Onslow power scheme feasible

The odds of a multibillion-dollar pumped hydro scheme at Lake Onslow in Otago getting the green light appear to have increased after the Cabinet expressed confidence in the work done so far.

The Ministry of Business, Innovation and Employment (MBIE) said early analysis suggested Lake Onslow could help smooth out wholesale electricity prices, which have been volatile and soaring over the past few years,

It could also ensure the country had enough power in dry years when traditional hydro output was low.

Engineers engaged by MBIE are in the midst of investigating the viability of the scheme, which could cost $4 billion or more, but which could enable the power system to end its periodic reliance on expensive coal and gas generation to meet periods of peak demand as well as low hydro generation.

Analyst Forsyth Barr said on Wednesday that it expected wholesale electricity prices to rise further due to expectations of higher interest rates, and rising capital expenditure costs for generators.

It said a big increase in the cost of running back-up thermal generation was also having an impact.

Coal and thermal generation is now far more expensive than renewable generation from hydro and geothermal plants and more intermittent wind and solar power.

The Lake Onslow scheme could allow the country to move entirely to cheaper renewables as it would be capable of storing at least 5 terawatt-hours of power, which equates to about an eighth of the country’s total annual electricity usage.

The costs of the project would be highly dependent on the results of engineering studies, and in particular whether rock from the alpine site is of good enough quality to construct the dams it would require, or whether significant volumes of material would need to be trucked in.

MBIE said in its project update that the Cabinet had confirmed a pumped hydro scheme at Lake Onslow ‘‘appears technically feasible at this stage’’, although it said more work was needed to confirm that.

‘‘Early analysis also shows Lake Onslow could mitigate the dry year problem and would support a pathway to a 100% renewable electricity system,’’ it said.

KATHRYN GEORGE/STUFF The Lake Onslow power project has prompted fierce debate within and outside the industry, even before all the facts have been gathered on its likely costs, viability and implications.