Gas Transmission Investment Programme

The Gas Transmission Investment Programme (GTIP) is Gas Industry Co’s response to industry concerns over the long-term outlook for gas transmission capacity availability in the Auckland region. This work has its origins in 2009, when Vector announced to the industry that it would no longer be able to sell new capacity on its North Pipeline as that pipeline has reached the limits of its capacity.

Overview

Background

The Gas Transmission Investment Programme (GTIP) was developed by Gas Industry Co in late 2011, at the request of industry participants, to address issues relating to efficient access to, and investment in gas transmission. More detail on the background to the GTIP can be found here under the GTIP Background tab.

Work on the overall GTIP can be found here under the GTIP (All Projects) tab and the associated work of the Panel of Expert Advisers (PEA) can be found here.

The GTIP comprises Market, Information, and Regulatory Projects. Each of these Projects is also discussed in more detail under separate tabs. In particular the Information Projects include development of New Zealand's first gas supply/demand study and a gas demand management study which can be found here.

Latest

Late in 2013, the TSOs responded to Gas Industry Co confirming that they, with support from code signatories and other interested stakeholders, will progress the PEA's proposals for the industry to adopt and operationalise the guiding principles and recommendations.

Gas Industry Co has continued through its policy development and Gas Act processes, by publishing an Options Paper on 23 December 2013. A workshop presenting the Options Paper was held at Gas Industry Co on 12 February 2014. Further details can be found here.

In October 2013, Gas Industry Co released an Analysis of Submissions in relation to:

The Panel of Expert Advisors' (PEA) Second Advisory Report on Transmission Access and Pricing (July 2013)

Gas Industry Co's GTIP Status and Development Report (July 2013)

GTIP Background

Objective

The objective of the GTIP is to:

  • ensure that existing and future gas transmission assets are used efficiently;
  • establish the need for gas transmission investment; and
  • develop an effective pathway for efficient gas transmission investment to take place.

Structure and Governance

The GTIP is structured as a package of interconnected projects:

Two advisory panels provide advice to Gas Industry Co in relation to the Programme. The panels are two key ways the industry can be substantively involved in the GTIP, although care will be taken to keep all stakeholders informed of progress, and consulted on critical issues.

The diagram below illustrates the GTIP structure and governance.

GTIP Structure and Scope paper and review


Gas Industry Co has prepared the paper: Gas Transmission Investment Programme - Structure and Scope. The aim of the paper is to provide:

  • a clear objective and scope for the Programme;
  • further detail on the GTIP governance arrangements and component projects; and
  • a detailed work plan.

The scope of projects identified in the paper will be reviewed by the Panel of Expert Advisers (PEA). Any advice the panel has on revising the scope will be considered by Gas Industry Co before the scope of the GTIP is finalised.

Background to this work

Gas Industry Co has been working on transmission pipeline capacity issues for several years. Our work in this area has sought to address both short and long-term issues that have arisen from the North Pipeline constraint. In relation to the short-term, large end users on the North Pipeline have experienced a reduction in the number of credible bids they receive when seeking a new gas supplier. Gas Industry Co's investigation of this situation prompted key industry members to put in place a set of commitments known as the, 'Bridge Commitments'. Gas Industry Co is monitoring the market to assess the effectiveness of these commitments.

More information on this work can be found in the Short-term Capacity Workstream

In relation to the long-term, Gas Industry Co has investigated Vector's access regime and developed various options for improving the performance of the regime. Stakeholders have participated in this work through various workshops and consultation papers. At an April 2011 workshop, attendees strongly endorsed the need for a more holistic approach to finding solutions to the longer-term transmission capacity issues. It was proposed that Gas Industry Co lead a structured programme of work, and subsequent industry submissions endorsed an outline for the GTIP prepared by Gas Industry Co.

More information on this work can be found in the Long-term Capacity Workstream


Workshop on Demand Management and Transparency

On Tuesday 15th January 2013 a workshop was held relating to Demand Management and Transparency.

Here are two presentations from this workshop

Demand Management and Transparency

GIC Physical Constraint Management

These are issues that the PEA have provided advice on and their work can be found here

Transmission Update and Workshop on Gas Supply/Demand

Gas Industry Co held two transmission-related sessions on Friday, 18 May, 2012 for industry participants and interested stakeholders. They were held to ensure that stakeholders were up to date on the range of transmission-related workstreams that are progressing, particularly as we move towards the phase of considering options for transmission access arrangements.

Morning session: Transmission Update

The morning session provided an update on transmission capacity work, including a progress report on the Bridge Commitments, an overview of the operation of the Gas Transmission Capacity Trading bulletin board, and a summary of the work undertaken by the Panel of Expert Advisers on transmission capacity access and pricing.

Afternoon session: Gas supply/demand workshop

The afternoon session focussed on the gas supply/demand modelling that Concept Consulting is undertaking as a means of understanding future scenarios for gas demand and thus demand for transmission capacity. This session presented an overview of the modelling approach, describe modelled supply and demand scenarios, and present some preliminary results from the modelling.
The purpose of the supply/demand workshop was to present preliminary results and elicit feedback from stakeholders on the modelled assumptions and inputs. Although this is not a formal consultation, Gas Industry Co would welcome feedback from interested parties on the modelling, including the assumption and information that were used as inputs on the preliminary conclusions reached.

GTIP (All Projects)

Previously Consulted On

Gas Transmission Investment Programme Status and Development

Date Published: 19 July 2013

Gas Industry Co published a report entitled Gas Transmission Investment Programme Status and Development considering the broader perspective of the overall GTIP work and the context of the PEA's current advice - which it describes as a significant milestone. It notes that several GTIP projects are complete and have delivered valuable outputs, while others have yet to begin. It discusses how matters should be progressed. In particular, it suggests that the PEA's recommended industry-led approach will need to involve timely changes, subject to a public cost-benefit analysis.

Submissions recieved on this report and the PEA's Second Advice Report can be found below

Submissions received

Advisory Panels

Two advisory panels provide advice to Gas Industry Co in relation to the Programme. The panels are two key ways the industry can be substantively involved in the GTIP, although care will be taken to keep all stakeholders informed of progress, and consulted on critical issues.

Panel of Expert Advisers

Updates

PEA Update - June 2013

PEA Update - May 2013

PEA Update - April 2013

PEA Update - March 2013

PEA Update - February 2013

PEA Update - January 2013

PEA Update - December 2012

Workshop

On 11 April 2013 GIC held a workshop with industry participants to review and discuss the progress and direction of the Transmission Access and Capacity Pricing project, which is part of our Gas Transmission Investment Programme (GTIP).

11 April 2013 Workshop Presentations (zip folder)

Key Documents

Letter to submitters from Dr Graham Scott, PEA Chair, and Steve Bielby, dated 22 November 2012.
The Review of Transmission Access and Capacity Pricing was issued for consultation on 16 July 2012.
The PEA's work plan was finalised by the PEA on 8 March 2012.
Principles adopted by the PEA to guide their work were approved 20 February 2012.
The PEA has provided advice to Gas Industry Co on the component projects of the GTIP:
Scope review, finalised by the PEA on 16 December 2011
The PEA terms of reference: Terms of reference: PEA
Members
  • Graham Scott (Chair)
  • Brenda Talacek (nominated by Vector Limited)
  • Bruce Girdwood (nominated by Vector Limited)
  • Charles Teichert (nominated by Todd Energy)
  • Don Gray (nominated by Maui Development Limited)
  • John Small (nominated by Major Gas Users' Group)
  • Nick McDougall (nominated by OMV)
  • Roger Johnston - appointed 24 October 2012 (nominated by Genesis Energy)
  • Stuart Dickson - appointed 24 October 2012 (nominated by Powerco)
  • Ross Parry (nominated by Genesis Energy; served on the PEA from September 2011 until September 2012)

Meetings

#

Meeting date

Meeting material

19 Wednesday 3 July 2013

3 July PEA Meeting Material

Minutes

18 Wednesday 12 June 2013

12 June PEA Meeting Material

Minutes

17 Monday 6 May 2013

6 May PEA Meeting Material

Minutes

16 Monday 8 April 2013

8 April PEA Meeting Material

Minutes

15 Friday 15 March 2013 15 March PEA Meeting Material
14 Thursday 21 February 2013

21 February PEA Meeting Material

Minutes

13 Tuesday 29 January 2013

29 January PEA Meeting Material

Minutes

12 Tuesday 4 December 2012

4 December PEA Meeting Material

Minutes

11 Friday 2 November 2012

2 November PEA Meeting Material

Minutes

10

Tuesday 25 September 2012

25 September PEA Meeting Material

Minutes

9

Thursday 14 June 2012

14 June PEA Meeting Material

Minutes
8 Thursday 7 June 2012

7 June PEA Meeting Material

Minutes

7 Monday 7 May 2012

7 May PEA Meeting Material

Minutes

6 Monday 2 April 2012

2 April PEA Meeting Material

Minutes

5 Thursday 8 March 2012

8 March PEA Meeting Material

Minutes

4 Monday 20 February 2012

20 February PEA Meeting Material

Minutes

3 Friday 16 December 2011

16 December PEA Meeting Material

Minutes

2 Monday 7 November 2011

7 November PEA Meeting Material

Minutes

1 Thursday 13 October 2011

13 October PEA Meeting material

Minutes

Panel of Strategic Advisers

The Panel of Strategic Advisers (PSA), comprising senior stakeholder executives, provides programme oversight. The PSA Members and Chair are as follows:

  • Andrew Brown (Chair)
  • Allan Carvell (nominated by Vector Limited)
  • Doug Watson (nominated by Major Gas Users' Group)
  • Duncan Jared (nominated by MRP)
  • Hayden Laird (nominated by Greymouth Gas)
  • Malcolm Alexander (nominated by Genesis Energy)
  • Murray Jackson (nominated by Shell)
  • Sharon Wray (nominated by Contact Energy)

The PSA Terms of Reference can be found here:

Panel of Strategic Advisers

Meetings

# Meeting Date Meeting material
3 Wednesday 12 December 2012

12 December Meeting Presentation

Minutes

2

Friday 6 July 2012

6 July Meeting Presentation

Minutes

1 Monday 19 December 2011

19 December Meeting Material

Minutes

Market Projects

Purpose of the Market Projects: to provide for efficient market arrangements to allow an efficient allocation of transmission capacity and signal the need for new investment.

In the paper: Gas Transmission Investment Programme - Structure and Scope, Gas Industry Co identified one Market Project, Transmission Access and Pricing.

A Panel of Expert Advisers (PEA), under the chairmanship of Graham Scott, is assisting Gas Industry Co to develop its understanding, and policy approach, in relation to gas transmission access and pricing. The first key deliverable of this project was a report from the PEA to Gas Industry Co. The report:
· considered economics of pipeline access;
· discussed some lessons from other jurisdictions;
· identified problems with current arrangements; and
· proposed a 'straw man' for improvement.

The second key deliverable is a report to Gas Industry Co that recommends an 'evolutionary convergence' approach to achieve improvements to gas transport arrangements on both the Maui and Vector transmission pipelines systems. The advice includes a set of proposed guiding principles to take this approach forward.

Previously Consulted On

Transmission Access: Options for Improvement

Date Published: 23 December 2013

This paper falls under the auspices of the Gas Transmission Investment Programme work that Gas Industry Co embarked upon in 2011. In July of this year, the Panel of Expert Advisers (PEA) provided a second report to Gas Industry Co that outlined ways that the transmission access codes could evolve to meet the characteristics of a well-functioning market. That report recommended that:

1. Signatories to the Vector Transmission Code and Maui Pipeline Operating Code be invited to consider ways that the codes could be brought into greater alignment with the principles outlined in the paper.

2. Gas Industry Co should consider regulatory options, in case they are required. This paper is the first step in the development of those regulatory options.

Gas Industry Co is fully supportive of the industry-led process. We have written to Vector and MDL on 31 October, as recommended by the PEA, and have received positive responses. (The letter (and responses) is published on our website.) Gas Industry Co is pleased that there appears to be a willingness among transmission system owners and shippers to work cooperatively on this issue.

At the same time, however, Gas Industry Co considers that the problems identified by the PEA are of such importance that their resolution cannot depend solely upon a voluntary industry process. For this reason, and to provide further impetus to the industry process, Gas Industry Co has embarked on a policy process to develop a counterfactual design. This process is consistent with the PEA recommendation for Gas Industry Co to 'consider regulatory options should they be required'.

The attached paper is the first step towards developing a counterfactual design as a fall-back in the event that industry initiatives do not adequately address the problems in a timely way. In it, we have identified possible options for addressing the problems described by the PEA. Its purpose is to ensure that we have considered the full range of possible options and to begin to narrow that range to options that will most likely prove to be feasible and effective ways to address the identified problems. Submissions close 5pm Monday, 24 February. We look forward to your feedback.

On 12 February Gas Industry Co held a workshop to present the Options Paper and provide an opportunity for attendees to discuss and clarify any aspects of the paper. The slides from that workshop are avalable here.

Submissions received

Advice from Panel of Expert Advisers

Date Published: 19 July 2013

Following establishment of the Gas Transmission Investment Programme in September 2011, a Panel of Expert Advisers (PEA) was established to provide advice on a range of market design issues.

The PEA's latest advice to Gas Industry Co recommends an 'evolutionary convergence' approach to achieve improvements to gas transport arrangements on both the Maui and Vector transmission pipelines systems. It notes there are already a number of commonalities between the two codes and considers that the firm and non-firm services currently provided for on both systems can be progressively evolved and harmonised to allow shippers to seek the mix of rights that best match their needs. The advice includes a set of proposed guiding principles to take this approach forward.

The PEA also proposes a system of daily nominations, a price-based auction process for scarce capacity, the phasing-out of 'in perpetuity' grandfathering , and improved transparency.

It suggests the improvement process should begin immediately and that Gas Industry Co invites signatories to the MPOC and VTC to adopt and operationalise its guiding principles.

Submissions recieved on this report and the Gas Industry Co update report on the broader GTIP work can be found below

Submissions received

Review of Transmission Access and Capacity Pricing: Advice from the Panel of Expert Advisers

Date Published: 16 July 2012

Analysis of Submissions 5 March 2013

Letter to submitters from Dr Graham Scott, PEA Chair, and Steve Bielby, dated 22 November 2012.

Following establishment of the Gas Transmission Investment Programme in September 2011, a Panel of Expert Advisers (PEA) was established to provide advice on a range of market design issues. The first key deliverable of the PEA Work Plan is presented here. It is a report from the PEA to Gas Industry Co

The report:

· considers economics of pipeline access;
· discusses some lessons from other jurisdictions;
· identifies problems with current arrangements; and
· proposes a 'straw man' for improvement.

Submissions on the PEA report closed on Friday 24 August 2012.

Submissions received

Industry led Process

Gas Industry Co wrote to MDL and Vector on 31 October 2013, inviting them and the signatories to the pipeline access codes to adopt and operationalise a set of guiding principles developed by the PEA in its July 2013 advice paper.

We have received responses from both MDL and Vector, as well as a copy of a signed Memorandum of Understanding (MoU) between them. The MoU states that the parties "agree to proceed with a programme of work to evolve towards a compatible set of access and capacity pricing arrangements across both pipeline systems, broadly in line with the [PEA] recommendations".

Gas Industry Co is pleased that there is a willingness among TSOs and shippers to work cooperatively on this issue. Amended transmission Codes that satisfactorily address the identified problems and are supported by signatories and other stakeholders would be the best option in this situation. Gas Industry Co is supportive of this process.

At the same time, however, Gas Industry Co considers that the problems identified by the PEA are of such importance that their resolution cannot depend solely upon a voluntary industry process. For this reason, Gas Industry Co has embarked on a policy process to develop a counterfactual design. More information about this project can be found here.

Information Projects

Purpose of the Information Projects: to minimise information asymmetries to allow stakeholders to make informed decisions that will result in the efficent allocation of resources.
In the paper Gas Transmission Investment Programme-Structure and Scope, Gas Industry Co identified four Information Projects:
  • Vector's capacity determination;
  • Supply and demand outlook;
  • Transmission market disclosures; and
  • Backstop information gathering and analysis.

Demand Management Study (March 2014)

Investigation of possible scale of gas demand management on the Vector North system (5 March 2014)

Gas Industry Co has commissioned JT Consulting to conduct a study to investigate the possible extent of demand management among large gas users located on the North pipeline of the Vector system. Demand management is a means by which congestion on a pipeline can be managed, by incentivising gas users to curtail their usage at times of high gas demand. The idea behind the study was to get a baseline indication of the potential amount of demand interruption that currently exists amongst large industrial consumers on the North pipeline.

Interviews were conducted with representatives of 15 of the largest gas consumers on the North pipeline, all of whom consume more than 100 TJ of gas annually. The group of consumers included electricity generators; manufacturers of food, building products, and steel; producers of fresh produce, and health services providers. Some of the interviewed consumers have more than one site on the North pipeline, so that the interviews covered 24 sites in total.

Interview respondents reported the ability to curtail a total of 8.3 TJ in a day, an amount that represents about 10.7% of their average daily gas consumption. If that average rate applied to all large consumers (defined here as consuming more than 50 TJ per year), then it would be possible to curtail about 5% of the largest peak usage experienced on the Rotowaro-North pipeline.

Amongst non-generation consumers, the average amount of curtailment possible is about 37.5%.

These results suggest that demand curtailment is an option worth pursuing in order to maximise the efficient usage of pipeline capacity. Interview respondents generally reported some interest in the possibility of curtailing gas usage in exchange for compensation.

Gas Supply and Demand Scenarios 2012-2027 (Updated - March 2013)

Amended Gas Supply and Demand Scenarios 2012 - 2027 (March 2013)

Concept Consulting has amended its gas supply and demand study to include an analysis of the demand on the Maui pipeline north of the Mokau compressor. Gas Industry Co has commissioned this addition in response to feedback on the original report. This analysis is contained in Appendix D of the revised report (note that the rest of the report remains unchanged). The analysis develops projections for annual and peak day demands on the Maui pipeline north of the Mokau compressor station, taking account of trends in generation demand, coal prices, and carbon dioxide prices.

The modelling tool has been updated to include the Maui pipeline analysis. To download the model, visit: https://docs.google.com/folder/d/0B8Fpt8nHFgDZdU1VbzZ6M0pLcjA/edit The model consists of an Excel file and a supporting Access database. The files are compatible with Excel 2007 (and above) and Access 2007 (and above).

Download the two files labelled 'Gas_dem_sum.accdb' and 'Gas_Dem_v22.xlsm' by clicking on them (the folder labelled '20121129 Release' contains the original model and database released in November 2012).

Click 'Download'. A window may appear stating it is too large to be scanned - click 'Download anyway'.

The Access file must be saved to the same folder as the Excel file for the model to work properly. Also, both files should not be marked as Read-only (to check, right-click the file in the file list, click Properties, then make sure that the Read-only box on the General tab is not ticked).

The Access document may open automatically and request a password but can be closed as it does not need to be open for the model to work; simply open the Excel file called Gas_Dem_v22.xlsm. The first tab in the Excel file consists of notes about the model and the second tab is a diagram of the model.

Gas Supply and Demand Scenarios 2012-2027 (December 2012)

Gas Supply and Demand Scenarios 2012 - 2027 (December 2012)

Key Findings

The report has been produced by Concept Consulting Group and is the first substantive look at gas supply and demand in New Zealand. The report includes national gas supply/demand scenarios, regional gas demand scenarios, and peak demand projections that can assist the industry and large users to assess the need for, and timing of, investment in pipeline infrastructure.

In response to requests from submitters, the final versions of the report and associated model include more information on the data inputs and modelling results:

  • The modelling tool (available online; directions for downloading it are below) now includes a separate tab that contains historical and projected data tables. Stakeholders can use these data tables in their own analysis and business planning.
  • The analysis of industrial and commercial boilers has also been discussed in greater detail in the final report.
A copy of the model is available online and will enable users to incorporate their own planning assumptions into the model and to use the modelled outputs to inform their business decision making. (See above)

Previously Consulted On

Gas Supply and Demand Scenarios 2012-2027 (September 2012)

Date Published: 06 September 2012

Gas Industry Co has released a draft report, "Gas Supply and Demand Scenarios 2012 - 2027," for public comment. The report has been produced by Concept Consulting Group and is the first substantive look at gas supply and demand in New Zealand. Gas Industry Co commissioned the report to develop a set of national gas supply/demand scenarios, regional gas demand scenarios, and peak demand projections that can assist the industry and large users to assess the need for, and timing of, investment in pipeline infrastructure.

We are seeking public comment on the draft report, particularly in regard to the assumptions used in the analysis and the conclusions that the report reaches. Comments will be accepted until 24 September 2012. Comments will be incorporated into the final version of the modelling and the report.
A copy of the model is available online and will enable users to incorporate their own planning assumptions into the model and to use the modelled outputs to inform their business decision making. Instructions are at the end of this page.
Key draft findings from the report include:
On gas supply:
  • New Zealand's gas supply position is stronger than it has been for many years, driven by the highest level of exploration effort seen for a long time, which in turn has been driven by high oil prices.
  • Greater gas availability in recent years has been reflected in softer wholesale gas prices relative to earlier levels (albeit above the 'low gas price' scenario). Current indications are that these conditions are likely to continue for some years.
On gas demand:
  • Long-term gas demand in New Zealand is likely to vary significantly between the different price scenarios, ranging from 250 PJ/year in the low price scenario down to 75 PJ/year in the high price scenario.
  • The sectors most sensitive to changes in wholesale gas prices are petrochemical manufacturing (especially methanol production) and power generation. The demand variability in response to gas prices - and therefore supply - acts as a 'shock-absorber' to the gas market, providing a volume market for gas when it is plentiful and relatively inexpensive, but reducing demand if reserves become scarce. This helps to underpin gas exploration and development activity and can provide a buffer to extend the remaining life of existing resources if reserves to production ratios start to decline.
  • Gas demand for other industrial, commercial and residential users is relatively steady across the scenarios, reflecting the relatively strong competitive position of gas versus alternative fuels for the provision of energy services.
On pipeline investment issues:
  • The existing pipeline system is expected to have sufficient capacity to accommodate the projected scenarios with higher demand, with the exception of Vector's northern pipeline system (from central Waikato northwards), which has already reached its capacity limit during peak weeks, and it appears that some potential new gas demand is being suppressed in this region through an inability to secure pipeline capacity.
  • However, some gas users (e.g. power generators) appear to have relatively low cost options to reduce their usage during peak demand periods. If this potential can be harnessed, the need for costly new investment could be deferred for many years.
To download the model, visit: https://docs.google.com/folder/d/0B8Fpt8nHFgDZdU1VbzZ6M0pLcjA/edit and download both files. The model consists of an Excel file and a supporting Access database. The files are compatible with Excel 2007 (and above) and Access 2007 (and above).
Note that the Access file must be saved to the same folder as the Excel file for the model to work properly. Also, both files should not be marked as Read-only (to check, right-click the file in the file list, click Properties, then make sure that the Read-only box on the General tab is not ticked).
The Access document may open automatically but can be closed as it does not need to be open for the model to work; simply open the Excel file called Gas_Dem_v16. An instruction sheet is on the first tab in the Excel file.

Submissions received

Vector Pipeline Capacity Consultation

Date Published: 05 September 2012

Vector Ltd undertook consultation with industry participants as part of its process to determine available pipeline capacity, particularly as it relates to the North Pipeline. Details of this process are available on Vector's website

Backstop Information Gathering and Analysis Workstream

Date Published: 04 September 2012

The Backstop information gathering and analysis workstream is currently underway. The work is being pursued in parallel to the GTIP and will apply to all areas of Gas Industry Co's work. With respect to the GTIP, this information gathering process (or any regulation implemented for this purpose) has the potential to assist in the development of market arrangements - that could lead to improved availability of information in the market. More information on this work can be found here: Policy Development and Information Gathering