- The cabinet has agreed that the Lake Onslow electricity project seems technically feasible at this stage.
- Officials say it could ease wholesale power prices and create a path to 100% renewable energy.
- Forsyth Barr says the cost of providing backup generation with coal and gas has risen sharply.
The chances of a multi-billion dollar hydroelectric plant at Lake Onslow in Otago getting the green light appear to have increased after the cabinet expressed confidence in the work done so far.
The Ministry of Business, Innovation and Employment (MBIE) said early analysis suggested Lake Onslow could help reduce wholesale electricity prices, which have risen volatile and sharply in recent years, and ensure the country has adequate power. has been in dry years when traditional hydroelectric power output was low.
Engineers hired by MBIE are investigating the viability of the plan, which could cost $4 billion or more but would allow the electricity system to stop its periodic reliance on expensive coal and gas generation to meet periods of peak demand. as low hydrogeneration.
Analyst Forsyth Barr said on Wednesday he expected wholesale electricity prices to rise further amid expectations of higher interest rates and rising investment costs for producers.
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It said a large rise in the cost of backup thermal generation also had an impact.
Coal and generation are now much more expensive than renewable generation from hydro and geothermal plants and more intermittent wind and solar power.
The Lake Onslow scheme could allow the country to switch completely to cheaper renewables as it would be able to store at least 5 terawatt hours of powerwhich is equivalent to about one-eighth of the country’s total annual electricity consumption.
The cost of the project would depend heavily on the results of technical studies, and in particular whether: rock of the alpine site is of sufficient quality to build the dams required to do so, or that significant amounts of material must be supplied.
Kathryn George / Stuff
The Lake Onslow energy project has sparked heated debate within and outside the industry, even before all the facts have been gathered about its likely cost, viability and implications.
MBIE said in its project update that the cabinet had confirmed that a pumped water system at Lake Onslow “seems technically feasible at this stage”, although it said more work was needed to confirm that.
“Early analysis also shows that Lake Onslow could alleviate the dry-year problem and support a path to a 100% renewable electricity system,” it said.
“It could also help lower wholesale prices and reduce the need to build renewable generation to replace fossil fuel generation.”
But the ministry said more work was needed to “incorporate environmental, cultural, social and geotechnical findings” and refine possible design options.
“This gives a good indication of the development timelines and costs for a feasibility-level decision,” it said.
A decision on the feasibility of the scheme is expected by the end of the year, but a final decision on the investment would not be made until after a detailed business case, which would not start until early next year.
The area around Lake Onslow was culturally significant, so it was important that MBIE continued to work with mana whenua as they explored the possibility of this plan, the ministry said.
“It is also important that we understand the potential impact on the local community and we will continue to work with community members in the coming months.
In particular, we appreciate that the studies are creating uncertainty and stress for a small group of landowners who would be significantly impacted if the plan were to go ahead.
The cabinet decided to forgo research into investing in rechargeable batteries or compressed air to store the massive amounts of power needed to provide backup during times of low hydropower generation.
Both options are considered significantly more expensive.
But it will continue to consider pumped water at other sites, hydrogen storage, biofuels and “flexible geothermal” generation as alternative options.