The Commerce Commission has given the green light to one of the largest pieces of electricity infrastructure spending New Zealand has seen in years, approving a roughly $1.1 billion plan to replace and expand the ageing power cables that run beneath Cook Strait.
Those cables are the heart of the high voltage direct current link, usually shortened to the HVDC link, that ties the North and South Island power grids together. Three undersea cables currently carry electricity across the strait. Grid operator Transpower says they are about 35 years old and approaching the end of their working life, with the existing equipment expected to reach the end of its days around 2030. Under the plan the company will replace those three cables, lay a fourth, and build new termination stations on each side of the water.
The standout number in the regulator’s decision is the extra capacity. Adding a fourth cable lifts the link’s transfer capacity from 1,200 megawatts to 1,400 megawatts, a gain of 200 megawatts. The Commission’s associate commissioner Nathan Strong said installing a fourth cable at the same time “unlocks an additional 200MW of capacity, which can reduce long-term electricity market costs”, while also making room for more renewable generation in the South Island. He said the upgrade could “better utilise renewable generation, particularly in the South Island, which could help put downward pressure on wholesale electricity prices over time”.
In its decision the Commission described the cables as “critical electricity transmission infrastructure and vital for national security of supply”. That phrase captures why a single connection beneath a narrow stretch of water carries such weight. The link first opened in the 1960s and has been rebuilt and added to over the decades, and it now lets the two islands share their cheapest electricity day by day rather than each running as an island unto itself.
The way it works is straightforward in principle. The South Island is rich in hydro generation, with large lakes behind dams in places like the Waitaki and Clutha valleys. The North Island holds most of the population and demand, along with wind farms, geothermal stations and gas-fired plants. The HVDC link lets power flow in whichever direction makes sense. In a wet southern year cheap hydro can be pushed north, and when southern lakes run low the flow reverses and northern generation supports the south. Take that connection away and the country loses one of its main tools for keeping the lights on at the lowest cost.
Transpower chief executive James Kilty said the link mattered for several reasons. “The link is of national importance for three key reasons. Firstly, it allows Kiwis to access the lowest cost electricity around New Zealand each day,” he said. The company has also pointed to the role the connection plays in system stability as more wind and solar come onto the grid, since variable renewable output needs a strong backbone to lean on.
For households and businesses, the obvious question is who pays. The answer is that the cost will be added to Transpower’s regulated asset base and recovered gradually over the life of the equipment, which runs to several decades. Strong said the costs “will be shared by the electricity consumers and generators that benefit from the HVDC link” under what is known as benefits-based pricing. In plain terms, the spending shows up over time in the transmission charges that sit inside power bills, but only once the new cables are actually in service in the early 2030s. There is no immediate jump in prices off the back of this approval, though the investment will eventually land on electricity accounts in a small way, spread thin across many years and many users.
The timeline is long because undersea cable is not something a supplier keeps on a shelf. Approving the first stage now lets Transpower order equipment and cable and begin work from around 2028, with the physical cable replacement happening in the early 2030s. Locking in contracts early gives manufacturers the lead time to build and deliver the cable when it is needed, rather than leaving the country exposed if the old cables fail before replacements arrive.
This decision covers what Transpower calls stage one, the physical cables and the termination stations. A second stage, focused on a new digital control system for the link, is still to come, and the company has said it expects to consult on that part of the programme before the end of 2026. The regulator is also taking public submissions before its approval is finalised, so there is still a formal step to clear, but the direction of travel is now clear.
The approval lands at a time when electricity security has been firmly on the national agenda. Concerns about dry-year risk, a declining domestic gas supply and the price spikes that hit industrial users last winter have all pushed the resilience of the grid up the priority list. A stronger, higher-capacity link between the islands does not solve those problems on its own, but it gives the system more room to move the cheapest available power to wherever it is needed, which is exactly the flexibility a tighter market calls for. You can read Transpower’s statement on the decision here and earlier coverage of the proposal from RNZ.
What do you make of the Cook Strait cable upgrade and the way the cost will eventually filter through to power bills? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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