Cook Strait cable investment to keep NZ’s electricity reliable into the future
The Commerce Commission has approved Transpower’s $1.1 billion investment to replace and expand New Zealand’s inter-island electricity link, helping ensure a continued reliable electricity supply between the North and South islands.
Associate Commissioner Nathan Strong says the upgrade will replace ageing infrastructure that is expected to reach the end of its life by 2030, reducing the risk of faults and outages that could otherwise raise electricity costs for consumers.
The Commission’s approval covers the first stage of a two-stage plan to replace the three ageing Cook Strait cables, install a fourth, and build new termination stations. This will increase inter-island capacity from 1,200 MW to 1,400 MW.
“The cost of the infrastructure will be added to Transpower’s regulated asset base and recovered over the life of the equipment. Under the benefits-based pricing method, those costs will be shared by the electricity consumers and generators that benefit from the HVDC link,” says Mr Strong.
“This investment will better utilise renewable generation – particularly in the South Island which could help put downward pressure on wholesale electricity prices over time.”
He said feedback from stakeholders broadly supported the Commission’s draft decision.
“Installing the fourth cable as part of the initial upgrade will maximise benefits and avoid higher costs later. Analysis shows that delaying it would reduce overall market benefits.”
The project will also improve resilience and system security, including upgrades to withstand seismic risks and reduce the likelihood and impact of outages.
The Commission is satisfied the investment meets the multiple stringent regulatory tests and is in the long-term interests of electricity consumers.
Construction is expected to be completed by the early 2030s, helping ensure the HVDC link continues to support New Zealand’s transition to a more electrified, lower-emissions economy.
Learn more on our HVDC link upgrade page.
Background
Transpower, a state-owned enterprise, owns and operates New Zealand’s national electricity grid. It also manages the electricity system in real time, ensuring power flows where it is needed across the country.
The Commerce Commission has regulated Transpower under the Commerce Act since 2011. This includes setting limits on the revenue Transpower can recover from customers and the quality standards it must meet. These rules are typically set for five-year periods.
Transpower can ask the Commission at any time to approve spending on major infrastructure projects. The rules for these investments are set out in the Capital Expenditure Input Methodology, which defines what Transpower must show when proposing a project and how the Commission assesses whether it should be approved.