvement in unplanned outages, but also a positive impact on planned activities for customers. Importantly, as the SRMP involved bringing forward work programmes and expenditure already discussed in our 2019 AMP, there is no additional long-term cost to consumers other than the time value of money. The accelerated programmes include the rollout of network automation. It is also important to note that the reliability objectives and reliability strategies within the SRMP are a subset of Vector’s broader set of asset management objectives as specified in the 2019 AMP and reiterated again where necessary in this 2020 AMP update. In some limited instances, work in our 2019 AMP was deferred by a short period to enable work under the SRMP
1.1
1 A copy of this AMP is available on the Vector website at https://www.vector.co.nz/disclosures/electricity/amp
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Vector Electricity Asset Management Plan— 2020 Update
to be expedited. For example, some preventive ring main unit replacements have been deferred between six and twelve months to enable automation projects to proceed earlier. In all cases where such a decision was taken, the impact of the deferral on SAIDI (system average interruption duration index) and safety risk was assessed as low. Initiatives within the SRMP related to asset portfolio and asset management capability improvement have been integrated into this 2020 AMP update. EVOLUTION OF WORK PRACTICES Following the significant changes to Health and Safety legislation through the Health and Safety at Work Act 2015, Vector introduced operational practices of working deenergised except in specific limited circumstances. Since that time, and in accordance with a prudent approach to reassessment of hazards and risks associated with our activities, we have developed a greater understanding of the holistic work task risks, as well as the implications for our health and safety and asset management systems. New technologies and more advanced operating practices both in New Zealand and internationally are also available. In RY19, in collaboration with our field service providers (FSPs), we commenced a comprehensive review of all work tasks previously performed live, considering both the risk and the complexity of the task. We also considered the risk and complexity of the alternative to performing the work live along with new technologies and innovative practices. As a result of that review we identified and have implemented some changes to work practices that enable holistic safety risks to be appropriately managed while also managing down the outage time for customers. These changes have included some specific work tasks which are appropriate to perform live to manage down the impact on customers (either because the tasks have an acceptable level of risk and complexity, or because alternative techniques requiring customer outages would carry a similar quantum of risk); and utilising technologies and practices that can provide ‘indirect live line’ capability, with work being performed on energised assets thereby minimising disruption to customers. The use of new equipment such as bypass cables, increased use of temporary pole supports and more robust application of defect classifications can enable remedial work to be carried out under planned conditions making the customer experience better since the work can be more efficiently planned, then completed at a prior advised time, rather than under unplanned emergency conditions. Our FSPs remain empowered to assess the risk of the work task on the day, applying controls up to, and including, vetoing work when it is unsafe to do so. We have also conducted protection reviews and risk assessments on recloser operations to improve the customer experience from transient fault protocols with the aim to align these with international best practice. SINGLE POINT ACCOUNTABILITY Reflecting the advice of the Commerce Commission, we have implemented organisational realignment to provide single points of accountability within the regulated electricity network business for regulatory quality standards, and to separate out accountability for the regulated gas network. Please refer to section 3, Asset Management System for more information. REGULATORY SETTINGS CONFIRMED As we noted in our FY20 half year report, the Commerce Commission has confirmed the regulatory settings for the DPP3 period, commencing 1 April 2020. Those settings have restricted the capital expenditure available to us over the next five years at a time when the need to maintain and upgrade Auckland’s electricity network is at an all-time high. The level of both capital and operating expenditure is less than was published in the 2019 AMP and we have throughout this AMP update considered the impacts of the settings for revenue, expenditure and quality in the investment decisions made. Our investment prioritisation will continue to be health and safety outcomes, asset renewal, reliability and resilience of our existing network. Expenditure in these areas of investment will remain within the DPP3 allowances – any shortfall in the DPP3 CAPEX allowance is likely to impact our investment in the area of capital growth which will require regular reviews of options to fund that growth investment. While our focus for OPEX is increased expenditure in maintenance categories, there are operating expenditure areas that are outside the DPP3 framework that are fundamental to the safe, reliable future of our electricity network. These include cyber security, LV metering data, costs for new systems to support new technologies, as well as the costs of implementing the changes in DPP3 requirements. Our Symphony Strategy It is a time of challenges and opportunities for the energy sector in New Zealand. The Electricity Price Review (EPR) has highlighted the need for a coordinated and proactive step-change to ensure that key customer issues – such as energy affordability, are at the centre of the sector's decision making. This is particularly relevant as we transition to a low emissions future – as former Interim Climate Change Committee (ICCC) Chair David Prentice put it, “accelerated electrification will not happen if electricity is too expensive”. We maintain our belief that in order to enable a transition to low emissions energy at an affordable price, technology and innovation must play a leading role. It follows that the long-term interests of Auckland’s energy consumers cannot be served by a traditional view of what a network is and needs to deliver. Our traditional network assets will continue to play a key role, while becoming increasingly integrated with digital and consumer assets. This convergence allows us to more efficiently manage loads and smooth out demand curves, and adapt more quickly to changing network dynamics. This is a key part of efficiently responding to uncertain and rapidly changing demand patterns.
1.2
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Vector Electricity Asset Management Plan— 2020 Update
Accordingly, we will continue to target investments as efficiently as we can by supporting traditional network assets with digital and new energy solutions for the long-term benefit of energy consumers. New energy solutions, such as smart demand response and demand management technologies (such as smart EV chargers), can respond to customers and flatten peak demand, optimising network assets whilst meeting customer needs. These technologies deliver the most benefit when they are coordinated through a digital platform – such as our Distributed Energy Resource Management System (DERMS). “Enabling the different drivers of a new energy future – such as demand response, EVs, and renewable DER – to coordinate seamlessly around customers enables a system which is greater than the sum of its parts, delivering greater return on investment.” SYMPHONY IS CREATING A NEW ENERGY FUTURE FOR OUR CUSTOMERS Whilst energy supply chains have traditionally focused on connecting generation to customers, Symphony is creating a New Energy Future which starts with the customer and ensures our energy systems respond seamlessly and efficiently to their needs. With Vector being majority owned by Entrust on behalf of customer beneficiaries, our interests are our communities’ interests. Every customer is different, but every business and residential customer is facing significant change in the way that they consume electricity and get around. At the same time, customer service expectations are increasing as a result of new technologies and business models that have invested in digital services, rather than physical infrastructure. This approach enables businesses to be agile and responsive to changing customer needs and delivers intuitive, relevant services that meet the needs of each individual customer. Understanding customer behaviours is key to delivering network optimisation with the needs of the customer at the centre. Vector is working with partners across the sector to develop behavioural based insights to understand, for instance, the role of price incentives to manage demand efficiently, equitably and in line with customer needs and preferences. Vector is working with Mercury on the Power Down Trial to test the impact of financial incentives to reduce electricity consumption during peak times. Whilst the findings are still in the early stages, this study will be a step toward understanding the role of incentive-based price levers to manage demand. We have used behavioural insights to deepen our understanding of the demand impact of new energy solutions including energy efficient appliances, solar PV, or switching to/from gas. These insights inform our network management and strategy and have implications for customer cost and experience as well as New Zealand’s wider transition to a low emissions energy future. These insights shed light on the value of implementing customer facing energy efficiency measures to achieve New Zealand’s wider energy goals. Understanding the behaviour of our own customers is key also to understanding how transferable overseas policy interventions could be to the New Zealand context. Symphony creates a new energy future for our customers through the integration of data analytics and digital platforms which support distributed energy resources (DER) – such as solar PV and batteries, and smart demand management technology. This enables us to understand customers and to create a system which responds seamlessly to their needs. In turn, this supports the transformation of our wider energy system – to start with the customer, not the power-plant. SYMPHONY IS A WHOLE GROUP STRATEGY Symphony provides a blueprint for the Vector group to lead the creation of intelligent and affordable energy systems that empower our customers and communities well into the future. At its core, Symphony leverages new energy solutions to deliver optimal outcomes for customers, society, and the environment in the context of disruptive change. Because new energy solutions are designed around customer needs – rather than old regulatory or market silos – Symphony is not confined to the networks part of the Vector group. It takes a whole-of-systems approach that requires seamless coordination – between our network and customers; within the Vector group; across the energy supply chains; and between Government and industry. Our drive to re-organise ourselves around the customer is reflected in the recent move to reengineer our organisational model, to further enable the Symphony strategy. This will see the Vector group transition to a collaborative working model, reflecting the groups’ priority to leverage constructive interdependencies – both internally and externally (see section 3 for the latest organisation diagram). Across the Vector group the Symphony strategy is shaping our approach to creating a New Energy Future. For example, reducing emissions from transport is a complex challenge which draws on the efforts of many. Vector OnGas, which has a fleet of 80 trucks, is investigating a trial of electric trucks as a first step in understanding the infrastructure costs and changes associated with the electrification of the heavy vehicle fleet – a transition which will have direct implications for Vector’s distribution network and the national transmission grid. Vector PowerSmart is concurrently working with Auckland Transport to understand the network impacts of the electrification of buses. These efforts are alongside our continued engagement with the Ministry of Transport to support the Green Freight Project, which seeks to understand how to reduce greenhouse gas emissions from New Zealand’s heavy vehicle fleet. As transport accounts for 20 percent of New Zealand’s overall emissions, this strategy is a key first step in New Zealand’s decarbonisation efforts and will require a coordinated approach. “The best way to predict the future is to create it.” Peter Drucker
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Vector Electricity Asset Management Plan— 2020 Update
SYMPHONY FOR OUR ELECTRICITY DISTRIBUTION NETWORK Symphony emerged from a scenario planning exercise in 2018 that identified alternative future scenarios for the next ten years. These were labelled Pop, Rock, and Symphony and modelled variations of two key inputs – the uptake of new customer technologies and the network response. Under the Pop scenario, a 22% increase in network demand was predicted by 2028. This was based on a steady energy efficiency uptake; steady electric vehicle (EV), solar and battery uptake, and intelligent but passive management of the network. The Rock scenario showed that with faster EV, solar and battery uptake network demand could increase by 38%. The Symphony scenario showed that with investment in network intelligence and digital platforms, innovative pricing signals, and integration of distributed energy resources, Vector could limit demand increases to 7%. As stated in our previous AMP, “The two greatest uncertainties around future demand growth are the speed of the uptake of new customer side technologies and the network response to such technologies”. By using a consistent rate of customer growth and testing the impact of different variables relating to those core uncertainties, a scenario emerged where our network could mould to the demand curves of the future. By adopting Symphony as our preferred scenario to manage future demand growth, in 2019 we forecast a reduction in $78m in system growth expenditures for the period of 2019-2028. Such savings are passed on to our customers. This showed that by forecasting and planning for a demand future we were also shaping it. We have consequently continued to embed Symphony as a proactive strategy in our network asset management and planning, ensuring that decisions and investments are made around the customer. Symphony seeks to manage uncertainty by both responding to, and leading, change for customers and goes beyond traditional poles and wires solutions in analysing options for network investments. In adopting this approach, Symphony minimises the risk of ‘stranded assets’ by deferring, or avoiding, costly investments in traditional network infrastructure which may not have a role in the future. As an investment approach, Symphony avoids unnecessary investments in physical network assets to ensure long-term efficiency for customers in the context of future demand which is subject to rapid change. In addition to the development and adoption of new technology, Symphony also considers the impact of global and domestic policies and climate impacts, as well as unquantifiable ‘unknown unknowns’. To ensure an efficient and agile response to this uncertainty, Symphony leverages smart demand management technology, optimised by smart digital platforms which can support increasing penetration of DERs, and integrating network-level data analytics and customer behavioural insights to ensure that where physical network investments are required, this reinforcement and design is targeted towards consumption. For example, our DERMS makes use of predictive modelling algorithms to assess and predict utility loads, customer demand, capacity, and market dynamics in real time and it can automatically issue commands in response to these predictions. This facilitates the coordination of DERs and demand management technology to provide visibility and flexibility at a network level. The result is a symphony where customers, the network, and wider energy services work together seamlessly.
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Vector Electricity Asset Management Plan Update — Information Disclosure 2020
section 02
customers, stakeholders and service levels
Vector Electricity Asset Management Plan— 2020 Update
2 – customers, stakeholders and service levels
Our customers continue to tell us that they want safe, reliable and affordable energy systems that empower them with choice and control. This means we have a responsibility to ensure our energy systems remain stable and robust, yet flexible enough to evolve in concert with changing customer behaviours. Keeping our broad range of stakeholders at the heart of what we do is key to achieving this. As part of the COVID-19 pandemic response, we continue to prioritise proactive communication with stakeholders through a proactive communications plan and are prioritising in particular the provision of information to customers. We are also co- ordinating and communicating with our industry partners and other external stakeholders specifically on this topic.
2.1
Customer engagement
Understanding customer needs and behaviours is core to delivering optimal network services with the customer at the centre. By leveraging behavioural and customer insights Symphony optimises the way that Vector delivers operational services to customers. Qualitative and quantitative data from multiple channels builds our understanding of customer needs and behaviours, which then can inform the scheduling and management of planned outages to minimise disruption to customers, as well as our communications and digital strategies. One example of this from the last twelve months is how customer insights have informed the development of our recently-released, web-based outage map to show the location and the status of the outage to minimise customer impact. This is additional to the outage centre where customers are able to check if there is an outage in their area or report one themselves. Furthermore, based on their preferences, customers can also choose how they are notified when there is a planned outage. The application of behavioural insights is a dynamic and ongoing focus for Vector as we continue to explore opportunities for innovation and better solutions which put the customer at the centre. We continue to deepen community and customer engagement regarding planning and impact of operations to ensure optimal solutions and minimal disruptions for our consumers. One element of this is our Customer Advisory Board (CAB) – it provides a forum to engage with a range of customers directly and exchange information about the electricity network. Having greater access to our customers’ smart meter data, as discussed in the 2019 AMP is also an important element. We support the recommendation of the EPR for the Electricity Authority (EA) to expedite work to make it easier for networks and customers to access smart meter data. While we continue to work with metering businesses independently to have greater access to smart meter data, we look forward to the EA progressing this important work. We also support the EPR’s focus on strengthening the voice of customers, and the EPR’s recommendation to establish a Customer Advocacy Council to help ensure that the interests of customers remain at the centre of regulatory and industry decision making. We believe that the composition of this Council will be key to its success in providing a genuine voice for the customer, and we support fresh thinking which is informed by customer data analytics.
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Vector Electricity Asset Management Plan— 2020 Update
CUSTOMER PERFORMANCE
Our Customer Performance snapshot details the latest key customer engagement metrics.
FY19 CUSTOMER PERFORMANCE SNAPSHOT
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Vector Electricity Asset Management Plan— 2020 Update
COMMUNITY ENGAGEMENT WITH ASSET BEAUTIFICATION Vector’s electricity assets are spread throughout Auckland and form part of the built environment of each community’s local neighbourhood. That’s why we’re happy to work with local artists and other organisations who want to take ownership of their spaces and make them look great. In May 2019 we published guidelines that set out our approach to facilitating requests for public art on Vector’s network assets. One recent example of this process in action was a request we received from the Onehunga Business Association to facilitate public art on the Onehunga substation.
ONEHUNGA SUBSTATION – THE ART PIECE IS CALLED ‘THE PEOPLE WEAVER’ AND IS PART OF NGA ATUA HOU, A SERIES OF MURAL PROJECTS TO REVITALISE SPACES ACROSS THE CITY
2.2
Service levels
The Service Levels measurements from AMP19 are updated for the RY19 measurements in the table below:
DESCRIPTION
RY15
RY16
RY17
RY18
RY19
Customer Effort Means Score
-
-
6.9
6.7
7.0
Speed of quotes for new connections – (<5 lots)
-
-
-
84%
87%
Advance notification of planned outages
-
-
-
-
95.45%
Average Grade of Service (GOS)
86%
87%
81%
75%
79%
Total recordable injury frequency rate (TRIFR)
6.89
7.17
5.28
14.07
5.01
Asset safety incident
0
2
1
7
5
SAIFI (system average interruption frequency index)
1.41
1.11
1.85
2.14
1.76
Customer interruptions performance
99.3%
97.8%
96.6%
92.6%
97.1%
SAIDI (system average interruption duration index)
128.5
117.0
173.6
226.2
198.2
SERVICE LEVEL MEASUREMENTS
We are pleased that all the service levels show improvement over the course of RY19. Per our previous AMP, no measures are included for our Cyber Security and Privacy service levels due to commercial sensitivities and for security reasons.
SECURITY OF SUPPLY STANDARDS The Security of Supply Standards (SoSS) are being reviewed in line with the expansion of the Symphony strategy across the network planning function and the RY20 SRMP activities. The previous SOSS did not reflect these improvements and the amendments will also more clearly articulate the Auckland CBD security of supply and includes cost/benefit principles.
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Vector Electricity Asset Management Plan— 2020 Update
2.3
Supporting Auckland’s growth Auckland’s relentless growth continues, with a population that has now grown since 2013 by the size of Tauranga and Whangarei combined. In that time, we have spent nearly $1.3 billion to strengthen network integrity and support Auckland’s growth, and have added 59,222 new customers to the network. This growth is not stopping. In the next 10 years Auckland will see around 300,000 more people in the region for a total population of 2 million; up to 250,000 more vehicles on our roads (assuming current ownership rates continue); and 117,000 new energy network connections required to support this growth. Development projects in new areas, or greenfield developments, have started slowing down but the Auckland Unitary Plan triggered a significant amount of small infill subdivisions over the past several years, where property owners of single lots were redeveloping these to high density developments. Re-development projects, or brown field developments, are more complex and more expensive for Vector, because existing assets often need to be removed, relocated, or upgraded. There is also typically less space to work in as a result of the existing buildings, and as work is done in existing roads, traffic management and access are more complex. Enabling this growth through the provision of necessary electricity connections and upgrades requires appropriate investment, whether that be constructing new assets, adding intelligence to our network and systems, or developing digital solutions that put customers’ needs at the centre. Significant investment is required across all infrastructure in Auckland to cater for growth and electricity network reinforcement is no exception – ensuring this growth results in the greatest economic benefit for Auckland requires a partnership approach to capital and infrastructure needs by local and central Government. We support the Government’s focus on infrastructure investment and agree that now is the time to be investing for future growth. Traditional network assets will continue to form the backbone of our network. However, our Symphony strategy will integrate new technologies and digital solutions into the broader system in order to maximise customer outcomes within allowable spend, and to better manage energy flows as demand grows and changes. An important factor in how we support Auckland growth is the availability of suitable resource to undertake project works. We will not compromise on safety, quality of materials or technician expertise when considering investments to deliver a resilient, reliable electricity network that meets the current and future needs of Auckland families and businesses. Resource constraints are a factor in our capability to support Auckland’s growth in a timely fashion. FUNDING APPROPRIATE INVESTMENT The growth in Auckland’s population over the past five years has caused a significant volume of growth-related investment for new connections and for reinforcement works to meet the increased demand on the network. At the same time, we have increased capital spend year-on-year since RY16 to address the integrity needs of our assets with a focus on addressing the long-term requirements in an economically prudent manner. With no sign of Auckland growth conditions easing, we will need to continue to invest significant capital expenditure in our network to support infrastructure growth for Auckland. This continued investment ensures that the electricity network can play its part building Auckland’s future which includes affordability and choice, making it a great city to live in for those who call Auckland home today. The investment to support new housing connections is significant and we anticipate greater investment will be needed to support residential intensification objectives – consents for dwellings in Auckland are forecast to hit 17,200 in 2023. Affordability of electricity is an important issue – particularly as EV uptake will increase demand for electricity. Pushing value for money and continuing to deliver quality services in the long run requires new efficiencies and technology. Our work to put in place new technology options that will flatten peak demand has the direct outcome of being able to defer infrastructure investment that would otherwise be needed, thereby keeping costs for consumers down. Vector’s investment in innovation is also important to find new efficiencies and resilience in the future. Some of the future investment required flows directly from other infrastructure decisions made either by central or local government. The proposal to build a light rail line (Auckland Light Rail or ALR) from the city to the airport is a good example – depending on the route finally chosen, we anticipate a capital cost in the vicinity of $85m to move the electricity assets. ENABLING ELECTRIFICATION OF TRANSPORT We support the work of the former ICCC, which recommended in their report, Accelerated Electrification 2 , that the electrification of transport be prioritised to reduce emissions. This reflects New Zealand’s unique energy emissions profile – whereby emissions from transport are around four times greater than the emissions from electricity generation (with transport accounting for around 20 percent of New Zealand’s total emissions). The scenario favoured by the ICCC to reduce emissions included replacing around two million vehicles with EVs in New Zealand over the next 15 years. Already more than 40% of EVs are on Auckland roads, and international trends suggest that EV uptake tends to be concentrated in larger urban centres. This ‘clustering’ would further concentrate load on the network. EVs require charging and a 22kW fast charger can add the equivalent average demand of 9 houses to the existing network. Clearly, growth in EV uptake puts pressure on network infrastructure. Even with the uptake of 7kW ‘slow’ chargers, our modelling has found that existing network capacity would be exceeded at just 20 percent EV penetration. New solutions, such as vehicle-to-home technology and smart EV chargers (coordinated through a smart digital platform, like a DERMs), supported by the right pricing signals, can help shift load, manage network peak and keep electricity affordable in the long term.
2 https://www.iccc.mfe.govt.nz/assets/PDF_Library/daed426432/FINAL-ICCC-Electricity-report.pdf
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Vector Electricity Asset Management Plan— 2020 Update
In addition to passenger vehicles, Auckland Transport’s Low Emission Bus Roadmap targets an entirely low-emissions bus fleet by 2040. Trials have already begun with 11 electric buses expected on the road by the end of 2020. Vector and AT will carry out a feasibility study to assess the impact of a fully electric bus fleet on the Auckland electricity network, and to identify opportunities where innovative energy technologies could be deployed to facilitate the transition and help avoid large network upgrade costs.
2.4 Better outcomes through regulatory and policy alignment
Here we present Vector’s position on regulatory and policy related matters that have significant potential to improve network reliability, security and resilience. Vector continues to engage with stakeholders on all these issues in a proactive and committed manner. We believe that some regulatory settings are inconsistent with other policy and regulatory goals – including to enable Auckland growth, as well as to ensure long term reliability is delivered affordably and in partnership with communities and stakeholders. Some of the regulatory issues below – such as the current vegetation management regulation, are significantly misaligned with the efficient delivery of reliability. VEGETATION MANAGEMENT Vegetation management regulations are currently under review by the Ministry of Business Innovation and Employment (MBIE) – and we support this initiative and its continued urgent progression. Current regulations present significant issues. For example, in some cases the narrow growth limit zone prescribed does not align with minimum approach distances (MAD) prescribed by health and safety legislation. Accountabilities are not appropriately balanced within the current regulatory framework and do not align with parties’ abilities to manage risk. We support regulations that respond to the drivers of risk, that allow a preventative approach, and which align incentives with good health and safety practices and reliability outcomes. As we expect an increase in extreme weather events linked to climate change, and as we rely on electricity more through the electrification of transport and industrial process heat, it is critical that vegetation management regulations respond to the key drivers of risk. As stated in the 2014 Opus report, a review of the effectiveness of the Electricity (Hazards from Trees) Regulation 2003 3 , “of all reported tree related incidents, fall zone and overhanging trees have the most significant impact on electricity network reliability, although these trees are not covered under the current regulations”. We therefore support an approach which accounts for the factors that contribute to the risk posed by a tree – including, critically, the fall zone. A risk- based approach could support a more efficient response by targeting resource towards trees that most require a response, whilst allowing trees to grow which do not pose a risk. By only prescribing a narrow distance that trees’ branches must be from lines, the current framework limits the scope for prevention and efficiency. There is an opportunity for regulation to better protect security of supply and health and safety, to gain efficiency, to create a better experience for customers. We also believe there is an opportunity to support these outcomes through preventive planting guidelines – to prevent trees from being planted where they will inevitably grow into lines in the future. Lastly, cost recovery for electricity distribution businesses (EDBs) is determined by whether the cut is the first or a subsequent cut. This approach creates administrative burden and does not clearly reflect considerations which we believe should be central in determining cost recovery – such as affordability and health and safety. OUTAGE RESPONSE We support the proposed, “Land Transport (Vehicles Responding to Electrical Emergency) Amendment Bill” 4 allowing lines companies’ response vehicles to use flashing lights to move through traffic and swiftly respond to electrical emergencies. Under current land transport rules, emergency response vehicles such as the ambulance or fire brigade can use their lights to respond quickly to an accident. However, when that accident involves downed electrical lines from a vehicle striking a power pole, the emergency response crews must wait for our lines crews, who are often stuck in traffic, to arrive and turn off the power flowing through the downed lines before they can safely perform their life-saving work. Similarly, in the case of customers who are medically dependent on electrical machines, the response time for getting the power back on in a power outage is critical. The proposed bill addresses the use of vehicle lights to respond to those electrical emergencies with an associated health and safety issue. However, following the proposed pathways to decarbonising New Zealand’s economy will make consumers lives and businesses more dependent on an uninterrupted supply of electricity. If response crews had access to flashing lights in every power outage situation where congestion is a problem, we could reduce response times and speed up power restoration considerably. CUSTOMER SERVICE LINES We support the Ministry of Business, Innovation and Employment’s (MBIE’s) review of the regulations around customer service lines, including discussions about the treatment of right of way poles. The legislative treatment of customer service lines has changed over time, contributing to inconsistency in how assets are treated by different EDBs and a lack of clarity around responsibilities in some cases. In this context, it is our experience that customers often do not know they own these assets or what their responsibilities are (and often dispute responsibility when this is raised). This is concerning as the assets age and require maintenance. Limitations around property access rights and cost recovery restricts an EDB’s ability to undertake proactive maintenance of customer service lines.
3 https://www.ena.org.nz/assets/Uploads/Opus-Tree-Regs-Report-May-2014-Final.pdf
4 https://www.parliament.nz/en/pb/bills-and-laws/proposed-members-bills/document/52HOH_MEMBILL157_1/land-transport-vehicles-responding-to-electrical-emergency
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Vector Electricity Asset Management Plan— 2020 Update
Ambiguity around the treatment of customer service lines does not provide clarity as customers explore distributed energy resources, electric vehicles, and other electrification options which may require upgrades to their customer service lines. The review is an opportunity to create regulations that give clarity to market participants about ownership and responsibility, while supporting New Zealand’s policy objectives around decarbonisation alongside reliable and resilient electricity supply.
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Vector Electricity Asset Management Plan— 2020 Update
CASE STUDY: GETTING AHEAD OF INCREASING NUMBERS OF END-OF-LIFE BATTERIES In December 2019 Vector announced the launch of the Battery Industry Group (B.I.G.), a cross-industry collaboration that will design reuse and recycling solutions for large batteries, commonly found in electric vehicles or in stationary energy storage. The vision and context for the group is provided by Vector’s New Energy Futures Paper: Batteries and the Circular Economy and a Technical Addendum, in which Vector transparently shares all research and data gathered to date. B.I.G. is a significant move for the business community, being described by internationally prominent sustainability charity, Forum for the Future, as a ‘lightning rod’ for the public and private sector in New Zealand. The group aims to propose a ‘circular’ product stewardship scheme for end-of-use and end-of-life battery management to the Ministry for the Environment within the next 12 months. This will include recommendations on consistent safety guidance for the handling, storage and shipping of used large batteries. The group has a core delivery team of Vector, Eunomia Research & Consulting and WasteMINZ, with funding from Vector, EECA and the Motor Industry Association of New Zealand. The move acknowledges the important role businesses can play in not only front-footing the e-waste challenge, but also acting as a catalyst to accelerate our transition to a low-emission circular economy. “Vector recognises that electrification of transport presents a significant opportunity to help New Zealand achieve a zero-carbon future,” said Vector Group CEO, Simon Mackenzie. “The research in the New Energy Futures Paper tells us that there will be between 500 and 1,000 EV batteries coming to the end of their lives by 2020, potentially rising to 17,000 by 2025 and a staggering 84,000 by 2030. “While batteries are key to powering our new energy future, they contain valuable materials that come at an environmental and social cost. It’s clear that we must work collaboratively with others to ensure we have a proactive, robust plan in place to make the most of battery capacity, as well as mitigating any risks from their disposal. This initiative will produce the circular blueprint we need to achieve this.” The New Energy Futures Paper is the culmination of research commissioned by Vector from Eunomia with the Batteries Leaders Group in 2018. That group now forms the basis of the wider B.I.G. and its three working groups: the Safety & Logistics Group, the Battery Innovation Hub, and the Battery User Group.
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Vector Electricity Asset Management Plan Update — Information Disclosure 2020
section 03
assest management system
Vector Electricity Asset Management Plan— 2020 Update
3 – asset management system
As noted in the 2019 AMP, the continuous improvement of the Asset Management systems, practices and policies is a fundamental part of our Asset Management Strategy. Since the publication of that AMP, we have continued the development and formalisation of the proposed framework, supported by the completion of an external review of the asset management systems and processes, the outcomes of which are being adopted into the required activities. It remains our strategic objective to seek accord with the principles of ISO 55000 as we improve our asset management system to deliver a forward- looking proactive approach to asset management. Dedicated resource has been assigned to ensure focus on these activities is maintained. Our Asset Management policy is being refreshed and as noted below, the planned expansion of the use of SAP PM is progressing well, becoming operational during FY21, creating a single source of truth for asset information in the system of record (SAP). This streamlines and automates the proactive and planned network maintenance processes, and this improved view of the condition of our assets will enable even better asset management decisions and customer outcomes. In the last 12 months, we have also formally published to our internal document register Asset Class Strategies for six of our nine header classes, focusing on the large population distribution and critical subtransmission classes first, as well as completing the seventh condition-based asset risk management (CBARM) model. Four more models are proposed for completion in FY21, including the first two relating to low voltage (LV) assets.
3.1
Enabling technologies
As part of the continuous improvement path for asset management, we are continuing the investment in key systems that will enhance our capabilities.
SAP PM In the 2019 AMP we included planned investment in the plant maintenance module of SAP (SAP-PM) to enhance our asset replacement, planning and maintenance capabilities by centralising operational history, providing additional condition data and auditing capability for planned and corrective maintenance activities and incorporating financial transactions. This provides a standard method for FSPs to access maintenance standards and inform Vector of work completed. Throughout FY20, this project has been extended to include further functionality than what was initially envisaged with the new design reflecting an updated field operating model as well. While it will largely be complete in FY20 as planned, some activity will continue into FY21. Strategic partnerships are being leveraged in this area and investment has been allowed for in order to optimise dispatch and work allocation in a way that will minimise outages and maximise use of the outage window. ADVANCED DISTRIBUTION MANAGEMENT SYSTEM Over the course of FY20, we have further explored the benefits of Advanced Distribution Management Systems (ADMS) capabilities and have approved a business case for the implementation of such a system. We have expanded the functionality and reduced the timeframe for delivery in order to provide benefits to our customers as early as possible and earlier than initially planned. We will be utilising the Electronic Switching Module to reduce manual and paper-based processes and the Outage Management System (OMS) component supports better and faster response time to faults. Due to the acceleration of the feeder automation programme (see section 4.1), we will also include Fault Location, Isolation and Service Restoration (FLISR) in an earlier timeframe than initially expected to fully utilise the capability of remote switching. With FLISR, the system will automatically choose the best devices to operate to reconfigure the network and reduce the impact of an outage to the minimum number of customers. Including these capabilities supports DPP3 requirements and provides better outcomes for our customers. As noted in section 1.2, under the Symphony strategy, our network planning approach needs to go beyond traditional solutions to building solutions that are able to adapt and respond as time progresses. While some models exist already, new methodologies are required to enable integration into the planning processes. Therefore, we have added a new project for this AMP period where the necessary tools can be developed over FY21 and FY22. The roadmap for this Symphony Planning project is being finalised and formalises use of granular bottom-up modelling from customer level, further system dynamics modelling and a greater level of power flow analysis to allow risk-based options analysis to be applied when determining the most appropriate solution to a network need. Other tools will provide greater visibility, observability and controllability for the operations and ongoing asset management of the solutions. Part of our approach is to leverage expertise through investment in strategic partnerships that will be focused on modelling and simulation to aid in planning. The form and detail of these investments are still being determined. SYMPHONY NETWORK MODELLING TOOLS
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