Stuart Smith
http://stuartsmith.national.org.nz/
A silver bullet solution is hard to resist: it is easy to promote and potentially the stuff that legacies are made of. Last week we saw Energy and Resources Minister Megan Woods succumb to this, when she doubled down on the Lake Onslow Pumped Hydro Scheme, despite the expected build cost quadrupling.
The potential for pumped hydro at Lake Onslow in the event of a dry year was first identified by Waikato University Professor Earl Bardsley, in 2002. An electricity dry year usually lasts around four months and comes to a head in the colder months when most of the precipitation is locked up as snow and ice and not available to replenish our hydro lakes. Therefore, Lake Onslow was initially seen as a potential solution.
The proposal is to pump water from Lake Roxburgh up through a 23 km tunnel to Lake Onslow, and when needed return the water back down through the tunnel, generating electricity.
Pumped hydro, however, is not a perpetual source of energy as it uses more than it generates due to pumping losses.
Nevertheless, in 2020, Minister Woods embraced the $4 billion proposal as the ultimate solution to address the challenge of dry years and promote decarbonization in the electricity industry. As a result, she established the NZ Battery Project to examine the project’s feasibility and provide a report to the government by 2022.
At the time many critics raised concerns about the cost and the fact that Onslow is in Otago, far from where most of the electricity demand is. Additionally, cost overruns and delays incurred during the construction of the nearby Clyde Dam, largely due to the local geology, were also cited and, based on these factors, delays and cost overruns are deemed inevitable.
Last week The NZ Battery Project reported a shocking updated cost estimate of $15.7 billion – nearly four times the earlier estimate. But, rather than walking away from the project in the midst of a cost-of-living crisis, the minister is trumpeting it with more enthusiasm than before. She committed to a business case being delivered within two years, and the project will take up to nine years to build, which takes it out to 2035 at the earliest.
Large projects are always challenging, usually more so when the government is involved. For example, the Central Rail Link in Auckland announced last week that costs have blown out by over $1 billion and have asked the government and Auckland Council for more money.
We should take a close look at the Snowy 2 Pumped Hydro Scheme, which is still under construction in Australia, and learn from their experience. I say ‘still’ under construction because it was expected to be completed in 2021 but is now expected to be finished in 2027, at the earliest, and at a cost of AU$10 billion: a staggering five-fold increase. Which is widely expected to be an underestimate.
There is no question that pumped hydro can play an important role in our electricity sector, but it must be the right project in the right place. Our electricity companies are best placed to make those assessments and to manage the risks, not the minister.
Let go of your silver bullet minister, before you shoot us in the foot.