Alden Williams/Stuff
The government released documentation on the Lake Onslow plan late on Friday afternoon.
The pumped hydropower plan the government is exploring to build on Lake Onslow in Otago would likely cost between $8 billion and $28 billion, depending on what was included, according to a cabinet document released late Friday afternoon.
The newspaper said officials had estimated the flowchart’s “base” construction cost at $8.7 billion, but that rose to $15.7 billion when compensation for overruns and “escalation” of costs was included.
It estimated the “total project spend” — which would include all of the above, along with the first 42 years of operating costs for the power scheme and the cost of upgrading and operating transmission lines to its power plant — at $28.7 billion.
The cabinet document also indicated that it would take between seven and nine years to build the flowchart after a final investment decision was made in late 2026, with officials being the best guess that it would be possible to complete it in 2036.
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Energy Secretary Megan Woods announced two weeks ago that the cabinet had agreed to this prepare a detailed business case for the potential pumped hydro power system in central Otago, while at the same time agreeing to explore an alternative set of energy storage initiatives that she indicated could be even more costly.
however, the Cabinet document that informed that decisionand the Ministry of Trade, Innovation and Employment “Phase One” study that informed itwere withheld until they were released late Friday afternoon.
STUFF
How a shallow lake high in Central Otago’s hill country could electrify the land. (First published June 2022)
The goal of the Lake Onslow plan and the alternative being explored would be to ensure the country gets through “a dry year” without power shortages once fossil fuels can no longer be used to close a generation gap from existing hydropower generation .
However, the high cost estimates for the project seem to have dampened an initially strong public interest in the plan, according to Stuff-reader polling that started before the possible $15.7 billion construction cost was revealed.
Professor Earl Bardsley of Waikato University, who first identified the potential of the natural rock basin at Lake Onslow to create an artificial lake, said at the time of Woods’ mid-March announcement that the business case for the plan takes a “broad view on the national benefits”, given the costs.
That could be the economic benefit of electricity being cheaper than it otherwise would be, and the overall benefits of the green transition, he said.
Woods told colleagues in the cabinet newspaper that none of the options examined by MBIE “performed well in terms of value for money”.
But she recommended that the Lake Onslow option move through to the detailed design stage as she continues to explore the alternative which entails a hodgepodge of initiatives, including a possible smaller pumped hydro system on the Upper Moawhango at the central North Island.
“There will be costs associated with this. But given the lead time to develop such an option, progressing work to the next phase will maintain momentum and, should it continue to appear future, avoid delays in making a final investment decision,” she said.
“There is also a risk of loss of competence and institutional knowledge on that aspect of the project if work is interrupted,” she also told fellow ministers.
In any scenario, a very large investment in wind and solar generation would be required over time to meet the increased demand from electrification, and a continuing need for peak capacity in the North Island to meet demand reliably during calm overcast spells, she said in the Cabinet paper.
Woods said the Lake Onslow plan would have a stabilizing effect on the electricity market by increasing demand when electricity was abundant and prices were low, and increasing supply when electricity was scarce and prices were high.
“It is likely that this will result in downward pressure on wholesale prices, compared to other scenarios,” she told the cabinet.