Capital expenditure workshop 26 October 2016 Disclaimer please - - PowerPoint PPT Presentation

Capital expenditure workshop

26 October 2016

Disclaimer – please note that some sections of this presentation have been amended due to the presence of commercially sensitive material.

Agenda

• 1. Welcome and objectives

Tony Meehan, EGM, Business Growth and Revenue, TransGrid

• 2. TransGrid’s forecasting approach

Gerard Reiter, EGM, Asset Management, TransGrid

• 3. Powering Sydney’s Future

Nalin Pahalawaththa, GM, Power System Analysis, TransGrid Lunch break

• 4. Sydney East Transformer

Lance Wee, GM, Asset Strategy, TransGrid Break

• 6. Probabilistic investment forecasting

Nalin Pahalawaththa, GM, Power System Analysis, TransGrid Close Tony Meehan, EGM, Business Growth and Revenue, TransGrid

TransGrid Capital Expenditure Workshop

Welcome and objectives

> Inform you on TransGrid’s capital forecasting approach > Consult on Powering Sydney’s Future, Sydney East Transformer and understand your needs and views > Collaborate and discuss what you think we should consider when thinking of customers > Hear your thoughts on if we have our priorities right and if there anything missing What are you hoping to get out of today’s workshop?

4 /

An overview of TransGrid’s capital forecasting approach

Gerard Reiter, EGM, Asset Management, TransGrid

TransGrid Capital Expenditure Workshop

What is capital investment?

Replacement Market benefits Others Augmentation

New or upgraded infrastructure to cater for growing demand Updating infrastructure which is wearing out New or upgraded infrastructure to expand generator access and competition Non network infrastructure, including commercial property and IT systems

All assets have a lifecycle – they are planned, built, operated, maintained and then renewed or replaced

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TransGrid’s Asset Management System

Monitoring of the asset

• peration and

maintenance determines renewal needs Corporate Plan Asset management policy and strategies describe in detail how we manage assets The Network Investment Process manages projects from planning to delivery

Build Acquire Operate Plan Design Maintain Renew Replace Reuse Dispose

ISO: 55001 asset management

Lifecycle of assets Social licence NSW government reliability standards NSW & ACT transmission licences NER requirements

˃ Service level agreements ˃ Asset management committee governance structures ˃ Network performance monitoring ˃ Asset Management Program of Work

Asset

TransGrid Capital Expenditure Workshop 7 /

TransGrid Capital Expenditure Workshop

Our approach to CAPEX and OPEX

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Investment framework

Ensuring calibration of risk tool TransGrid Capital Expenditure Workshop 9 /

TransGrid Capital Expenditure Workshop

What is reliability?

Reliability generally refers to the extent to which customers have a continuous supply

• f electricity.

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TransGrid Capital Expenditure Workshop

NSW transmission reliability standards

˃ The NSW Government will set a new reliability standard to apply to TransGrid’s network from 1 July 2018 ˃ In late August 2016, IPART provided its recommendation to the NSW Minister for Industry, Resources and Energy ˃ There has been additional work required to develop a recommended standard for the Inner Sydney area ˃ IPART are consulting separately on the inner city and will provide the Minister with a recommendation in December 2016

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TransGrid Capital Expenditure Workshop

The importance of reliable transmission

˃ Affects a large geographical area ˃ Result in a significant commercial impact ˃ Safety could be compromised ˃ Lead to critical services not being available We are mindful of the cost to customers and consumers

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Discussion

> What are your initial thoughts on

• ur risk based approach?

> What are your thoughts on the current reliability levels of the network?

Powering Sydney’s Future

Nalin Pahalawaththa, GM, Power System Analysis, TransGrid

TransGrid Capital Expenditure Workshop

Powering Sydney’s Future

˃ PSF has been considered prior to the current regulatory period ˃ The condition or performance of cables were not confirmed ˃ The load growth had been expected to be moderate ˃ The proposal has been postponed until the next regulatory period ˃ PSF consultations highlighted that the consumers value reliability of supply to Sydney inner metro and CBD

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TransGrid Capital Expenditure Workshop

Background

˃ The Inner Sydney transmission system is defined as TransGrid’s 330kV cables 41 and 42, and the 330/132kV BSPS, together with Ausgrid’s 132kV transmission network that links those supply points. ˃ Total demand within the area amounts to about 1600MW. ˃ CBD area is mostly supplied from Haymarket BSP, and Ausgrid’s network provide supply redundancy. ˃ Total demand within the CBD area amounts to about 900MW.

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TransGrid Capital Expenditure Workshop

Transmission network - what are we looking at?

Feeder Year Commissioned (oldest cable section) Age in 2016 (years) Feeder Route Length (km) Committed Retirement 41 1979 37 19.7 Derated to 426MVA 42 2004 12 27.5 92L/3 1970 46 10.8 2017/18 92M/1 1970 46 10.8 2017/18 91M/1 1973 43 19.5 2016/17 928/3 1966 50 11.9 Proposed 2018/19 – possible delay 929/1 1966 50 12 Proposed 2018/19 – possible delay 92X 1968 48 14.5 Proposed 2023 – following new cable 92C 1968 48 14.5 Proposed 2023 – following new cable 91X/2 1972 44 13 Proposed 2023 – following new cable 91Y/2 1972 44 13 Proposed 2023 – following new cable 90T/1 1981 35 3.8 Proposed 2023 – following new cable 9S2 1988 28 5.2 Proposed 2023 – following new cable 9SA 1973 43 5.7 Remediation Planned 92P 1973 43 5.5 Remediation Planned

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Need

TransGrid Capital Expenditure Workshop

Environmental risks

Ausgrid environmental risk costs have been reviewed by WolfPeak

Reliability risks

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TransGrid Capital Expenditure Workshop

Cable Conditions – Ausgrid cables

Circuit From To kV 2008 Rating 2015 rating Difference Amps Amps MVA

91M/1 Beaconsfield BSP Peakhurst STS 132 980 800

• 41

91M/3 Beaconsfield BSP Bunnerong STSS 132 980 800

• 41

92C St Peters Chullora STSS 132 595 455

• 32

91B/1 Beaconsfield BSP St Peters 132 595 440

• 35

92X St Peters Chullora STSS 132 595 455

• 32

91X/1 Beaconsfield BSP Marrickville 132 595 435

• 37

91X/2 Marrickville Chullora STSS 132 595 440

• 35

91Y/1 Beaconsfield BSP Marrickville 132 595 435

• 37

91Y/2 Marrickville Chullora STSS 132 595 440

• 35

928/3 Lane Cove STSS Dalley St 132 650 530

• 27

929/1 Lane Cove STSS Dalley St 132 585 530

• 13

9SA Beaconsfield BSP Campbell St 132 1105 565

• 123

9SB/1 Beaconsfield BSP Surry Hills Annex 132 1105 565

• 123

90T/1 Green Square Haymarket BSP 132 1190 970

• 50

9S2 Beaconsfield BSP Haymarket BSP 132 1230 985

• 56

9SE Beaconsfield BSP Green Square 132 1190 995

• 45

9S6/1 Haymarket BSP Pyrmont STS 132 1230 935

• 67

9S9/1 Haymarket BSP Pyrmont STS 132 1230 1000

• 53

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Network capacity and forecast load

TransGrid Capital Expenditure Workshop

500 1000 1500 2000 2500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 MW H-L range N-2 Modified Capacities hist raw hist POE50 Ausgrid 2016 POE50 H dev Ausgrid 2016 POE50 M dev Ausgrid 2016 POE50 L dev Ausgrid 2015 POE50 M dev BIS Shrapnel POE50 Forecast

92L and 92M One new 330kV cable to retire Cable 41 91M retired at the end of 2016

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TransGrid Capital Expenditure Workshop

Methodology

˃ Cable failure frequency model – Crow-AMSAA model: statistical model that predicts how often a cable might fail ˃ Reliability model possible impacts based on failure consequences such as time, day, season, costs and previous outages

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TransGrid Capital Expenditure Workshop

Forecast unserved energy

0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027 N-5 EUE (MWh) N-4 EUE (MWh) N-3 EUE (MWh) N-2 EUE (MWh) N-1 EUE (MWh)

Forecasts of unserved energy in Inner Sydney, 2017/18 to 2026/27

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Process

Activity 2016 2017 2018 2019 2020 2021 2022 RIT-T process Project delivery (network solution) New IPART reliability standard need date Need date based on economic benefit Non-network solutions responses to assist managing risk of unserved energy until project delivered TransGrid Capital Expenditure Workshop 23 /

Potential non-network options

Storage Curtailment of load Embedded generation Alternatives to network augmentation which address a potential shortage in electricity supply

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Potential non-network options

Storage Curtailment of load Embedded generation Alternatives to network augmentation which address a potential shortage in electricity supply Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Potential non-network options

Year Minimum network support required 2022/23 60 MW 2023/24 90 MW 2024/25 150 MW ˃ TransGrid and Ausgrid have estimated the approximate level of network support required to provide the minimum amount of reduced estimated unserved energy to defer the network investment. ˃ These requirements, detailed in the table, based upon availability of network support for an entire year.

TransGrid Capital Expenditure Workshop 26 /

Potential non-network options

˃ Area A represents the area supplied by TransGrid’s Beaconsfield bulk supply point. Non-network solutions in this area are considered highly effective for all contingency events. ˃ Area B represents the remaining area within Transmission Corridor 1 (TC1). Non-network solutions in this area are considered moderately effective for most contingency events and moderate to highly effective for some contingency events. ˃ Area C represents areas that can influence the load on some supply cables in the TC1 area for some contingency events. Non-network solutions in this area have low effectiveness for most contingency.

TransGrid Capital Expenditure Workshop 27 /

TransGrid Capital Expenditure Workshop

Ausgrid & TransGrid considered options

There have been a number of options considered but were not technically or economically feasible. Therefore they are not being progressed as credible options.

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Potential network options

Option Option 1: install two 330 kV cables in stages, retire Cable 41 and decommission Ausgrid cables in two stages Cost estimates for these options are commercially sensitive and cannot be disclosed at this time Option 2: operate Cable 41 at 132 kV, install two 330 kV cables in stages and decommission Ausgrid cables in two stages Option 3: install two 330 kV cables at once, retire Cable 41 and decommission Ausgrid cables in one stage Option 4: remediate Cable 41, install two 330 kV cables in stages and decommission Ausgrid cables in one stage Option 5: remediate Cable 41, install two 330 kV cables at once (initially operating at 132 kV) and decommission Ausgrid cables in two stages Option 6: remediate Cable 41, install two 330 kV cables at once and decommission Ausgrid cables in one stage

TransGrid Capital Expenditure Workshop 29 /

Discussion

> Based on the information you have heard what’s your preferred

• ption and why?

> Is there anything missing? > What is the best outcome for customers and consumers?

Lunch

Sydney East Transformers

Lance Wee, GM, Asset Management, TransGrid

TransGrid Capital Expenditure Workshop

TransGrid’s proposed REPEX approach Meeting the needs of customers and

consumers at least cost: > Reliable electricity supply outcomes > Safety outcomes (set by government on behalf of consumers) > Manage public safety risks to As Low As Reasonably Practical (ALARP) and So Far As Is Reasonably Practical (SFAIRP) > Environmental outcomes (set by government on behalf of consumers) > Acceptable levels of environmental harm > Manage bushfire risk to ALARP

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TransGrid Capital Expenditure Workshop

Approach

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TransGrid Capital Expenditure Workshop

Risk assessment methodology

> Catastrophic/explosive failure > Uncontrolled discharge or contact with electricity > Conductor drop > Structure failure > Unplanned outage of supply (electricity or communications) > Unauthorised access to assets > Uncontrolled release of pollutant Asset Management High Consequence Risks (Bow Tie Analysis)

35 /

Network

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Transformers

There are 4 transformers at Sydney East > 3 are originals from 1974

• Single phase banks (9 tanks)
• Rated to supply 400,000 X 1 kW

bar radiators

• 330,000V down to 132,000V to

supply distributors > Each tank weighs 146 tonnes and is made up of 42,300 litres of oil.

Transformer 1 Transformer 3 Transformer 2 Transformer 4

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Transformer – condition monitoring

Condition issues

Issue Transformer 1 Transformer 2 Transformer 3 Noted inside transformer during internal inspection Noted inside transformer during internal inspection Leakage is apparent in oil results - two phases Leakage is apparent in oil results - three phases Leakage is apparent in oil results - two phases Winding DLA is elevated Paper later life - 570-650 Lowest of 180 - end of life Lowest of 373 - near end of life Bushings - HV One in caution 2 in caution All in caution Bushing - LV One in caution, second one very close 2 elevated One in caution Corrsoive Sulphur yes yes No DGA - for diagnostic 2 phases affected 3 phases affected Two phases affected Core fault - has been managed using resistor earthing Minor oil leaks Minor oil leaks Minor oil leaks Some corrosion Some corrosion Some corrosion Defects Carbon

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TransGrid Capital Expenditure Workshop

Emerging challenges

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TransGrid Capital Expenditure Workshop

Emerging challenges

HR

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Risk cost Probability of failure Probability of failure model Failure data Estimate remaining life HI / Remaining life model Health index Condition data Age Service history (load, usage rate, defects) Consequence Safety, Environment Network reliability Intangible (Reputation etc)

Evaluation

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Failure risk

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Risk cost components

Transformer 1 Transformer 2 Transformer 3 Transformer 4 Environmental Cost estimates for these categories are commercially sensitive and cannot be disclosed at this time Safety Reliability Financial Total Risk Cost

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TransGrid Capital Expenditure Workshop 45 /

Transformers for Sydney Load

TransGrid Capital Expenditure Workshop 46 /

Heat map

TransGrid Capital Expenditure Workshop 47 /

Options

Refurbish 2 transformers Replace 2 transformers Refurbish 1 transformer and replace a second Non-network solutions were considered but are not viable for this site due to the large loads and inability to transfer them There are no sufficiently large demand management options available

TransGrid Capital Expenditure Workshop 48 /

Outcomes

Option CAPEX ($,000) NPV ($,000) ALARP Refurbish 2 transformers

Cost estimates for these options are commercially sensitive and cannot be disclosed at this time

Refurbish 1 transformer and replace a second

Replace 2 transformers

TransGrid Capital Expenditure Workshop 49 /

Asset Monitoring Centre

The AMC collect and analyse real time asset data, allowing > predictive analysis for equipment failure mechanisms > automatic fault data collection and diagnosis > tailored maintenance requirements

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Asset Data Collection

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Discussion

> What are your thoughts and feedback?

Break

Probabilistic Investment Forecasting

Nalin Pahalawaththa, GM, Power System Analysis, TransGrid

TransGrid Capital Expenditure Workshop

Probabilistic Investment Forecasting

Objective To forecast the investment taking into account the uncertainty associated with ˃ Demand growth ˃ Generation developments and retirements Approach Use probabilistic scenario based approach to identify the likelihood of investments needed

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TransGrid Capital Expenditure Workshop

Probabilistic Investment Forecasting

Methodology ˃ TransGrid engaged EY to identify and assess the likelihood of new load and generation developments in New South Wales. ˃ EY identified a total of 66 different load projects by market research. ˃ In order for a project to proceed it must meet certain criteria. Project development Level of support Approvals Project schedule Market conditions

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TransGrid Capital Expenditure Workshop

Probabilistic Investment Forecasting

Methodology (contd.) ˃ For AEMO’s High, Medium and Low demand growth scenarios, different likelihoods were assigned for the projects. ˃ With the likelihood values assigned to each project for each demand scenario, then calculate an overall probability for that project to proceed. ˃ Weight the augmentation cost by the probability

• f project being undertaken during the next

revenue period to obtain the “ probabilistically expected” transmission augmentation cost for the project.

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TransGrid Capital Expenditure Workshop

Probabilistic Investment Forecasting example

Project Network Augmentation Possible cost ($million) Scenario 1 (High) Scenario 2 (Medium) Scenario 3 (Low) Expected Investment ($million) P(S1) P(p|S1) P(S2) P(p|S2) P(S3) P(p|S3) A Gas Project connection (40 MW) at Narrabri Install two capacitor banks on Narrabri 66kV bus $4.00 10% 70% 60% 60% 30% 35% $2.14 A Coal Mine connection (40 MW) at Gunnedah Reconductor 969 transmission line (higher capacity conductor) and install 2 x cap bank at Gunnedah $10.00 10% 70% 60% 60% 30% 35% $5.35 Western Sydney demand growth - constraints in networks between Macarthur and Nepean. Install second Macarthur transformer (1 x 330/132 kV 375MVA Tx) $10.00 10% 100% 60% 60% 30% 20% $5.20 Enabling connection of renewables to remote parts of the grid - Dynamic Voltage Support 2x SVCs (e.g. at Buronga 220kV and Parkes 132kV) $50.00 10% 60% 60% 60% 30% 60% $30.00 Total $74.00 $42.69

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Discussion

> What are your thoughts and feedback?

Closing remarks

> From what you have heard today, do you feel that TransGrid has considered the needs of customers and consumers?