Electricity reform? Let’s start with hydro lakes

Sunday, 14 September 2025

Mike Roan is the chief executive of Meridian.

OPINION: After months of waiting, we may be just weeks (or even days) away from seeing the findings of the Frontier Report, commissioned by the Government to review New Zealand’s electricity system, and any changes the Government has planned off the back of it.

The Government has said it is considering surgical interventions. This could include a focus on firming, which is how the system responds to the ups and downs of renewable generation to ensure homes and businesses have all the power they need.

In New Zealand, firming generation has traditionally come from gas, coal and hydro generation from water stored in lakes.

But last year exposed a problem – the gas available for industrial users and electricity generation reduced dramatically, and is still reducing today. And because the hydro storage lakes, which might have taken up the slack, were built in the 1970s for demand forecast then and not now, New Zealand was left with coal.

Not an ideal solution, but this year the country’s major generator-retailers, including Meridian, agreed to support Genesis in securing a coal reserve at Huntly to boost New Zealand’s firming capacity over the next decade.

For me, the longer-term solution is to gain access to more water in our existing hydro lakes, increasing hydro storage. This is a no-brainer. Larger hydro lakes would boost power supply, reduce electricity costs by $400 million to $500 million a year, and – unlike coal - come with zero emissions.

Nestled in the Mackenzie Basin of the South Island is Lake Pūkaki. New Zealand’s largest hydro storage lake, it holds 40% of all hydro storage. If we could access more water, this is the place to start. It’s purpose-built and every drop that flows from it passes through, not one, but six power stations along the Waitaki Power Scheme.

And the environmental impacts would be small compared to building new power stations. The dams and canals are already there.

As a start, we’ve applied – initially to Transpower and now through the fast-track process – for access to what’s called contingent storage.

Meridian, as the operator of this lake, is currently allowed to take the lake’s level as low as 518 metres above sea level. Below that is a further five metres of reserve storage. To put this in perspective, that’s roughly enough to power 300,000 homes for three months.

But it requires a change to the rules before it can be accessed, and that’s what we’re asking for.

The more water hydro generators like Meridian can access, the less coal others need to burn to shore up supply when the wind doesn’t blow, and the sun doesn’t shine. By doing this, it will underpin New Zealand’s progress towards an even more renewable and cost-effective electricity system.

And with that comes a massive opportunity for the New Zealand economy.

The natural bounty provided by our sun, rain, wind and steam is a commercial selling point very few countries can offer, and one that’s ripe for New Zealand to capitalise on.

Those green electrons are gold. And New Zealand’s ability to generate them at scale has the potential to pull in enormous amounts of investment from global companies that want to produce and market green products.

This isn’t a hypothetical. Every year the New Zealand Aluminium Smelter in Bluff produces more than 350,000 tonnes of ‘green’ aluminium, directly employing almost 700 people and supporting the Southland economy in the process.

It’s one of the lowest carbon smelters in the world, and its aluminium is used around the world in products ranging from iPhones to aircraft. It’s also one of New Zealand’s biggest exporters, and the country’s single biggest export to Japan and Korea.

Their ability to achieve this is partly down to our country’s renewable electricity resources, which gives their aluminium its green credentials.

There can – and will – be many more users like them.

First, though, there are some challenges we need to overcome.

We need to build more generation capacity to overcome the loss of gas. That’s happening faster than ever – currently at a rate that is 25% higher than at the peak of Think Big - and Meridian is doing our share of the heavy lifting. We’ve invested more than $1 billion over the last five years and are set to invest a further $2 billion over the next three.

But we also need more firming generation – generation that can flex when the wind doesn’t blow and the sun doesn’t shine. Let’s see what the Frontier Report has to say, but I don’t think we can afford to miss the opportunity to get more out of our existing hydro storage.

It's easy, it creates zero emissions, and it can be done now.

A clean solution that will benefit New Zealand, enormously.