Private sector consortium ‘serious’ about reviving Lake Onslow hydro scheme

Friday, 5 September 2025

A former top executive at Meridian Energy, Ken Smales, says a private consortium he represents is serious about building the Lake Onslow pumped hydro scheme in central Otago.

Smales, whose past roles included being head of generation at Meridian and a director of Meridian Energy Australia, confirmed a Dunedin report that the Clutha Pumped Hydro Consortium had been sounding out local land-owners.

“The whole concept of starting this project up again is to have very good communication and relationships with the landowners, because they're key to this project succeeding,” he told The Post.

The industry veteran, who has spent 50 years in the energy industry, would not reveal who the other members of the consortium were, or where they envisaged the billions of dollars needed to construct Lake Onslow might come from.

But he dismissed speculation the consortium’s goal might simply be to acquire land rights in the hope of profiting from Lake Onslow being revived by a future Labour government.

“We are absolutely serious about it. This is a fantastic project for ‘NZ Inc’ and essential.

“You’ve only got to pick up the news about gas, and coal for Huntly, to see it's obvious we've got to do something in New Zealand to support intermittent renewable generation,” he said, referring to dwindling gas supplies and an industry agreement to keep burning coal at Huntly.

Smales confirmed the consortium’s letter to landowners stated three former chief executives or people who have chaired public companies were involved in the consortium.

They are believed to include other seasoned executives concerned about the country’s economic prospects and aiming to end their careers in the energy industry with a bang.

“There will be a time when we will be able to talk and it won't be far away but, right now, we're just trying to work with the landowners,” Smales said.

Keith Turner, a former chief executive of Meridian who stepped down as chairperson of Transpower at the end of May, worked alongside Smales at Meridian and is known to have strongly supported the Lake Onslow concept.

He would not comment on whether he was also involved in the pumped hydro consortium.

John Harbord, chairperson of the Major Electricity User Group, which represents many of the country’s largest power users, was supportive.

“If they want to put their own money into it, all power to them,” he said.

But significant private-sector interest in developing Lake Onslow could prove a curve ball for the coalition Government.

Ministers had characterised the power scheme as an unrealistic idea backed by Labour after appearing to take at face value claims from Contact Energy and other gentailers that the scheme would have a chilling effect on other energy investments.

Energy Minister Simon Watts said the Government had “not sought nor received any formal information” on the consortium’s activities.

As such, it would be premature to comment on the project, he said.

“I am aware of many generation projects and note that private sector participants are free to explore potential opportunities. The Government’s focus remains on ensuring a secure and affordable energy system for New Zealand,” he said.

A feasibility study commissioned by the former government estimated the cost of building Lake Onslow at somewhere between $8.7 billion and $15.7b, depending on the extent of any cost-overruns and “escalation” in costs, before further study was called off by the coalition Government.

That concept had been for an artificial lake and dam capable of storing enough water to generate about 5 terawatt-hours of electricity, which equates to about six weeks’ worth of the country’s total electricity demand.

Officials had estimated that was what could be required to see the country through a “dry winter” following the retirement of gas and coal generation.

They envisaged the power scheme would also provide some firming capacity to balance out shorter-term variations in solar and wind generation.

Waikato University associate professor Earl Bardsley, who first identified the opportunity for Lake Onlsow to act as a massive battery to back-up electricity generation, said private investors could build Lake Onslow at a smaller-scale to reduce the capital requirements.

Officials had also looked at the option of a 3TWh lake which would reduce the cost of the dam, Bardsley noted.

But the cost of drilling the tunnels to drop the water from Lake Onslow to a power station that would need to be built near the Clutha River was essentially a fixed cost, meaning it probably wouldn’t make sense to build something much smaller than that, he said.

There would be no particular downside in having Lake Onslow privately owned, rather than government-funded, Bardsley said.

“It's quite encouraging, but it really depends on the extent to which the people have got the backing,” he said on the consortium’s plans.

Large power users could help fund the development given it was “not in the interests of the major electricity users to have to pay a high price for electricity”, he said.

A private development might also work out better for local land-owners, he speculated.

“I suspect that with a change of government Onslow would go ahead anyway, but rather than have a forced acquisition of their land, they could perhaps get a better deal through the private sector.”

Labour energy spokesperson Megan Woods said in 2023 that anyone shocked by the possible $15.7b price tag for the scheme should remember it would “serve New Zealand for 100 years or more”.

The Labour government had also been exploring a combination of smaller measures to store power for dry winters and attempt to being down energy prices as an alternative to Lake Onslow, but those investigations were also halted and re-cast by the coalition Government.

Harbord said the biggest concern the Major Electricity Users Group had with the former government’s consideration of Lake Onslow was its cost.

“If it’s private capital, that's a different proposition to the government spending tens of billions of taxpayers’ money,” he said.