Frequently asked questions

Transpower and the National Grid

Who is Transpower?

Transpower is the state-owned enterprise that owns and operates the National Grid – or high voltage transmission network – that carries electricity around the country.

What is the National Grid?

The National Grid is made up of over 12,000 km of transmission lines and more than 170 substations. Electricity is transmitted over the grid at high voltages (up to 220,000 volts) from power stations to local lines companies and major industries.

Does Transpower own or sell electricity?

No. Transpower's role is to build, operate and maintain the grid. Transpower does not generate, own or sell electricity.

Why can't Transpower generate electricity?

The electricity market is separated between:

  • Generators
  • Distributors (lines companies)
  • Retailers
  • Transmission companies (Transpower)

Transpower is a transmission company set up as a State Owned Enterprise in 1994. Its business and experience is in building, maintaining and operating the National Grid – the high voltage transmission lines carrying electricity throughout New Zealand.

There are already a number of large generator owners including Contact Energy, Meridian Energy, Mighty River Power, Genesis Energy and Trust Power who own and operate generating stations.

Why is the National Grid so important?

Most of New Zealand's electricity is generated from renewable energy sources (hydro and increasingly wind) that exist in remote areas, a long way from where the majority of people actually live.

A strong national grid supports competition in the market and assists generation to be developed and electricity to be transported to where it is used.

Why is investment in the National Grid needed?

The current ‘backbone’ of the National Grid was largely built in the 1950s and 60s and, in places, is now nearing its capacity. Transpower has a major investment programme to address:

  • Strong recent growth in electricity demand and predicted growth over the next 40 years
  • The need to connect a diverse range of new sources of generation
  • The ageing of the grid

The grid is essentially a transport system and like the roading network, it needs to be maintained and upgraded to meet the needs of a growing economy. Also, like the roading network, there comes a time when a new route is necessary.

Why do we use AC (alternating current)?

Electricity distribution systems use AC for three main reasons:

  • The most cost-effective way to generate large amounts of electricity is with a rotating synchronous generator, which naturally produces alternating current
  • The most economical and robust construction of motors for industrial, commercial and domestic applications is based on induction or synchronous motors, which both use alternating current
  • With an AC system, relatively inexpensive transformers can be used to increase or decrease the voltage as needed for either:
    • increasing the voltage at power stations to high levels, to transmit large amounts of power over long distances
    • decreasing the voltage in the distribution network (‘stepping the voltage down’ at local substations or local street transformers to the standard domestic voltage that is normal and safe for our standard appliances).

Non-transmission alternatives

Why can't we just conserve more energy?

Energy conservation is important and highly desirable. However it takes time and a lot of education to get people to change their habits and for new and more efficient technologies to replace existing ones.

New Zealand needs to generate more electricity and provide more capacity in the National Grid to meet growing demand. Using energy more efficiently has a role to play but it is a slow process. Even accepting greater efficiency by users, New Zealand is a growing country with a growing economy. Energy efficiency alone is not the answer.

What about non-transmission alternatives?

Transpower has always said that a stronger grid is only part of the answer to meeting New Zealand's future electricity needs. New Zealand also needs new sources of generation and energy efficiency measures. In other words, we need to make more electricity, provide a strong highway to transport it, and use it more wisely.

Why can't we penalise inefficient users of electricity as this would decrease demand?

New Zealanders do need to be more responsible with their electricity use and Transpower encourages sustainable environmental practices within our own industry and with our customers. However, electricity usage continues to grow as our population and economic activity grows. While we can be more efficient with our usage, demand will continue to grow as our country grows.

In regards to penalising inefficient use, this would have to be a government initiative. Notwithstanding this, the more electricity a consumer uses, the more they have to pay. It is in the best interests of any business or household to maximise the efficiency of their energy use in order to minimise their expense.

How does Transpower forecast demand?

When assessing the need for transmission upgrades Transpower takes into account several sources of information on the future level of demand. These include:

  • Transpower's own electricity demand forecasting model, which is based on external GDP forecasts, population and housing forecasts, electricity price forecasts (reflecting the expected impact of factors such as increasing gas prices and possible carbon charges) and distributed generation uptake
  • Information from connected customers (such as local lines businesses) on other factors, such as new committed loads, retirement of existing load, distributed generation, and load shifting.

Costs

How do your upgrades affect my existing power bill?

Transmission (Transpower) only makes up a small part, less than 10 per cent, of your existing power bill – although this varies depending on how your lines company apportions costs to its customers. Even after these upgrades, we expect our proportion of your bill to remain below 10%.

Who will pay for grid upgrades?

Transpower should be able to fund the grid investment off its balance sheet and by securing its own debt, without the need for a capital injection from the shareholder. As an SOE, Transpower is required to seek a commercial return on its investments.

It is the Electricity Authority's role to formulate a transmission pricing methodology which enables Transpower's regulated revenues to be recovered from transmission customers. The Authority's pricing methodology is set out in Schedule 12.4 to Part 12 of the Electricity Industry Participation Code 2010., which can be found on the Electricity Authority website.