Easing the Shock

TransGrid

In December 2012, TransGrid, the owner, operator and manager of the high-voltage electricity transmission system in NSW, announced a freeze on its transmission revenue in 2013 in a bid to remove price volatility for customers. In addition, TransGrid has undertaken for at least the next five years to keep revenue increases to no more than CPI.

That should be good news, surely? TransGrid’s Managing Director Peter McIntyre said at the time that the decision was a forward thinking response to the impact of increasing electricity prices on NSW households. “Even though the cost of electricity transmission represents as little as six per cent of an average household electricity bill in NSW, we know every dollar counts; that’s why we’re freezing our transmission network charges for end-use customers in 2013,” he said.

But freezing such a small fraction of the cost of power is of nugatory value, isn’t it? Not so, Peter tells Resource in Focus. The ‘six per cent’ is very much at the private household end of the market; “if you are a large industrial customer closer to a network and taking more power, then the percentage of our transmission cost can be much more than that.”

Also, he points out, if everyone took the same view – that their little saving doesn’t count – “then we don’t get progress toward a more acceptable outcome for the community. If other people come to the party and examine how they can mitigate their part of the pie, that would be better.” In NSW, he says, the company that groups the generators themselves – AusGrid, Essential Energy and Endeavour Energy – “has also communicated that it does not anticipate its prices rising by more than CPI over the medium term either,” with the result that at least half the total bill will be constrained to CPI or less. “We don’t control government policy around carbon pricing and we don’t seek to influence the generation side of the business,” Peter explains. “Our job is to facilitate the maximum competition so the competitive market can hopefully deliver the best value to consumers.”

As a state-regulated monopoly, TransGrid’s primary responsibility is to provide and maintain the infrastructure that sits between the generator and the user of the electricity in the state of NSW (and of course the ACT). But it also sits in the middle of the national electricity market; since the completion a decade or so ago of the transmission line right up to northern Queensland (making this one of the largest networks in the world, stretching from above Cairns right down to Tasmania and comprising12,656 kilometres of high voltage transmission lines and underground cables, along with 91 substations), TransGrid has assumed a role, and is incentivised, to ensure the network performs optimally to help transfer power around Australia to meet demand highs and lows.

It is not TransGrid’s role to choose or to favour any specific method of generation – government policy and market prices will dictate the decision taken by the competitive market. “We connect any generator and move their power around for them,” Peter says. But there is a challenge, because the networks across the country have been constructed around moving power from large generators near rich sources of (fossil) fuel to centres of population. Peter cites the fact that on a high-load day, the coastal corridor between Sydney and Wollongong consumes around one-third of all of Australia’s electricity. Changing the source of the power to, say, remote wind or solar farms or geothermal rigs, requires careful planning of the infrastructure required to transmit it. “As the generation sources change, it is a challenge for us to ensure we build enough capacity to be able to move the power from where it comes to where it is consumed.”

With new sources of generation comes the further challenge of storage: the wind blows and the sun shines, but not always conveniently at the times when consumers and industry need the resultant power. Conventional batteries, hot-rock systems and even liquid air (see Resource in Focus, November 2012) are all simple science that can retain generated power for release as the grid needs it, but who should control the storage – and pay and be paid for it? According to Peter, there is “not enough clarity as yet” as to whether this should be a competitive part of the overall power market or delegated to the transmission service. Costs are high at the moment but are highly likely to come down with rising use, but there is as yet no clear direction for the industry on the issue. Storage for distribution at the consumer level, for households and even electric cars, is almost certainly an area for the competitive side of the industry, but “our role in large scale, ‘lumpy’ storage is a question that is just coming onto the agenda and one we have started thinking about in recent months.”

There are inevitable political undertones around the whole electricity supply business, with tension between state and federal governments over policy, pressure on the cost of living and of course nowadays the push to reduce consumption of fossil fuels. “There is certainly a lot of pressure around the level of investment in networks,” Peter says. “The public commentary is probably running a little bit unbalanced at the moment… We are very conscious of the cost we impose on the community for our services but we are also conscious that our projects have a very long lead time (typically at least three to four years although the provision of a major transmission line with all its attendant environmental impact assessments could easily take eight years to complete) and we have to get the balance right between cost and having assets on the ground when we will need them.”

As Peter is keen to emphasise, safety is an issue that must never be underestimated when your business consists of stringing thick wires from poles across the state and putting nearly half a million volts through them. “At those kinds of voltages you cannot afford for people to come into contact or even approach them.” So in terms of staff, TransGrid must be very focused on its protocols; in terms of the public it is education and access to sites, but it is also about things like ensuring outages don’t start bush fires or impact in any other way on the local community. “When you run a network with such inherently high risks you must maintain very high standards to ensure you provide a safe and reliable service.” The work ethic of looking after oneself and also looking out for one’s mates is “incredibly strong” within TransGrid. Complacency is always dangerous, though. “The challenge is not to lose focus and have that performance diminish.”

Peter has a serious warning to impart to contractors, many of whom are used as TransGrid outsources much of the work of building, repairing or maintaining the far-flung network (much of the TransGrid network runs through national parks, state forests and remote areas where the terrain is largely undisturbed by man). The number of incidents and accidents among contractors has been “in recent years at a level beyond what we achieve with our own staff, which means we don’t believe all our contractors are as focused on safety as we have been. So we are going through a process to carefully select and enter longer-term arrangements with suppliers who will be focused on delivering safety outcomes in the longer term consistent with our performance on other matters. We don’t believe we have achieved the level of safety we can accept.”

The recent termination of the contract of one prominent but under-performing (in this safety context) contractor should, says Peter, send a wake-up call through the industry. “Our approach will be to go to the market and identify those companies that are willing to make the commitment – in training, systems and supervision – to deliver the level of performance we expect of a major contractor.”

So much for the stick – what about the carrot? Peter says industry, especially in remote areas, can help TransGrid to impart it. Part of the sum allocated to renewing infrastructure each year goes to ensuring peak demand can be met; this is expensive and only used occasionally but is essential to keep the wheels of mining and resource companies turning. It may suit some companies to be removed from the grid at times of high load, which would enable TransGrid not to have to fund additional network for those peaks; if a company can secure its power in other ways for those peaks, it can both reduce its transmission cost (its ‘electricity bill’) and, via a contractual agreement with TransGrid, be paid for doing so, leading on to a reduction in the overall cost to the consumer of the transmission network. “It’s an opportunity for large business in particular to understand how they can work in that arrangement,” Peter explains.

Recently, TransGrid has undertaken to work with the top 200 peak loads in NSW, although it only has direct contracts with a few of those companies at present. “We are at a very early stage of rolling it out, but I think that will be a really positive move.” Look out for it – it could pay you to talk to the pylon people!

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

December 19, 2018, 5:11 AM AEDT