Lake Onslow: bold vision or engineer’s pipe dream?
Thinking big . . . New Zealand Herald Wellington business editor Hamish Rutherford looks into the sudden excitement over the ‘‘engineer’s dream’’ of pumping water up a hill in Central Otago.
IN a winter marked by huge spending promises, Labour’s announcement about the potential of a new lower South Island power scheme was bold: potentially thousands of jobs and a ‘‘game changer’’ for the electricity sector.
Energy Minister Megan Woods announced that a $30 million study on how to address pressures on New Zealand’s electricity system will look at possible options, but with the emphasis almost entirely on just one: Lake Onslow.
Talked about for years, but appearing to gain momentum suddenly, the scheme would pump water from the Clutha River into a massive artificial lake (on top of the existing, much smaller, Lake Onslow) east of Roxburgh.
Unlike conventional hydro schemes, Lake Onslow would pump water uphill to allow it to run back down again later, in and out of the reservoir behind the Roxburgh Dam.
While any pumped hydro scheme will generate less electricity than it uses, the dynamics of the wider electricity market mean this could be a viable idea.
In normal conditions, New Zealand’s predominantly hydropowered electricity system has periods when it has much more fuel than it can possibly use, particularly in the lower South Island, where much of the generation is situated.
Pumping water into Onslow during a time of plenty would provide a backup for other periods when rainfall in hydro catchments is low.
This would — potentially — displace the remaining part of New Zealand’s electricity generation which is currently filled by thermal generation — fuelled by coal and gas — the ‘‘dry year’’ problem.
But it would come at a massive cost. Among other things, the scheme is likely to require a
25km tunnel.
The initial estimates are $4 billion, while observers have pointed to a broadly similar scheme in Australia, Snowy 2.0, running well over its original budget.
Dr Woods’ statement hyped potential, even with the announcement being of no more than a technical assessment to see if the case could be made for further study.
Presenting the study as a ‘‘significant step’’ in the Government’s ‘‘goal for 100% renewable electricity generation’’ she was prepared to talk about jobs.
‘‘The full Lake Onslow project at its peak could employ 35004500 skilled and semiskilled workers, as well as thousands more in indirect jobs.’’
Elsewhere she said the project could be a ‘‘game changer’’ and ‘‘transformative for our energy system’’ while on the proviso, naturally, that this was ‘‘if a business case stacks up’’.
For Dr Woods, this was a major change in tone from a year ago.
The issue of pumped hydro storage was covered briefly in a report by the Interim Climate Change Committee (ICCC) which was asked to report on how the Government could chart a course to 100% renewable generation.
Delivered in early 2019, the report won praise from industry and business groups for its pragmatism; it effectively told the Government its goal was counterproductive.
Achieving 100% renewable generation was possible, the ICCC said, but squeezing out the final few percent of thermal generation would be so expensive it would slow the electrification of New Zealand’s vehicle fleet and industry.
The report treated pumped hydro almost as an afterthought, saying that while it should be considered, there were obvious challenges.
In a Cabinet paper, Dr Woods echoed the concerns. Any pumpedstorage hydro scheme would involve ‘‘significant tradeoffs with environmental goals’’ and could potentially counter commitments under the Treaty of Waitangi.
‘‘My view is that while some of these schemes may be technically feasible, it is by no means clear that they would be undertaken.’’
In an interview, the minister appeared to suggest the case was growing.
‘‘What’s got me excited is the evidence,’’ she said.
‘‘The evidence is that in terms of dryyear storage, on the face of it, it looks like pumped hydro is one of the cheapest options we have in terms of rectifying [the dryyear] problem and unlocking the potential that our lowcost renewable energy system has.’’
Response to the proposal has been divided between sceptical and evangelical.
Some in the industry expressed concerns that while the study is meant to consider all of the options, it is being geared in one, expensive, direction.
Genesis Energy welcomed a study into the electricity system, but warned the costs needed to be stacked up next to the benefits to the system.
Others are promoting a vision. On the afternoon of the Government’s announcement,
BusinessDesk published an opinion piece by Dr Keith Turner, former chief executive of Meridian Energy, warning of the impacts of Covid and the looming closure of the Tiwai Point aluminium smelter.
‘‘These twin crises offer a real catalyst for ‘nationbuilding’,’’ Dr Turner wrote.
Regarded, even by those who admire him, as the type of engineer generally prone to nationbuilding ideas, Dr Turner told the Herald he had pushed hard for the study.
‘‘I’ve been a big driver of this, I don’t mind admitting it, because it [Lake Onslow] is a fantastic possibility.’’
Other business figures, with less obvious expertise in energy, have been active in promoting Lake Onslow.
Rod Drury, the nowretired founder of Xero, has been meeting energy companies, ministers and even seemingly sovereign wealth funds, ‘‘evangelising’’ the idea that New Zealand’s renewable energy system is a competitive advantage in the future akin to Saudi Arabian oil.
Mr Drury outlined how given there was no marginal cost to electricity once renewable generation was built, ‘‘the more you use it, the cheaper it gets’’, pointing to a future of electrified heat, transport and aviation.
He maintained there was a groundswell of support for Lake Onslow from business.
‘‘Everyone is enthusiastically behind it. This is the stuff that we want to do. We want big, fun projects that are good in the long term.’’
And who is everyone? Mr Drury names Trade Me founder Sam Morgan, Warehouse founder Sir Stephen Tindall and former Air New Zealand chief executive
Rob Fyfe, the same trio he earlier named as the business leaders who started the process of New Zealand going into lockdown.
Former Green Party MP Kevin Hague, who is now the chief executive at Forest and Bird, dismissed the hype. ‘‘Not everyone thinks it’s necessarily a good idea. Rod [Drury] and his friends, I’m sure they do.’’
Mr Hague said the correct way to solve a problem was to conduct a rigorous examination of what the problem was, generate all of the possible solutions, analyse them, and work out which was the best.
‘‘That doesn’t seem to be happening here. There hasn’t been that deep understanding of the problem, or the generating of the solution, and my worry about the announcement [on Sunday] is that while on the fine print, the ministers are saying ‘Oh, yes, let’s look at the alternatives as well’, really, it’s all about Lake Onslow,’’ Mr Hague said.
‘‘I fear that we may be dealing with a fait accompli.’’