The resurrection of the Lake Onslow pumped hydro scheme

Source: Radio New Zealand

The same government that scrapped the Lake Onslow pumped hydro project has put it on the fast-track list. But whether this country can pull off a project of its size is another question.

It was hyped as the answer to the country’s energy anxiety – a giant “battery” in the deep south that could keep the lights on when the lakes run dry.

But when the coalition government was voted in, the project was voted out, deemed too big and too expensive.

Now, the Lake Onslow pumped hydro scheme is back – or at least, back in the conversation – thanks to a private consortium group, and somewhat ironically, the government has agreed to refer the scheme for possible fast-tracking.

“There’s a view that the fast-track system makes it a lot easier to consent to a lot of different things, but this is a really big project,” says Newsroom senior political reporter Marc Daalder, who has been covering the story.

“It’s hard to overstate how significant this would be, both in terms of its broader energy system and national economic impact, but also just in terms of the actual size of the thing they are proposing to build.

“And that’s the real question, right? People often say it’s hard to build things in New Zealand. Well, this is a really big thing. Can we build it?

“Recent history would suggest no, not without significant cost overruns and significant regulatory difficulty. The government likes to think that they have tackled those issues. I guess we will find out.”

Today, The Detail looks into the pumped hydro scheme concept, which is deceptively simple: pump water uphill when electricity is plentiful, then release it when it’s scarce, with energy stored at a scale never seen before in New Zealand.

Supporters say it’s exactly what’s needed to tackle the country’s biggest vulnerability – the dreaded “dry year”, when hydro lakes drop, gas runs tight, and coal-fired generation has to ramp up.

The Labour government liked the idea, but when they looked into it, the bill was around $16 billion, with years, likely more than a decade, before anything tangible would be delivered.

So in 2023, not long after being elected, the coalition government pulled the pin.

“The theory was, at the time, that the opposition to Onslow was that it was creating too much uncertainty in the market because it would have a really significant effect on the electricity market,” Daalder says.

“It would basically be buying a lot of power when power prices are low, in order to charge up the battery as it were, in order to pump that water up the hill, and then when power prices were high, it could be used to depress those because you could flick it on, like with the flick of a switch, and generate power.

“So it would bring up the low prices, but cap off the high prices; it would have quite a significant effect on the markets. There were concerns that people weren’t investing in new generation, as a result of that.”

But it turns out the project wasn’t dead in the water, with industry players circling and forming a private planning group. The Clutha Pumped Hydro Consortium includes former Meridian Energy chief executive and Transpower chairperson Keith Turner, former environment minister David Parker, Christchurch lawyer John Hardie, and Reserve Bank board chair Rodger Finlay.

Turner told RNZ’s Morning Report that they estimated their build would cost around $8-10b, and if successful, it could be up and running by 2035. International investors had already shown interest in the project, he said.

And now their plan is being considered for fast-track consenting that could, in theory, bulldoze through years of red tape – thanks to the same government that axed the scheme.

“I asked the Energy Minister, Simon Watts, who has spoken before about the chilling impact that the Lake Onslow project had on the electricity market, whether he was worried about it having a chilling effect,” Daalder says.

“He said ‘no’ but he said it is different because this is the private market, rather than the government making its decisions.

“I don’t know if that logic fully holds. We know that private players in the energy market can have significant impacts on investment decisions, so, for example, we often hear how the uncertainty over whether Tiwai Point would stay or go for five years – between 2019 and 2024 – meant that people weren’t investing in new generation because they thought if the smelter was going to close there would be all this power available.

“It’s hard to see why you would get a different result or a significantly different result, depending on who is actually funding it.”

In limbo

So, where does this leave Lake Onslow? Right now, it’s in limbo. Not quite dead, not quite alive, but very much in the realm of unfinished business with fast-track in its sights.

It was hyped as the answer to the country’s energy anxiety – a giant “battery” in the deep south that could keep the lights on when the lakes run dry.

But when the coalition government was voted in, the project was voted out, deemed too big and too expensive.

Now, the Lake Onslow pumped hydro scheme is back – or at least, back in the conversation – thanks to a private consortium group, and somewhat ironically, the government has agreed to refer the scheme for possible fast-tracking.

“There’s a view that the fast-track system makes it a lot easier to consent to a lot of different things, but this is a really big project,” says Newsroom senior political reporter Marc Daalder, who has been covering the story.

“It’s hard to overstate how significant this would be, both in terms of its broader energy system and national economic impact, but also just in terms of the actual size of the thing they are proposing to build.

“And that’s the real question, right? People often say it’s hard to build things in New Zealand. Well, this is a really big thing. Can we build it?

“Recent history would suggest no, not without significant cost overruns and significant regulatory difficulty. The government likes to think that they have tackled those issues. I guess we will find out.”

‘Too much uncertainty’

Today, The Detail looks into the pumped hydro scheme concept, which is deceptively simple: pump water uphill when electricity is plentiful, then release it when it’s scarce, with energy stored at a scale never seen before in New Zealand.

Supporters say it’s exactly what’s needed to tackle the country’s biggest vulnerability – the dreaded “dry year”, when hydro lakes drop, gas runs tight, and coal-fired generation has to ramp up.

The Labour government liked the idea, but when they looked into it, the bill was around $16 billion, with years, likely more than a decade, before anything tangible would be delivered.

So in 2023, not long after being elected, the coalition government pulled the pin.

“The theory was, at the time, that the opposition to Onslow was that it was creating too much uncertainty in the market because it would have a really significant effect on the electricity market,” Daalder says.

“It would basically be buying a lot of power when power prices are low, in order to charge up the battery as it were, in order to pump that water up the hill, and then when power prices were high, it could be used to depress those because you could flick it on, like with the flick of a switch, and generate power.

“So it would bring up the low prices, but cap off the high prices; it would have quite a significant effect on the markets. There were concerns that people weren’t investing in new generation, as a result of that.”

But it turns out the project wasn’t dead in the water, with industry players circling and forming a private planning group. The Clutha Pumped Hydro Consortium includes former Meridian Energy chief executive and Transpower chairperson Keith Turner, former environment minister David Parker, Christchurch lawyer John Hardie, and Reserve Bank board chair Rodger Finlay.

Turner told RNZ’s Morning Report that they estimated their build would cost around $8-10b, and if successful, it could be up and running by 2035. International investors had already shown interest in the project, he said.

And now their plan is being considered for fast-track consenting that could, in theory, bulldoze through years of red tape – thanks to the same government that axed the scheme.

“I asked the energy minister, Simon Watts, who has spoken before about the chilling impact that the Lake Onslow project had on the electricity market, whether he was worried about it having a chilling effect,” Daalder says.

“He said ‘no’ but he said it is different because this is the private market, rather than the government making its decisions.

“I don’t know if that logic fully holds. We know that private players in the energy market can have significant impacts on investment decisions, so, for example, we often hear how the uncertainty over whether Tiwai Point would stay or go for five years – between 2019 and 2024 – meant that people weren’t investing in new generation because they thought if the smelter was going to close there would be all this power available.

“It’s hard to see why you would get a different result or a significantly different result, depending on who is actually funding it.”

So, where does this leave Lake Onslow? Right now, it’s in limbo. Not quite dead, not quite alive, but very much in the realm of unfinished business with fast-track in its sights.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand