Siemens Secures $490 Million Construction Contract for New Zealand's Pole 3 HVDC Inter-Island Link

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Researched by Industrial Info Resources (Sugar Land, Texas)--National electricity grid operator Transpower New Zealand Limited (Wellington, New Zealand) has awarded the principal contract for construction of the Pole 3 High Voltage Direct Current (HVDC) link to Siemens AG (NYSE:SI) (Munich, Germany). Last September, the government approved the $490 million inter-island electricity link, which will connect the North and South Islands of New Zealand.

The Pole 3 project will replace the existing Pole 1 equipment at substations on both sides of the link, at Haywards, north of Wellington, and at Benmore on South Island. The equipment will be replaced with thyristor valve connectors and units.

Under the contract, Siemens will build converter stations on each side of the link, augment 220-kilovolt (kV) switchyards at both substations, and construct a new voltage support system at Haywards. Officials have indicated that Pole 3 will begin functioning by 2012 and that Pole 1 will be gradually decommissioned. The project is estimated to increase the capacity of the link to 1,000 MW by 2012 and to 1,200 MW by 2014.

State-owned Transpower operates the 12,000-kilometer national grid network, connecting 170 substations. The existing link, which was commissioned in 1965, transmits power from South Island to North Island. Electricity is converted from alternating current (AC) to direct current (DC) at Benmore in Waitaki Valley, and transmitted to Cooks Strait. At this point, undersea cables carry power to the Haywards substation on North Island. At Haywards in Hutt Valley, electricity is converted from DC to AC and linked to the national grid. The Pole 3 project is considered to be critical to provide balanced use of power between the islands and allow seamless transmission of electricity. Civil and seismic strengthening activities have commenced onsite. Siemens is expected to begin construction by March 2010.

The recently published electricity sector review, commissioned by the New Zealand government, indicates that it has become critical to develop competitiveness in the national energy sector. The study says that competition will assist in bringing down the spiraling price of electricity in New Zealand. New Zealand's energy mix is dominated by hydropower, which accounts for 60% of the power generated. Thermal power and energy from renewable sources (such as geothermal and wind) contribute 30% and 10%, respectively, to the national grid. The country has experienced at least three dry years in the past 10 years, which led to a slump in power generation and a subsequent hike in power prices.

The domestic electricity market is dominated by three state-controlled companies: Mighty River Power Limited (Auckland, New Zealand), Genesis Power Limited (Auckland), and Meridian Energy Limited (Wellington). Prominent private sector players include TrustPower (NZE:TPW) (Auckland) and Contact Energy (NZE:CEN) (Wellington). Power companies in New Zealand reportedly gained about $2.9 billion due to high prices during a six-year period until mid-2007, especially during dry years.

The construction and operation of Pole 3 is expected to improve power contribution to the peak demand in North Island. The project also may assist in deferring new power plant construction. The advanced technology to be used in the Pole 3 project is expected to offer greater flexibility in power generation and transmission, and reduce distribution losses. The link will ensure greater reliability between the islands, as it will mitigate problems if Pole 2 fails, and will spur the development of renewable sources of energy.

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