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Onslow to cost a lot more than thought

In brief
  • The proposed Lake Onslow pumped hydro scheme is estimated at almost $16b. 
  • Pumped hydro is to act as a battery but only works in limited circumstances. 
  • The project would take more than a decade to complete. 
  • Shouldn’t that be enough to discourage spending more money? 

Lake Onslow scheme announced 

The Government is proceeding with a detailed business case for a pumped hydro scheme at Lake Onslow in Central Otago, but is still open to an alternative option.

Estimated costs are close to $16b, which is four times previous estimates. The multi-technology alternative option is close to $14b.

Energy Minister Megan Woods says it could take two more years to make a decision and up to nine years to build, should the Government go with the pump hydro option. 

Woods cited “climate change” as a reason for pushing ahead. 

What is a pumped hydro scheme? 

The scheme is part of the NZ Battery Project, which focuses on examining the “dry year problem”. Times of low precipitation limits power output from hydro electric stations. The dry periods then require fossil fuels to meet electricity demands during peak times. 

Pumped hydro requires two reservoirs. Lake Onslow would be artificially expanded. Water would be pumped from the lower lake into an upper lake when power is cheaper. It’s then released back into the lower lake to generate power, thereby limiting the use of fossil fuels. 

Pumping water costs energy so the revenue from selling the electricity can only be more than the pumping costs if there is a considerable difference in the price received over the price paid. 

The scheme’s capacity is six weeks of current annual power consumption.

Many countries have pumped hydro stations with the largest in China and the United States. The main drawbacks are capital and operating costs. Also, the intense geo-engineering may have environmental consequences.

Onslow to cost a lot more than thought - Centrist
Lake Onslow -If it takes over a decade to build, can a cost estimate be reliable? 
Image by Shellie –Wikipedia  

What’s the alternative? 

The alternative option uses technologies like biomass, flexible geothermal energy and hydrogen. It would include a smaller pumped hydro scheme on the North Island’s upper Moawhango River. While cheaper and closer to major population centres, the alternative means higher ongoing costs according to Woods. 

Woods also said the North Island option would be subject to agreement with local iwi. With another party involved, any negotiations may be drawn out, complex and may include royalty type costs. 

The cost breakdown

The Government spent $24m so far mostly on engineering assessments. Another $70m has been allocated for developing the business case. How high would the early estimate have to have been to discourage proceeding with more costly consultation? 

We have seen no analysis on the price to reduce carbon with this scheme. It has got to be sky high. 

Waikato University professor Earl Bardlsey, who helped identify the Lake Otago region as geographically suitable, said the business case would have to take a wide view in considering the benefits of the scheme to justify the cost. 

And what are the chances the nearly $16b price tag won’t go higher? 

What’s the opposition saying? 

National Party Energy spokesperson Stuart Smith said his party would scrap the project, should they win the next election. Smith suggested the private market would be the better solution to the dry year problem. 

Private sector energy groups have also come out against the project. 

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