Dry year illustrates need for a giant ‘battery’
Turning Lake Onslow into a giant ‘battery’ could be an electricity insurance policy but it would also upset the energy market, writes Tom Pullar-Strecker.
Spending billions of dollars on a power scheme that uses more electricity than it generates might seem an unattractive proposition.
But the threat of a gradually unfolding power crisis this winter couldn’t have been timed better to boost the chances of a multibillion-dollar pumped hydro scheme at Lake Onslow in Otago.
Waikato University Associate Professor Earl Bardsley, the academic who first saw the potential of Lake Onslow, hopes this year’s dry year and higher electricity prices will act as a circuit-breaker.
‘‘It does focus minds on the need for some solution, or otherwise we are going to wreck our economy.’’
Lake Onslow would be a hydropower project like no other in New Zealand.
An earth dam stretching one or two kilometres would be built to seal off a natural rock basin 700 metres above sea level, which would be filled with pumped water from Lake Roxburgh to create a larger artificial lake.
Depending on its final dimensions, the hydro scheme would be capable of storing between 5 and 8 terawatt-hours of electricity in the form of water, effectively acting as a giant battery back-up for the country’s power supply.
For comparison, total annual electricity demand currently sits at about 40TWh.
Lake Onslow would be capable of producing between 1000 and 1100 megawatts of electricity when water was dropped hundreds of metres through concrete-lined tunnels back to Lake Roxburgh.
That’s more power than either Meridian Energy’s Manapouri hydro scheme or Genesis Energy’s Huntly gas and coal power station can generate.
But like any battery, Lake Onslow would need more power to recharge than it could release, making it a net consumer of electricity.
The main goal of the project would be to ensure the country had power in ‘‘dry years’’.
It would store energy when power was cheap and plentiful, including when water would otherwise be spilled from existing hydro schemes.
‘‘I would liken Lake Onslow to an insurance premium,’’ Bardsley says.
The costs have been measured against alternatives such as storing power in the form of hydrogen or, as is happening now, ‘‘shutting down industries’’, he says.
NZ Steel, the Tiwai Point aluminium smelter and the Norske Skog paper mill in Kawerau are among the businesses that have cut production amid a spike in wholesale electricity prices at least partly brought about by low lake levels and gas shortages.
Low lake levels have also sent carbon emissions from electricity generation through the roof.
Bardsley says ‘‘you wouldn’t have a crisis situation like we have now, if Onslow was in operation’’.
But Lake Onslow would also serve a second purpose, smoothing out and storing power generated by new wind farms, so more could be built to replace fossil-fuelled generation, he says.
Wind farms can produce electricity at a cost of about 7 or 8 cents a kilowatt-hour without any subsidies due to our high wind speeds, about 5c cheaper than burning coal.
But their contribution is capped by the fact production fluctuates and, in the absence of schemes like Lake Onslow, wind energy can’t be stored.
Bardsley says Lake Onslow’s generating capacity should be sufficient to allow about another 2000MW of wind generation to be built over and above what would otherwise make economic sense in the absence of the scheme.
To put that in perspective, another 2000MW of storable wind generation would increase New Zealand’s total generating capacity by about 20 per cent, or could enable the country to move to 100 per cent renewable power today based on current electricity demand.
Bardsley says Onslow could also be used as a buffer when power stations of any kind were taken offline for maintenance, and potentially as a supply of water for irrigation during droughts in Central Otago.
He first identified the potential of Lake Onslow back in 2005, but it wasn’t until last year, when the Government committed $30 million to investigate the opportunity, that it morphed into more than a pipe dream.
The Government has since set aside a further $70m for engineering studies for whatever solution it picks.
The scheme has its critics, not just because of its expected $2 billion to $4b price tag, but also because it appears to challenge the commercial status quo within the electricity market.
Enerlytica analyst John Kidd has likened it to a ‘‘100 pound gorilla’’ that could tip existing market structures on their head and create a ‘‘hard ceiling on electricity prices’’.
Bardsley says that he may have been naive when he first proposed the scheme, as he was hoping for some support from generators.
‘‘It really would help if the Government made a statement at some point about how the scheme was likely to be run and who was likely to own it,’’ he says.
Energy Minister Megan Woods indicated to Stuff last month that the Government had not yet decided whether Lake Onslow or a series of pumped hydro storage schemes in the North Island might make the most sense.
But Bardsley says large energy storage requires a mass of water at a sufficiently high elevation, and the North Island lacks the suitable topography.
Whatever the answer that officials from the Ministry of Business, Innovation and Employment come up with in about a year, the question looks likely to become more nagging.
Bardsley notes there was a 13-year gap between the last dryyear power crisis in 2008 and the current dry year.
But if New Zealand scientists are right about hotter, drier conditions due to climate change, the odds may be in favour of a shorter gap before the next one.