Studies into whether a massive pumped-hydro scheme at Lake Onslow is New Zealand’s best bet for a secure energy future may have only four more months to run.

While the continuation of feasibility work on the project was recently approved, a review due in July may see it not proceed to a preparation of a detailed business case.

With transmission-upgrade costs to support the scheme estimated at $615 million and the build cost $15.7 billion, the scheme would be the costlier of the government’s New Zealand Battery Project options.

The project is intended to find solutions for the country’s dry-year energy supply problem, which is managed at present by fossil fuels.

Although expensive, the Onslow option is considered to offer better value for money and stability for the electricity market, according to a Cabinet paper released on Friday.

The capital costs of the Government’s other potential dry-year-solution – a portfolio option – is estimated at $13.5 billion.

The various generation methods in the portfolio would cost more to operate than Onslow.

They could include biomass, flexible geothermal energy and hydrogen, says the Ministry of Business, Innovation and Employment.

Both options could lead to lower wholesale electricity prices.

Through a “multi-criteria” analysis, the portfolio option has edged ahead of Onslow.

With no definite sites yet for its various schemes, however, detailed environmental, social and cultural studies have not been possible, making some comparisons difficult.

MBIE’s battery project manager, David Darby, says further work on both options over the coming months is expected to provide a better understanding of which might be the better solution.

“Over the next few months we will be focusing our efforts on improving our understanding and assessment of the portfolio option – particularly focusing on matters that may change our overall assessment of its feasibility or desirability.”

He says Cabinet has agreed that the Minister of Energy and Resources will report back in about July and seek approval to begin a detailed business case for whichever option or options is selected.

The next stage could cost $69 million and would involve preparation of more detailed designs and analysis and work on the potential operating models of the preferred option or options.

It would also look at their impact on the market and could take until the end of next year. The final decision on what will be built may not be made until 2027 or 2028.

Part of the work scheduled for the coming months in Central Otago is next-level community consultation, Darby says.

“The local community are key stakeholders and as the project moves into Phase 2 further regular and comprehensive engagement with the community will occur. Phase 2 community engagement will begin in the next couple of months.”

He says as well as working with affected landowners and mana whenua, the project team has made presentations to local-government bodies and had meetings with Otago Fish & Game, Pioneer Energy and the Teviot Valley Irrigation Company.

An interim social impact assessment has been completed as part of phase 1 of the project and a full social-impact assessment will follow.

So far, in addition to statistics, council documents and historic records, work has included interviews with affected landowners, a community forum, meetings with farmers, council and community-board representatives and the Roxburgh Teviot Valley Business Group.

Uncertainties abound

If the Onslow proposal does pass muster in July, its continuation may be short-lived.

The MP for Kaikōura, National’s Stuart Smith, told Newsroom his party does not support the Government building such a scheme.

If National forms the next government it will not proceed with the scheme.

“If Lake Onslow does stack up financially then the private sector will build it.

“The Government needs to stay away, save taxpayer money, focus on lowering inflation and get on top of the cost-of-living crisis.”

“Myriad renewable-generation projects have been announced, which is very encouraging, but there are unnecessary bureaucratic delays.

“The bureaucracy involved with consenting is far too costly and far too lengthy and it is putting off investment that we need to decarbonise.

“The Resource Management Act must be amended to remove barriers and ensure projects are accepted or declined in a given timeframe.”

If built, the scheme would be the world’s largest in terms of energy-storage capacity at 5TWh, according to Earl Bardsley, the University of Waikato hydrologist who first conceived of the idea.

He says there’s no commercial incentive to build the scheme.

“Given the multibillion-dollar cost of Onslow pumped storage construction, it is not surprising that there has been no interest from private enterprise.

‘It would take a very long time of buying power cheaply and selling it at higher price before recovering $16 billion.”

He uses the analogy of a ratepayer-funded flood bank along a river.

“The flood bank could aid both the local economy and the local population by preventing flood damage.

“However, nobody would suggest that a flood bank should not be built because the private sector would not do it on its own initiative.”

He notes, however, in feasibility study findings so far that Onslow offers the greatest confidence for achieving security-of-supply objectives toward New Zealand having 100 percent renewable energy. 

It is also considered to have the highest benefit-to-cost ratio of all options.

Made with the support of the Public Interest Journalism Fund

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