BEFORE A BOARD OF INQUIRY EAST WEST LINK PROJECT UNDER the Resource Management Act 1991 (the RMA) AND IN THE MATTER OF Notices of requirement for designation and resource consent applications by the NEW ZEALAND TRANSPORT AGENCY for the East West Link Project STATEMENT OF REBUTTAL EVIDENCE OF WILLIAM ALAN HEAPS ON BEHALF OF THE NEW ZEALAND TRANSPORT AGENCY Electricity Dated: 20 June 2017 Barristers and Solicitors Auckland Solicitor Acting: Pat Mulligan Email: [email protected] Tel 64 9 358 2555 Fax 64 9 358 2055 PO Box 1433 DX CP24024 Auckland 1140 TABLE OF CONTENTS 1. SUMMARY OF EVIDENCE 1 2. INTRODUCTION 1 3. SCOPE OF EVIDENCE 3 4. EVIDENCE OF SUBMITTERS 4 5. CONCLUSION 19 ATTACHMENT 1: WAIKATO AND UPPER NORTH ISLAND VOLTAGE MANAGEMENT – SUMMARY OF AND RESPONSE TO SUBMISSIONS 21 ATTACHMENT 2: MIGHTY RIVER POWER PRESS RELEASE 57 ATTACHMENT 3 WAIRAKEI POWER STATION AND THE TAUPO BYPASS 59 BF\57021228\1 1. SUMMARY OF EVIDENCE 1.1 I have read all of the statements of evidence provided by the submitters in relation to electricity production and associated risks at the Southdown site owned and operated by Mercury NZ Limited (Mercury). 1.2 The main conclusions that I have drawn from reading the statements of evidence are: (a) The Southdown site is not substantially more attractive than all other generation sites. (b) Locating solar at the Southdown site would not be expected to have a security of electricity supply benefit. (c) There are not a range of scenarios where re-establishing power generation at Southdown would significantly reduce the probability of a national electricity shortage. (d) It is difficult to envisage construction of the East West Link on the proposed alignment limiting Mercury’s ability to provide a voltage support service. (e) It is difficult to think of examples where the risk of blackouts is less if Southdown generation can be recommenced 4 months sooner. (f) It is incorrect to state that the lost option value for future generation at Southdown is a substantial economic cost. (g) Restoration of gas turbine operation at Southdown is likely to take much longer than 3 to 4 months and Mercury’s claimed options value loss, due to the time to relocate cooling towers, does not exist. (h) Risks from electricity generation activities and danger to the public are likely to be manageable. (i) Disturbance and disruption issues during highway construction will be manageable. 2. INTRODUCTION 2.1 My full name is William Alan Heaps. 2.2 I am Managing Director of an independent consultancy business specialising in energy supply and energy management. I am a qualified electrical engineer and member of the Institution of Engineering and Technology (MIET). BF\57021228\1 Page 1 2.3 I have experience in many aspects of the electricity supply chain and have held several senior executive and governance positions in the energy sector. I was Commercial Manager for CentralPower, an electricity distributor, and General Manager of Energy Brokers, an electricity retail company. I managed the Wairakei and Ohaaki geothermal power stations for Electricity Corporation New Zealand and Contact Energy Limited and was General Manager Commercial Services with Transpower New Zealand Limited. I have been a Director of Orion Networks Limited and Chairman of the Retail, Wholesale Market, Transmission and Investment Advisory Groups for the Electricity Commission and Electricity Authority. I have also chaired several technical advisory groups for the electricity industry. 2.4 In my role as Geothermal Generation General Manager for ECNZ and Contact Energy, I was responsible for managing the power stations and steam field mining operations. A primary component of my work was the management of risks relating to the power generation activities, including the potential risks to the public from the power stations’ operation. 2.5 As a general manager at Transpower, I was involved in the management of the power supply issues relating to voltage support and the Auckland CBD outage in 1998. During the CBD outage, I advised the Prime Minister on demand management options for managing the ‘crisis’. I represented Transpower on ministerial reviews of the electricity industry and during power shortage periods. 2.6 I am currently Managing Director of Strata Energy Consulting Limited, and provide advice and consultancy services on energy issues to a range of clients in New Zealand, Australia, Singapore and Malaysia. Strata’s clients include the major electricity users, electricity generators, retailers, distributors and the governments and energy regulators. 2.7 I have undertaken lead technical consultant roles on several major regulatory reviews of SP Power Assets (Singapore distribution and transmission), Powerlink (Queensland transmission), ElectraNet (South Australia transmission) SPAusNet (Victoria transmission) and Transpower New Zealand Limited (New Zealand Transmission). For the Public Utilities Office in Western Australia, I reviewed the legislative and regulatory framework for energy safety. 2.8 I have provided expert evidence relating to resource consent applications for New Zealand electricity generation plant and, for the Australian Government Solicitor, relating to solar power generation. BF\57021228\1 Page 2 2.9 I advised the Electricity Authority on its investigation of a major substation fire and associated power outage that occurred on a major Transpower substation in Auckland. I have also been technical advisor to the Authority on reviews of major incidents on the power system. For example, I advised the Authority on an incident that occurred during the commissioning of a new component of the high voltage direct current (HVDC) link between the North and South Islands. 2.10 I am currently providing advice to the Security and Reliability Council (SRC), an industry committee required under section 20 of the Electricity Act 2010 to advise the Electricity Authority on electricity supply security and reliability issues. I have advised the SRC on issues relating to the management of risk and on the development of a risk management framework. 2.11 I have been engaged by the New Zealand Transport Agency (the Transport Agency) to provide evidence regarding the accuracy and reasonableness of evidence supporting specific aspects of Mercury’s submission on the proposed East West Link Project (the Project), for which the Notices of Requirement (NORs) and resource consent applications have been lodged with the Environmental Protection Authority (EPA). Although I did not provide primary evidence for the Transport Agency as part of the initial evidence exchange, I am providing this evidence to respond to some of the matters that have been raised in evidence by submitters. 2.12 I have read the 'Code of Conduct' for expert witnesses contained in the Environment Court Practice Note 2014 and my evidence has been prepared in compliance with that Code. In forming my opinion, I have not omitted consideration of any material facts known to me that might alter or detract from the views expressed. I have specified where my opinion is based on limited or partial information and identified any assumptions I have made in forming my opinions. 3. SCOPE OF EVIDENCE 3.1 In this statement of rebuttal evidence, I will respond to the evidence of: (a) Kieran O’Neill Murray; (b) James Kennedy Flexman; and (c) Damian James Phillis. BF\57021228\1 Page 3 3.2 The fact that this rebuttal statement does not respond to every matter raised in the evidence of submitter witnesses within my area of expertise should not be taken as acceptance of the matters raised. 4. EVIDENCE OF SUBMITTERS Evolution of the use of the Southdown site and its strategic value 4.1 In several respects, the primary points raised in the evidence of Mr Flexman, Mr Murray and Mr Phillis, reflect the impact of the changing electricity market environment, legislation and competition for land use. Mercury is continuing to evolve its use and management of the Southdown site in response to the changing environment. 4.2 The cessation of electricity generation at Southdown in December 2015 was a commercial decision made by Mercury based on its view of the future market value of the electricity generators at the Southdown site. As Mr Flexman points out,1 Mercury decided to retain an option to restart the Southdown generators based on changes in the electricity marketplace. New Zealand’s electricity market is designed and operated to deliver efficient, secure and reliable electricity supplies for the long-term benefit of consumers. Individual market participants make decisions to achieve commercial outcomes that are in the best interest of their shareholders. The market is designed and operated so that generally these interests align with the objective of the national electricity market. 4.3 In his evidence, Mr Flexman claims that the Southdown site has ‘unique, immense and long-term strategic value.2 This will ultimately be tested through the marketplace. At the current time, I understand that Mercury has not contracted with anyone to provide generation services from Southdown, which means that the claimed strategic value of the site is not proven. It is likely that other sites that can provide the services that Mercury is envisioning it could provide from Southdown. The strategic value of the future options for the Southdown site will depend on how competitively the services from Southdown can be provided. 4.4 The establishment of Mercury’s solar and battery storage development facility discussed by Mr Flexman3 is a commercial investment made by Mercury in response to potential opportunities it sees in the emerging markets for these technologies. The strategic value of the site for this activity is primarily to Mercury’s benefit. I disagree with Mr Flexman that the use of the site as a solar and battery storage research facility has significant 1 Statement of Evidence of James Kennedy Flexman for Mercury NZ Limited, 10 May 2017, para 23.