Lake Onslow backers step into the light as Meridian blows dust off old ideas for extra hydro

Monday, 3 November 2025

The Government has derided the idea of a pumped hydro scheme at Lake Onslow, but it has been a concept that has proved hard to kill off.

ANALYSIS: Right now the outlook should be looking rosier for power users. Many hydro lakes are brimming to near capacity.

Transpower reported on Wednesday that there was 41% more water in the hydro lakes than is usual for the time of year.

Meanwhile, broker Forsyth Barr notes the stockpile of coal sitting outside Genesis’ Huntly Power Station has topped a million tonnes for the first time in 13 years, in readiness for some cold and not-so-rainy days.

Reflecting the conditions, electricity was pretty much given away for free on the spot market during most of October.

Turn on the switch at the wall last week, and more than 98% of the power that came out would have been from renewable sources.

But buying power on long-term contracts for future winters remains expensive, at more than $200 a megawatt hour — far above the average cost of generation — and the speed at which current market conditions can change was rammed home on Tuesday morning.

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Electricity system operator Transpower made an urgent call to power companies to put more generation into the market shortly before 7am, to avoid the risk of power cuts later that morning.

It attributed the scramble to a cold snap hitting at a time when about 400 megawatts of generating capacity was unexpectedly offline.

With many of the country’s thermal power plants now in their twilight years, the ageing power cables that transfer electricity across the Cook Strait experiencing frequent unplanned outages, and the threat of a dry spell always around the corner, it won’t be the last such advisory Transpower issues.

So it should be encouraging that, all of a sudden, fresh investments in hydro generation are back on the agenda.

Renewable, and easy to turn on and off as required, though with huge local environmental impacts, hydro provides a giant “green” battery for the power system trumping all other forms of electricity generation.

To the potential embarrassment of the Government, some very senior figures are attempting to revive the Lake Onslow pumped hydro scheme that the National and Act parties had spent the last few years deriding as a madcap Labour pipe-dream.

Reserve Bank acting chairperson Rodger Finlay’s involvement in the attempt to revive Lake Onslow has turned heads.

Last week, it emerged that the shareholders in that venture, Pumped Hydro Holdings, include former Meridian chief executive and Transpower chairperson Keith Turner, former Labour energy minister David Parker and former New Zealand Oil and Gas chairperson and current Reserve Bank acting chairperson Rodger Finlay.

It would be hard to find anyone with more knowledge of the electricity system than Turner, or a more ambitious policy-maker than Parker, though it may be Finlay’s involvement that turns most heads outside the industry.

The billions of dollars that would be required to build Lake Onslow would need to be solicited from elsewhere, but these are people who could probably be expected to at least get a hearing from investors.

Perhaps not entirely coincidentally, Meridian Energy has meanwhile set up a team to dust off its own options to increase its hydro generation.

It has already requested access through the Fast-track process to more free water (hitherto saved for emergencies) to boost generation from Lake Pukaki, which it wants to be allowed to drain deeper as of right.

The case for why the Government should charge for any such water rights is set out here and Meridian’s argument as to why it should be gifted the resource for free is here.

But Earl Bardsley, the academic who first identified the potential of Lake Onslow, is speculating that Meridian and Genesis are also preparing to announce a plan to raise Lake Pukaki by building a new, higher dam at the foot of the lake.

“In that event, the gentailers might argue Lake Onslow is no longer needed for dry year firming,” he suggests.

Predicting Meridian’s next move is a tough ask, though.

Lake Pukaki is already New Zealand’s largest hydro storage lake with the capacity to store about 1700 gigawatt-hours (GWh) of energy based on its current maximum and minimum operating levels.

That equates to about 4% of the country’s total electricity demand.

Raising Lake Pukaki isn’t a new idea and might be the ultimate Lake Onslow “spoiler”.

Officials from the Ministry of Business, Innovation and Employment (MBIE) noted in 2021 that if the lake could be raised 29 metres, that would increase its storage potential by a massive 5000GWh.

That is about the same amount of “dry year” power that it has been envisaged Lake Onslow could provide, but it could be “a much less costly option than Lake Onslow, which requires extensive tunnelling,” MBIE claimed.

Drawbacks include the fact that raising the lake by anywhere near that level — were it even possible — would take out sections of State Highway 80 leading to Mount Cook, and flood a large tract of the braided Tasman riverbed which is a key habitat for several threatened bird species including the black stilt and wrybill.

One source argues that raising the lake by even a few metres would also incapacitate Genesis’ Tekapo B power station on the interconnected Lake Tekapo by removing its usual vertical drop.

Raising the lake wouldn’t increase its inflow of course, and maintaining a higher lake level would involve sacrificing some of its every-day generating capacity, while a wider operating range would increase erosion around the edges of the lake, which is understood to have been significant in the past.

That’s not to say it couldn’t make sense, just that there would be complications.

The soundings coming from Meridian suggest that all that may be happening at present is a general dusting off of all of its past hydro concepts.

“While we’re indicating that hydro will be a focus and we’ve got a team to investigate options, it’s still too early to have identified any specific projects,” a spokesperson says.

The review may simply be politically polite given Finance Minister Nicola Willis last month strongly signalled the Government’s willingness to consider participating in a rights issue by gentailers, alongside other shareholders, were any of them to think big and come up with an investment plan that required additional capital.

And if Meridian did feel threatened in any way by a revived Lake Onslow scheme, it would be in its commercial interest to look into plans of its own that might make an investment in Lake Onslow redundant — whether or not it ultimately decided to follow through on any of those.

If Meridian did want to boost its hydro capacity, options other than raising Lake Pukaki could include pumping water from the headwaters of the Rangitata River through a tunnel to the head of Tekapo to increase water flow down the whole Waitaki Valley hydro system.

It has even been suggested it could tunnel water through from the western side of the Southern Alps to feed Lake Pukaki or Lake Ōhau.

And Meridian is not the only game in town.

There has also been speculation Contact Energy could revive a plan to develop a hydro plant near Queensberry on the Clutha River that it shelved in 2012 in part due to roading costs, though a company spokesperson gave a straight “no” to that idea on Thursday.

Bottom line; these are more exciting times. There is a bit of a buzz, and more hydro built by anyone, including Meridian, should only be positive for the energy market.

But it remains in the commercial interest of all generators to keep electricity supplies tight and it may be difficult to second guess whether investments are really likely before someone gets the shovels out. Talk is cheap, after all.