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An economic study of underground electricity in Darwin

Thanh Tang (1998). An economic study of underground electricity in Darwin. Master Thesis, Northern Territory University.

Document type: Thesis
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Author Thanh Tang
Title An economic study of underground electricity in Darwin
Institution Northern Territory University
Publication Date 1998
Thesis Type Master
Subjects COMMERCE, MANAGEMENT, TOURISM AND SERVICES
1205 - Urban and Regional Planning
Abstract About 70% of Darwin's residents in older suburbs still have power supply from overhead distribution lines (415 Volts and 11,000 Volts) which are aging and vulnerable to damage by extreme tropical weather conditions, fast tree growth and collision of vehicles with power poles. It would cost around $60 million in current dollars to underground overhead power lines servicing the remaining residential urban suburbs. The purpose of this dissertation is to prepare an economic study, which evaluates the commercial viability of a 10-year underground power project in Darwin residential suburbs.

Two economic models are developed for overhead and underground power systems that include tangible benefits for the Power and Water Authority (PAWA), (the electricity utility in the Northern Territory) and tangible wider benefits to the community. The Net Present Value (NPV) method is applied to compare overall costs of each system with respect to PAWA and combined PAWA and externalities over a period of thirty years.

It is found that from the PAWA point of view, the cost of placing the existing overhead power system underground would only be justified if 70% of the total costs of the 10-year undergrounding scheme is recovered through contributions from the stakeholders. The pilot underground project in Nightcliff (October 1997 - January 1998) identified contributions of 20% of the total cost, from Darwin City Council (5%), Telstra (10%) and Austar (5%). It is reasonable to assume that 20% of the project cost could be recovered by charging customers a basic fee of $750 as a contribution towards the cost of converting their existing overhead service underground. There remains a further 30% of total costs to be recovered from the NT Government/Federal Government. The Federal Government should contribute together with the NT Government as a strategic benefit to protect 70% of Darwin residents from the potential risk of losing power supplies as result of another cyclone Tracy. The NT Government's contribution could be funded by way of a reduction in annual dividends payable by PAWA to the NT Government.

Not all tangible benefits of Darwin urban underground power can be identified and quantified in the models; however, the study indicates that there are ways to make this happen. From PAWA point of view, although there are clear and distinct benefits in having all urban distribution power lines underground, capital investment in such a program, with all construction costs born by the Authority, is unlikely to generate sufficient return in meeting its business objectives. It would seem that in addition to contributions from the council and telecommunication service providers; financial support from the Northern Territory Government/Federal Government and public willingness to contribute at a reasonable rate are vital for the power underground program. Various options of consumer's contribution are to be investigated and offered by the Authority to make it easily affordable. Without a strong commitment of the Territory/Federal Government and growing community support, it is unlikely that older urban suburbs in Darwin will be transformed· on a large scale in the foreseeable future.


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