rit-d final project assessment report

RIT-D Final Project Assessment Report

TS155 – Sussex Inlet Zone Substation

Endeavour Energy

September 2020

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Version control and endorsements

Version Date Comments

0.6 23 June 2020 Issue to Endeavour Energy internal stakeholders, draft for comment

1.0 12 September

2020

Approved issue

Author:

DINUKA SAMARAWEERA

Reviewed:

JONATHAN COOK

Dinuka Samaraweera

Renewal Project Development Officer

Jonathan Cook

Senior Renewal Project Development Engineer

Endorsed by:

DAVID MATE

Approved by:

PETER LANGDON

David Mate

Asset Performance Manager

Peter Langdon

Head of Asset Planning and Performance

Date: 12 September 2020

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Contents

1. EXECUTIVE SUMMARY 4

2. INTRODUCTION 5

3. CONSULTATION 5

3.1 Submissions received 5

3.2 Enquiries 5

4. IDENTIFIED NEED 5

4.1 Existing network overview 5

4.2 Description of the need 6

4.3 Load and energy at risk review 6

5. ASSUMPTIONS USED IN IDENTIFYING THE NEED 6

6. OPTIONS CONSIDERED 6

6.1 Credible network options 6

7. MARKET MODELLING 7

7.1 Market Benefits 7

7.2 Project Costs 8

7.3 Scenarios modelled to address uncertainty 8

7.4 Results of Analysis 9

8. SELECTED OPTION 10

RIT-D Final Project Assessment - Sussex Inlet ZS TS155 - APPROVED v1.0.docx

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1. EXECUTIVE SUMMARY

This Final Project Assessment Report has been prepared by Endeavour Energy in accordance with the

requirements of clauses 5.17.4(o) of the National Electricity Rules (NER).

This report describes the application of the Regulatory Investment Test for Distribution (RIT-D) for

addressing the network limitation created by the retirement of the Sussex Inlet Zone Substation (ZS) 11kV

busbar and associated structures.

Endeavour Energy has published a screening report that concludes that non-network options are not

feasible for this situation. As a result, non-network options have not been considered in this report.

Furthermore, all credible options to address the limitation are less than $10 million and therefore a Draft

Project Assessment Report was not required in accordance with clause 5.17.4 (n) of the NER.

This Final Project Assessment Report includes the following:

• a description of the identified need for the investment;

• the assumptions used in identifying that need;

• a description of the credible options that have been considered in this RIT-D assessment;

• a description of the quantified market benefits applicable to each credible option and the

methodologies used to quantify the costs and benefits;

• a quantification of the costs for each credible option (with a breakdown of operating and capital

expenditure);

• the results of the net present value analysis of each credible option and accompanying

explanatory statements regarding the results;

• confirmation of the preferred option as the selected option and details of that option; and

• contact details for queries relating to this RIT-D project.

A planning review has identified that the 11kV busbar and associated structures at Sussex Inlet Zone

Substation are suffering from corrosion damage and have reached the end of their life with an increasing

risk of failure, which will cause the complete loss of supply from the substation.

Further, the substation contains a single bus-section isolator which cannot be maintained without a

complete outage of the substation and the design and condition of these assets cause safety issues for

electricity workers required to do work on or near them.

Four options were considered. Option 1 includes refurbishing the 11kV busbar. Whilst this option is

technically feasible, it does not address the safety risks presented by the poor clearances and congested

design of the existing 11kV busbar arrangement. Accordingly, this option was not assessed further.

Option 2 includes construction of a new outdoor 11kV busbar to replace the existing aged equipment

essentially like-for-like. Option 3 includes the construction of a new control building with indoor 11kV

switchgear and Option 4 includes the construction of a new control building with indoor 33kV and 11kV

switchgear. Options 2, 3, and 4 have been evaluated against the “do-nothing” business as usual case.

Option 3 has been selected as the option which maximises the net market benefits and is expected to cost

$4.56 million. Note that these costs have reduced since the non-network options screening report was

published due to the adoption of a simplified design and efficiencies in the design and construction

processes being realised.

For the purposes of the RIT-D analysis, a number of scenarios have been considered for sensitivity

analysis. These scenarios are based on higher and lower variations in the factors of probability and

consequences of asset failure, value of customer reliability (VCR), capital cost and discount rate. The

results of the sensitivity analysis confirms that Option 3 remains the option that delivers the highest net

market benefit.


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2. INTRODUCTION

This Final Project Assessment Report has been prepared by Endeavour Energy in accordance with the

requirements of clauses 5.17.4(o) of the National Electricity Rules (NER).

This report describes the application of the Regulatory Investment Test for Distribution (RIT-D) for

addressing the network limitation created by the retirement of the Sussex Inlet Zone Substation (ZS) 11kV

busbar and associated structures.

Endeavour Energy has published a screening report that concludes that non-network options are not

feasible for this situation. As a result, non-network options have not been considered in this report.

Furthermore, all credible options to address the limitation are less than $10 million and therefore a Draft

Project Assessment Report has not been published in accordance with clause 5.17.4 (n) of the NER.

This Final Project Assessment Report includes the following:

• a description of the identified need for the investment;

• the assumptions used in identifying that need;

• a description of the credible options that have been considered in this RIT-D assessment;

• a description of the quantified market benefits applicable to each credible option and the

methodologies used to quantify the costs and benefits;

• a quantification of the costs for each credible option (with a breakdown of operating and capital

expenditure);

• the results of the net present value analysis of each credible option and accompanying

explanatory statements regarding the results;

• confirmation of the preferred option as the selected option and details of that option; and

• contact details for queries relating to this RIT-D project.

3. CONSULTATION

3.1 Submissions received

Endeavour Energy has published a Screening Report that concluded that there was no potential for

credible non-network solutions to meet the need at Sussex Inlet as a result of the retirement of the Sussex

Inlet Zone Substation 11kV busbar and associated structures. No submissions were received from

registered participants and interested parties in relation to the Screening Report.

3.2 Enquiries

All submissions and enquiries regarding this document should be directed to Endeavour Energy’s Head of

Asset Planning and Performance at [email protected]

4. IDENTIFIED NEED

4.1 Existing network overview

Sussex Inlet ZS is a rural 33kV/11kV zone substation supplied from West Tomerong Transmission

Substation via Tomerong Zone Substation. Sussex Inlet Zone Substation is located in The Springs Road

outside of the township of Sussex Inlet in an industrial/commercial area. There is also a residential

development taking place on the opposite side of The Springs Road which will eventually extend to

directly opposite the substation.

The substation is equipped with two 33/11kV 15MVA power transformers which are switched by two 33kV

circuit breakers. The substation also includes an outdoor 11kV switchyard which contains four reclosers.

The substation was established in 1968 and is therefore generally 52 years in age. However, various

assets within in the substation have been replaced in recent years and are therefore of a younger age.

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4.2 Description of the need

The evaluation of the condition of the assets within the substation has highlighted the safety and reliability

risks associated with the outdoor 11kV switchyard, the control building and the 33kV support structures

and recommends that these assets be retired to mitigate the risks they present.

4.3 Load and energy at risk review

The demand forecast and assessment of transfer capability identified that on retirement of Sussex Inlet ZS

in 2021, 7.5MVA of load and 63,000 MWh of energy will need to be supplied by alternative sources.

5. ASSUMPTIONS USED IN IDENTIFYING THE NEED

The assessment of this project is based on the RIT-D and the RIT-D application guidelines.

A baseline risk position has been established on the basis of a ‘Do-Nothing” option. This option involves nil

capital expenditure in the short term but will incur ongoing safety, reliability and equipment damage risk.

This option will also involve future capital costs that are required as a result of the lack of short-term

capital investment.

The project explores different options to replace the outdoor 11kV switchyard, the control building and the

33kV support structures to minimise these risks.

6. OPTIONS CONSIDERED

6.1 Credible network options

The network renewal options considered to address the asset and network needs identified at Sussex Inlet

Zone Substation include:

1. Refurbishment of the existing 11kV busbar;

2. Construction of a new outdoor 11kV busbar;

3. Construction of a new control building with indoor 11kV switchgear; and

4. Construction of a new control building with indoor 33kV and 11kV switchgear.

Option 1 proposes to maintain the existing 11kV switchyard arrangement and to address the bus-isolator

issues by installing a bus-section circuit breaker bay cabled to the ends of the two bus sections making the

existing bus-section isolator redundant.

The 11kV transformer bays would also be modified to include circuit breakers. This will allow all equipment

in the arrangement to be effectively maintained and provide operational flexibility to run the substation with

a solid 11kV busbar as required.

The corrosion of the busbar support structures would be repaired by cutting out the corroded sections and

welding in new sections and by paint treatment. The 11kV/415V auxiliary transformer would also be

replaced.

Whilst this option is technically feasible, this short-term patch-up approach does not address the safety risks

presented by the poor clearances and congested design of the existing 11kV busbar arrangement.

Accordingly, it is not considered that this option reduces the risks posed by the substation to as low as

reasonably practicable (ALARP) and therefore this option is not considered to be sufficiently adequate to

warrant further assessment.

The three remaining network options which warrant further assessment, along with their estimated costs,

are summarised in Table 1 below.


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TABLE 1 – REDEVELOPMENT OPTIONS

Option Redevelopment works

Option 2 -

New outdoor 11kV

busbar

• Construct a new outdoor 11kV busbar to the south of the existing busbar;

• Install 2 x transformer circuit breakers, 1 x bus-section breaker and 4 x 11kV feeder breakers;

• Install a new 11kV padmount auxiliary transformer;

• Construct a small new control building;

• Install new protection and control and metering equipment in the new control building;

• Install a new SCADA system in the new control building;

• Install a new station battery in the new control building;

• Replace the two corroded 33kV support structures;

• Demolish and remove the existing 11kV busbar and metering cubicle;

• Demolish and remove the existing control building including existing protection and control and auxiliary equipment.

Option 3 –

New 11kV control

building

• Construct a new control building on the southern side of the existing switchyard;

• Install a new 11kV switchboard with 2 x transformer circuit breakers, 1 x bus-section breaker and 4 x 11kV feeder breakers in the new building;

• Install a new 11kV auxiliary padmount transformer;

• Install new protection and control equipment and metering in the new control building;


• Install a new duplicated station battery and dc system in the new control building;

• Replace the two corroded 33kV support structures;

• Demolish and remove the existing 11kV switchyard and metering cubicle;


Option 4 –

New indoor 33kV

substation

• Construct a new control building to the south of the existing switchyard;

• Install a new 33kV switchboard with 2 x transformer circuit breakers, 1 x bus-section breaker and 1x 33kV feeder breakers;

• Install a new 11kV switchboard with 2 x transformer circuit breakers, 1 x bus-section breaker and 4 x 11kV feeder breakers;

• Install a new 11kV auxiliary padmount transformer;

• Install new protection and control equipment in the new control building;


• Install a new duplicated station battery and dc system in the new control building;

• Cable the 33kV feeder into the new switchboard;

• Demolish and remove the existing 11kV switchyard, metering cubicle and 33kV structures;


7. MARKET MODELLING

7.1 Market Benefits

The RIT-D states that the preferred option is the credible option that maximises the present value of the

net economic benefit to all those who produce, consume and transport electricity in the NEM.

The market benefit of a credible option is calculated by comparing the state of the world with the credible

option in place with the state of the world in the base case. The emphasis in this situation is differences in

the risks of involuntary load shedding.

Endeavour Energy considers that the only relevant category of market benefits prescribed under the NER

for this RIT-D relate to changes in involuntary load shedding.

Involuntary load shedding occurs when a customer’s load is interrupted from the network without their

agreement or prior warning. In this instance, this would occur if the 11kV busbar at Sussex Inlet ZS failed

and caused a complete outage of the substation. Endeavour Energy has forecast the load on the

substation over the assessment period and has quantified the expected value of unserved energy by


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comparing the forecast load to the network capabilities under system normal and substation outage

conditions. A reduction in involuntary load shedding expected from a credible option, relative to the base

case, results in a positive contribution to market benefits of the option being assessed.

The value of involuntary load shedding associated with a credible option is derived from the quantity of

load likely to be lost (in kWh) under that option multiplied by the Value of Customer Reliability (VCR),

where VCR is measured in dollars per kWh and is used as proxy to evaluate the economic impact of

unserved energy on customers under the RIT-D.

Endeavour Energy has applied a generalised estimate of VCR of $41/kWh, which is based on the VCR

estimates provided by AEMO in 20141, escalated to today’s value using the annual CPI increase and

weighted according to the make-up of the customers served by Sussex Inlet ZS, which is a mixture of

residential, commercial and industrial loads.

We have also investigated the effect of assuming both a lower and higher underlying VCR estimate of

30% consistent with the AEMO-stated level of confidence2.

This assessment gives a range of VCR values from $29/kWh to $53/kWh.

7.2 Project Costs

The capital costs associated with each credible option are estimated based on the scope of works

proposed and costing experience from previous projects of a similar nature recently completed.

Endeavour Energy has also included the financial costs associated with safety outcomes that are

estimated to be avoided under each of the options, relative to the base case. These costs have been

estimated using a probability of injury and monetary values of various levels of injury as used by the

industry.

The probability of injury has been estimated for the base case by taking into account:

• The expected level of work required on the 11kV busbar based on the frequency of routine

maintenance on each of the isolators and reclosers in the arrangement and the probability faults

occurring in the Sussex Inlet ZS 11kV network requiring switching works on the 11kV busbar; and

• The probability of a worker coming into inadvertent contact with live equipment during these

works.

Option 2 reduces the probability of injury due to the 11kV busbar being replaced with a modern 11kV

busbar with standard clearances. Options 3 and 4 provide an enclosed 11kV busbar in the arrangement

and therefore give a greater safety benefit.

7.3 Scenarios modelled to address uncertainty

RIT-D assessments are required to be based on a cost-benefit analysis that includes an assessment of

‘reasonable scenarios’, which are designed to test alternate sets of key assumptions and whether they

affect identification of the preferred option.

Endeavour Energy has elected to assess three alternative future scenarios – namely:

1 AEMO, Value of Customer Reliability Review, September 2014, Final Report. 2 AEMO, Value of Customer Reliability Review, September 2014, Final Report, p. 31.


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• Low benefit scenario – this scenario uses conservative assumptions that give rise to a lower

bound NPV estimate for each credible option, in order to represent a conservative future state of

the world with respect to potential benefits that could be realised under each credible option;

• Baseline scenario – the baseline scenario consists of assumptions that reflect Endeavour

Energy’s central set of variable estimates, which, in Endeavour Energy’s opinion, provides the

most likely scenario; and

• High benefit scenario – this scenario uses an optimistic set of assumptions, which have been

selected to investigate an upper bound on reasonably expected potential benefits.

TABLE 2 – SCENARIOS MODELLED

Variable Scenario 1 – central values Scenario 2 – low benefits Scenario 3 – high benefits

Capital cost Estimated network capital costs

25% increase in the estimated network capital costs

25% decrease in the estimated network capital costs

Safety risk Estimated network safety risk cost

50% increase in the estimated network safety costs

50% decrease in the estimated network safety costs

Value of customer reliability (VCR)

$41,000/MWh (derived from AEMO VCR estimates)

$29,000/MWh (30% lower than the central value)

$53,000/MWh (30% higher than the central value)

Discount rate 6.44% (WACC + 2%) 8.44% (WACC + 4%) 4.44% (WACC)

Scenario weighting 33.3% 33.3% 33.3%

7.4 Results of Analysis

This section summarises the results of the NPV analysis, including the sensitivity analysis undertaken which compares the two credible options to the ‘business as usual’ base case. The assessment period is 30 years.

7.4.1 Market benefits estimated for each credible option

Table 3 below summarises the benefit of each credible option relative to the base case in present value terms. As outlined above, the market benefits are solely attributable to reduced involuntary load shedding.

The value of involuntary load shedding avoided under each option is small for all options due to the low level of demand on Sussex Inlet ZS.

TABLE 3 – PRESENT VALUE OF THE MARKET BENEFITS ($ FY20)

Option Scenario 1 Scenario 2 Scenario 3

Option 2 56,000 33,000 89,000

Option 3 56,000 33,000 89,000

Option 4 105,000 61,000 166,000

7.4.2 Estimated costs for each credible option

Table 4 below summarises the project costs of each credible option relative to the base case in present

value terms. As outlined above, the project costs include capital costs and the ongoing cost of safety risks


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with each option. Note that the base case includes a substantial investment for the redevelopment of the

substation in FY36/37 which is reduced in magnitude by each of the network options. Taking this into

account and including the residual value of the investment at the end of the assessment period for each

option gives the present values of capital investment shown against each of the options as a negative

figure in Table 4. The benefit in reduced safety risk provided by each option is shown as a positive figure

in Table 4.

Note that for Scenarios 1 and 3 the reduction in safety risks outweighs the capital cost and therefore the

result is positive. In scenario 2 the capital costs outweigh the reduction in safety cost and therefore the

result is negative.

TABLE 4 – PRESENT VALUE OF THE GROSS COSTS OF EACH OPTION ($M FY20)

Option Scenario 1 Scenario 2 Scenario 3

Capital Safety Total Capital Safety Total Capital Safety Total

Option 2 -2.55 4.03 1.48 -3.27 1.67 -1.60 -1.86 7.37 5.51

Option 3 -2.56 4.81 2.25 -3.40 1.99 -1.41 -1.74 8.79 7.05

Option 4 -3.99 4.81 0.82 -5.27 1.99 -3.28 -2.72 8.79 6.07

7.4.3 Net present value assessment outcomes

Table 5 below summarises the net benefits in present value terms for each credible option under each

scenario. The net benefit is the gross benefit (as outlined in Table 3) less the cost of each option (as

outlined in Table 4).

Table 5 shows the corresponding ranking of each option for each scenario. Option 3 is shown to be

preferred over Options 2 and 4, which is driven primarily by the increased level of safety risk reduction and

modest capital costs provided by Option 3.

Furthermore, Option 3 provides a positive NPV for the scenario 1 (central values of risk reduction benefits

and central values of cost) and for scenario 3 (high values of risk reduction and low values of cost) but a

modest negative NPV for the low risk reduction and high cost scenario indicating the economic

assessment which recommends Option 3 is reasonably robust.

TABLE 5 – PRESENT VALUE OF EXPECTED ECONOMIC BENEFTS ($M FY20)

Option Scenario 1 Scenario 2 Scenario 3 Weighted Option ranking

Option 2 1.53 -1.57 5.59 1.85 2

Option 3 2.30 -1.37 7.13 2.69 1

Option 4 0.93 -3.22 6.23 1.31 3

8. SELECTED OPTION

The option that presents the greatest net benefit is Option 3 which is confirmed as being the preferred

option, which satisfies the RIT-D.

This option is expected to cost $4.56 million. Note that these costs have reduced since the non-network

options screening report was published due to the adoption of a simplified design and efficiencies in the

design and construction processes being realised.


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This option includes replacement of the 11kV busbars and other minor elements of the substation

including:

• Construction of a new control building with new indoor 11kV switchgear, auxiliaries and protection and control equipment;

• Installation of a portable amenities room;

• Installation of a new 11kV auxiliary padmount transformer;

• Replacement of the 33kV support structures in the transformer bunds;

• Demolition and removal of the existing 11kV busbar and associated switchgear; and

• Demolition and removal of the existing control building including existing protection and control and auxiliary equipment.

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