The government of New Zealand (NZ) has confirmed it will develop a detailed business case for an estimated $14.6 billion (NZD 15.7 billion) pumped hydro scheme at Lake Onslow in central Otago as it seeks to build “a resilient, affordable, secure and decarbonised energy system.”
Energy Minister Megan Woods said the Lake Onslow facility is central to the NZ Battery Project, which has been established to explore how best to solve the dry year problem – when low rainfall limits existing hydro-electricity supply – without using fossil fuels.
“Until we address the dry year problem, we will continue to rely on burning expensive and polluting fossil fuels to produce our electricity,” Woods said. “Pumped hydro is an ingenious way of storing energy in a big reservoir, which is released into a lower reservoir when more power is needed, like a giant battery.”
It has been estimated that there can be an energy deficit of between 3 TWh and 5 TWh in the worst dry years, about 10% of the nation’s current annual energy needs.
The pumped hydro scheme at Lake Onslow is expected to provide between 3 TWh and 8.5 TWh of annual generation and storage capacity, depending on the scope of the enlarged lake.
Phase 1 investigations showing the project would take approximately seven to nine years to build. The building cost has been estimated at $14.6 billion, about four times as much as previously expected but Woods said the project will definitely progress to the next stage.
“We always knew that any dry year battery storage solution will require significant investment, that’s why it’s important we thoroughly test these scenarios and get it right,” she said.
“Now some more detailed work has been done we have a much clearer picture of the projected costs which differ significantly from the 2006 high-level costings. The next phase will be to dig even further before we look at spending such a huge amount of money, but one thing we do know is that doing nothing to plan for climate change is not an option.”
Woods said the government would also continue to investigate an alternative option which would involve a portfolio of technologies, including burning biomass, geothermal energy and green hydrogen, as well as a smaller pumped hydro scheme in the central North Island.
The alternative portfolio option would cost about $13.5 billion, Woods said, but it would have much higher operating costs than the Lake Onslow pumped hydro project.
A detailed business case is expected to be developed by the end of next year. A final investment decision would take a further two years to make.
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