Government narrows down alternatives to $28b Lake Onslow power scheme

Wednesday, 9 August 2023

A shallow lake nestled high in the Central Otago hill country could electrify the country.

The Government has ruled out building a pumped hydro scheme in the North Island or investing in the storage of green hydrogen to back up the country’s electricity supply.

The decision means officials will continue to investigate only two options to provide cover for “dry years” when hydro generation is low.

These are either building a pumped hydro scheme at Lake Onslow in the South Island at an estimated cost of between $8.7 billion and $28b, depending what is included in the calculation, or an investment in other standby generation that could involve geothermal energy and burning wood waste.

Genesis Energy had suggested in 2021 that it might be possible to build a pumped hydro facility on army land in the upper reaches of the Moawhango River near Waiouru.

But the Ministry of Business, Innovation and Employment (MBIE) announced on Tuesday that idea had been dropped by the Cabinet.

“Following discussions with the main affected parties, it is apparent this concept comes with unique and significant challenges. It will therefore not be advanced for further analysis,” it said.

Similarly, MBIE will no longer look at whether the Government should invest in green hydrogen as a back-up for power generation “due to technology and market development uncertainties”.

Officials appear to be warming to an idea that could see the Government invest in geothermal generating capacity that would only be turned on during a power supply shortage.

Meridian Energy has been considering whether to divert some of the power currently used to supply the Tiwai Point aluminium smelter to the production of green hydrogen.

The Government has determined that the country needs a back-up power source equivalent to about a months-worth of its total electricity usage in order to take over the role that gas and coal currently play keeping the lights on when hydro lake levels are low.

Lake Onslow has often been assumed to be the Government’s preferred option.

But MBIE said the alternative “portfolio approach”, potentially involving “multiple technologies” such as biomass and standby geothermal, appeared feasible and could prove an “even more economically beneficial option” than it had supposed in an earlier business case.

Energy Minister Megan Woods confirmed both that and the Lake Onslow pumped hydro scheme would be scrutinised further before a decision was made mid-next year on which option to pursue.