Lake Onslow pumped hydro scheme to proceed

A decision on the Lake Onslow pumped hydro scheme to help overcome dry years when hydro-electric dam levels are low will take at least four years, latest estimates putting the cost at $13.5 billion although with higher ongoing operating costs than previously thought.

A detailed business case is expected to be developed by the end of 2024, followed by a final investment decision likely to take another two years.

Phase 1 investigations show a pumped hydro scheme at Lake Onslow in Otago would take about seven to nine years to build, with an estimated $15.7 billion building cost. 

In comparison, initial estimates for the capital element of the portfolio option are about $13.5 billion, but with significantly higher ongoing operating costs.

It’s part of a multi-technology approach in the Government’s long term-plan to build a resilient, affordable, secure and decarbonised energy system in New Zealand, says energy and resources minister Megan Woods.  

The NZ Battery Project was established in late 2020 to find innovative solutions to the ‘dry year problem’, when hydro-electricity lakes run low, leading to the burning of more fossil fuels to cover the electricity shortfall, and often higher power bills. 

“Until we address the dry year problem, we will continue to rely on burning expensive and polluting fossil fuels to produce our electricity. That’s bad for the climate and our power bills,” says Woods.

“Pumped hydro is an ingenious way of storing energy in a big reservoir, which is released into a lower reservoir when more power is needed, like a giant battery.

“A dry year solution would be a huge step towards our mission to move towards more renewable energy generation and power more of New Zealand.”

Woods says the Government has also agreed to continue looking at alternatives to the scheme, including a combination of comparator technologies and scoping a possible smaller pumped hydro scheme in the central North Island, subject to agreement with iwi.

Biomass, flexible geothermal energy, and hydrogen have been identified as possible alternatives to pumped hydro, as they have the most potential collectively to store enough energy to help solve the dry year problem, she explains.

“We always knew that any dry year battery storage solution will require significant investment, that’s why it’s important we thoroughly test these scenarios and get it right,” Woods adds.

“Now some more detailed work has been done we have a much clearer picture of the projected costs which differ significantly from the 2006 high level costings.

“The next phase will be to dig even further before we look at spending such a huge amount of money, but one thing we do know is that doing nothing to plan for climate change is not an option.”

The Lake Onslow scheme is outlined by the Ministry of Business, Innovation and Employment (MBIE), which has reportedly spent about $30m on investigating it so far.

Woods says there’s still a long way to go.