Labour’s promise that 100 percent of New Zealand’s electricity will be renewably generated by 2030 could be jeopardised by delays to its flagship NZ Battery project.

According to a factsheet released in July, the scheme seeking a solution to the dry year problem that has kept New Zealand reliant on fossil fuels for a small portion of our generation for decades was due to complete an initial investigation of options in 2021 and a more rigorous business case in 2022. The construction of whatever project was finally recommended by officials was slated to begin as early as 2022.

However, an update Energy and Resources Minister Megan Woods provided to Cabinet in December, just months after the NZ Battery project was launched, shows the timelines have already blown out considerably. Now, the first phase of the investigation is only expected to wrap up in May 2022. A second phase would finish in mid-2023 if all went well, or as late as early 2024, Woods wrote.

She told Newsroom that this was not a result of obstacles arising in the project’s path, but simply that the indicative timeline set in July was overly optimistic and the December Cabinet paper charted a more realistic path forward.

Extension criticised

Construction could then only begin after a public report was issued and Cabinet made a decision. However, previous major decisions like this have also involved several rounds of consultation, which could further extend timelines.

Moreover, the Government appears to be lagging behind even on the timeline set out in the December update. A Technical Reference Group was meant to be in place by the end of January but nominations to the group are now only expected to be announced this month.

Woods said this was because the Technical Reference Group was originally only intended to be involved in the second phase of the project, but would now play a role in the first phase as well.

The Government’s preferred option – a massive pumped hydroelectric station in Lake Onslow – is expected to take four to five years to build. It will then take another two years to fill up the artificial upper lake before the scheme is fully online.

Assuming those projections are accurate, even though they come from the same July factsheet as the Government’s earlier optimistic estimates for the business case due dates, the scheme might only be operational in 2031.

A spokesperson for Woods told Newsroom that the extensions were acceptable and that further tweaks to the timeline might occur.

“When announcing funding for the NZ Battery project, we gave early, estimated timelines of when various stages might be completed. The NZ Battery project team has updated the timelines, which are likely to be further refined as work progresses and key information is received,” the spokesperson said.

“Given the scale of the project, we are comfortable that it may take several months longer than originally estimated to complete a robust assessment. The scope of this project is significant and will have wide-ranging implications for New Zealand’s future, including how we can resolve our dry year hydro storage problem, decarbonise New Zealand’s economy, and future-proof the electricity market. Our Government has committed to prioritising this work and we will carefully work through all the implications as we move towards our goal of 100 percent renewable electricity in New Zealand.”

The spokesperson added that Woods is not concerned the extension may affect the 2030 renewables deadline.

Barbara Kuriger, the National Party’s energy and resources spokesperson, criticised the delay and the Government’s reliance on the pumped hydro plan.

“The Minister’s response to the gas shortage has been to invest in pumped hydro as a dry year solution to replace the role gas once played. $100 million has been put aside for feasibility studies from the Government’s ‘shovel ready projects’, this is an astronomical amount for a study,” she said.

“Industry experts have been critical of pumped hydro as a solution to our energy needs and it’s likely the project will struggle to get consent due to the two significant wetlands it will encroach and the seismic risk it will face from its proximity to the alpine fault. We need to be investigating battery project solutions, but the Government has been too quick to jump to pumped hydro as a solution, and is splashing the cash to make it work.

“The National Party is concerned about New Zealand’s energy security and the lack of any obvious government strategy to get the country through.”

Woods defended the cost of the project to Newsroom.

“If New Zealand is going to make the scale of change that we need in order to decarbonise our economy and do what we need to do, then we do need a Government that’s willing to invest in alternatives. We have that commitment and we’re showing that by following through on our actions,” she said.

“This is a big decision and an important decision, but it’s one you can’t skimp on. You wouldn’t embark on something of this scale without doing detailed investigations and understanding the environmental, the engineering, the economics – you’ve got to do it properly.”

2030 target at risk

A pumped hydro scheme or other solution to the dry year problem – in which backup fossil fuel generation is needed in the event of a dry year where hydroelectric stations produce less electricity than is needed – is crucial to the Government’s 2030 renewable electricity target.

Overcoming the dry year problem without a technological breakthrough like a pumped hydro scheme or a massive Tesla battery would mean building more renewable generation than we realistically need for non-dry years, the Interim Climate Change Committee (ICCC) found.

“It is technically feasible to achieve 100 percent renewable electricity by ʻoverbuilding’. This means building additional renewable generation like wind and solar to cover dry years, and substantially increasing battery storage and demand response,” the committee found.

Under a business-as-usual scenario, the electricity system will be 93 percent renewable by 2035 anyway. And more emissions could be avoided through electrifying transport and process heat than by decarbonising that last 7 percent.

“Such a solution is very costly, particularly in terms of achieving the last few percent of renewable electricity,” the ICCC wrote.

“The Committee recommends that the Government prioritises the accelerated electrification of transport and process heat over pursuing 100 percent renewable electricity by 2035 in a normal hydrological year because this could result in greater greenhouse gas emissions savings while keeping electricity prices affordable.”

Pursuing the 100 percent renewable scenario could see residential power prices jump 14 percent by 2035, along with a 29 percent increase in commercial electricity costs and a 39 percent increase for industry.

The ICCC’s successor, the Climate Change Commission, came to a similar conclusion in its recent draft advice to the Government. Under the Commission’s trajectory, natural gas would still be used to address peak prices and the dry year problem in 2035 and beyond.

“The 100 percent renewable electricity target should be treated as aspirational and considered in the broader context of the energy system that includes electricity, process and building heat and transport,” the Commission wrote. Instead, it recommended the Government set a target for 60 percent renewable energy by the end of 2035.

That’s because electricity emissions make up just 4.2 percent of New Zealand’s annual greenhouse gas emissions. Far bigger swathes are accounted for by transport (19 percent) and industrial process heat (9 percent).

Further delays to the NZ Battery project could see the Government forced to choose between achieving its 2030 target through costly overbuilding or abandoning the target in favour of a more holistic view. However, Labour’s decision to make the 2030 pledge a manifesto commitment in last year’s election could further complicate issues, raising the spectre of criticism from environmentalists or the Opposition if it broke that promise.

This story has been updated since its original publication.

Marc Daalder is a senior political reporter based in Wellington who covers climate change, health, energy and violent extremism. Twitter/Bluesky: @marcdaalder

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