Lake Onslow battery loses its charge


A New Zealand battery project centered on Central Otago’s Lake Onslow is starting to look less likely against a cheaper alternative in the North Island

Investigating whether a large-scale pumped hydropower system at Lake Onslow is New Zealand’s best choice for a secure energy future may only be four months away.

Although the continuation of feasibility work on the project has recently been approved, a review due in July may not proceed with the preparation of a detailed business case.

With transmission upgrade costs to support the scheme estimated at $615 million and construction costs at $15.7 billion, the scheme would be the more expensive of the government’s New Zealand battery project options.

The project aims to find solutions to the problem of energy supply in the country’s dry year, which is currently managed by fossil fuels.

Although expensive, the Onslow option is believed to provide better value for money and stability for the electricity market, according to a cabinet document released yesterday.

The capital cost of the government’s other possible solution to the government’s dry year — a portfolio option that may include a “potentially attractive” smaller hydropower system in Upper Moawhango in the North Island — is estimated at $13.5 billion.

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

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

Both options can lead to lower wholesale electricity prices.

A “multi-criteria” analysis has put the portfolio option ahead of Onslow.

However, as there are not yet final locations for the various plans, 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 in the coming months is expected to provide a better understanding of which might be the best solution.

“In the coming months, we will focus our efforts on improving our understanding and assessment of the portfolio option – focusing particularly on issues that may change our overall assessment of its feasibility or desirability.”

He says the cabinet has agreed that the energy and resources minister will report back around July and seek approval to prepare a detailed business case for whichever option or options are chosen.

The next phase could cost $69 million and involves preparing more detailed designs and analysis and working on the potential operational models of the desired option or options.

It would also look at their impact on the market and could last 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 planned for the coming months in Central Otago is next-level consultation, says Darby.

“The local community is the key stakeholder and as the project enters Phase 2 there will be more regular and extensive community involvement. Phase 2 community engagement will begin in the coming months.”

In addition to working with affected landowners and mana whenua, he says the project team has made presentations to local government agencies and met with Otago Fish & Game, Pioneer Energy and the Teviot Valley Irrigation Company.

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

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

There are plenty of uncertainties

If the Onslow proposal is approved in July, its continuation could be short-lived.

The MP for Kaikōura, National’s Stuart Smith, told the Newsroom that his party does not support the government putting forward such a plan.

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

“If Lake Onslow piles up financially, the private sector will build it.

“The government should stay away, save taxpayers’ money, focus on reducing inflation and overcome the cost of living crisis.”

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

“The bureaucracy that comes with consent is far too expensive, far too long, and it delays investments we need to decarbonise.

“The Resource Management Act should be amended to remove barriers and ensure that projects are accepted or rejected within a specified time frame.”

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

He says there is no commercial incentive to build the scheme.

“Given the multibillion-dollar construction costs of Onslow pumped storage, it is not surprising that there is no interest from private companies.

“It would take a very long time to buy power cheaply and sell it at a higher price before $16 billion is recovered.”

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

“The flood bank can help both the local economy and the local population by preventing flood damage.

“However, no one would suggest that a flood bank should not be built because the private sector would not do it on its own initiative.”

However, he notes in the findings of feasibility studies to date that Onslow offers the greatest confidence for achieving security of supply targets towards New Zealand having 100% renewable energy.

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

Made with the support of the Public Interest Journalism Fund