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Vector: Auckland's $2 billion 'power bill'

Photo / Nick Reed.
Photo / Nick Reed.

New technology is helping to drive down Auckland's electricity use. But it is also creating a $2 billion opportunity to step into a new energy future as power distributors look to meet the rampant growth expected in the city over the next 30 years.

With Auckland forecast to grow by a further 1 million people by 2046, giant electricity and gas distributor Vector says up to $1.8 billion must be invested in the coming decade to ensure the city's lights keep burning.

In the last 10 years options like more efficient appliances, changing consumer habits and higher construction standards for new homes have contributed to a 10 per cent reduction in average residential electricity use in Auckland - a decline expected to continue, if not accelerate in coming years.

This is giving Vector the chance to divert some of the $1.8 billion spend away from traditional - and costly - "poles and wires" infrastructure.

Vector CEO Simon Mackenzie says it means the $1.8 billion will "stretch" further - and lessen the risk future generations of Aucklanders will have to pay for "poles and wires" rendered obsolete by developing technologies.

"The easy answer for us would simply be to build in a traditional way and expect these future generations to pay. But our point of view is quite simple: if clever use of technology helps reduce cost, if it is cheaper than traditional poles and wires, we're in," he says.

Mackenzie says the company is "wrestling" with how best to spend the $1.8 billion: "It can only be spent once and, if we get it wrong, it is the consumer who will suffer."

"We don't want to invest in traditional network assets - the poles and wires - that in 15 to 20 years may no longer be needed at current capacity levels," he says. Up to 26 per cent of the average power bill goes towards the cost of building and maintaining power lines and Mackenzie says Vector needs to get the investment right otherwise it will leave customers funding costly 'white elephant' infrastructure.

"On the one hand we have to cater for the massive growth taking place; on the other we are aware changing technologies are giving people more energy-efficient options. We cannot afford to blindly build to old paradigms."

Vector believes one of the solutions is for Auckland to be treated as a special case in the way lines are regulated. Mackenzie says while the company's rates are controlled by the Commerce Commission to ensure it does not use its exclusive position to overcharge customers, Auckland's growth is so rampant, current rules could make it hard to pay for an expanding network.

He says Vector is in ongoing discussions with the commission but accepts it faces a tough challenge: "Their (regulators') world, which is to govern by prescription and rules, simply can't respond to the rapid pace of change that is occurring.

"In the last great energy shake-up of the late 1990s, no-one had any idea energy could be efficiently stored or consumers could cost-effectively generate their own electricity - it really is a different world."

Vector's predicament is one facing the industry world-wide. Johannes Pfeifenberger, an internationally renowned consultant in electricity markets, says the industry is facing a period of adaptation to new technologies with a grid largely built to serve the economy of the 1990s. If left unaddressed, he says, it could lead to costly "outcomes for customers".

United States technology futurist Daniel Burrus says investment in electrical power generation and distribution is a slow, long- term proposition. He says part of the problem facing the industry is traditional networks have to be scaled to meet peak demand - which may only be for five per cent of the day.

Already Vector is taking steps into the future, installing a Tesla Powerpack battery system in Glen Innes providing commercial and household power on a grid-scale storage system.
Equivalent to powering 450 homes for 2.3 hours, it stores power and helps ensure provision of power at peak winter levels at all times.

"In the past, networks were between a rock and a hard place," says Mackenzie. "We had to build to meet usage peaks but now, with technologies like battery storage, we can shave off the peaks and in the process save consumers from paying for the hundreds of millions of dollars required for traditional upgrades.

The sheer enormity of the growth challenge for Vector is apparent when looking at Auckland's predicted population growth across all areas of the city over the coming 30 years.

• In the north around Silverdale and Dairy Flat up to 27,000 new dwellings are planned.
• An additional 54,000 homes are targeted for south Auckland.
• In the north west developments around the Westgate Town Centre project will see 30,000 new houses and apartments constructed.
• Another 270,000 dwellings will sprout across existing urban areas.

Fewer poles and wires has another spin-off, greater safety. As part of new safety protocols, Vector is to stop live line work where possible, instead remotely shutting down power when lines are low-hanging or down.

"We appreciate this may lead to a few more outages," says Mackenzie, "but we believe Aucklanders will agree keeping our people and the public safe is worth it."


Watch this video to see what Auckland's energy future might look like.

Video


Read more from Vector here

Innovating to meet customer demands.
Vector’s vision is to be New Zealanders' first choice for integrated infrastructure solutions to help build a better, brighter future.

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