Pumped Hydro Report: September 2020

Building Back Better

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Source: ODT article titled Massive hydro storage plan to be reassessed, 18 September 2019


  1. Pumped Hydro: Introduction by Brendon Harré

2. New Zealand’s Green Grid by Brendon Harré

3. A Credit Injection to the Electricity Grid Would Boost New Zealand’s Economy by Brendon Harré

4. Build the Dam -Save the Planet by Brendon Harré

5. Pumped Hydro: Extended Comment by Prof Bardsley

1. Pumped Hydro: Introduction by Brendon Harré

Transitioning to a carbon-zero economy will require big initiatives, such as, pumped hydro

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Schematic of a pumped hydro plant

Something that I have been following for a while now is the benefits of pumped hydro for New Zealand. Prior to Covid-19 pumped hydro was coming to the top of the pile of worthy initiatives requiring policy assessment. With the disruption of the pandemic there was a concern this assessment would not happen.

Fortunately there was a significant announcement regarding pumped hydro at the end of July.

The government will fund a $30 million business case that addresses New Zealand’s dry year storage problem. The analysis will mostly focus on a pumped hydro storage project at Lake Onslow in Central Otago but will also include the assessment of smaller potential pumped storage options in the North Island, as well as other alternative technologies.

This is fantastic news because pumped hydro has a strong case on its own merits. Also in this time of sustained economic crisis when economic activity is much reduced and borrowing costs have never been lower, nation building schemes such as pumped hydro can support recovery efforts.

The idea of pumped hydro is to build high altitude storage lakes so that water can be pumped up to them when there is a surplus of generation capacity and electricity prices are low. Then when electricity is in short supply and prices rise the pumps can be reversed to generate electricity. Pumped hydro is considered the cheapest known technology method for doing large-scale energy storage; its ’round trip’ energy efficiency rate is about 75 -80%.

In the New Zealand context, the biggest energy storage need is for our periodic ‘abnormal hydrological’ years, this is also known as the ‘dry year’ risk. Basically, if not enough rain falls on hydro lake catchments so that lake levels fall to the degree that the electricity market becomes concerned, then wholesale electricity prices shoot up and fossil fuel generators (coal and gas) come on stream.

That is, coal and gas provide the backup energy supply for New Zealand’s electricity industry. In other countries with large hydro schemes they also have large amounts of energy storage within their hydro system. For instance, Norway has many month’s worth of generation capacity that easily covers increased winter demand even in a low rainfall year. Unfortunately, in New Zealand it is only 6 weeks.

A hydrologist in New Zealand, Associate-Professor Earl Bardsley, has investigated a pumped hydro scheme for New Zealand that would provide a renewable energy storage option to cover the electricity industry’s dry year risk.

Pumped hydro could also help fix the flaw in the electricity market laid bare by preliminary ruling against Meridian. The flaw being low cost generators have a perverse incentive to cause spikes in the wholesale electricity market, by various techniques such as spilling hydro lakes or manipulating maintenance schedules, so that the very last megawatt needed to match supply and demand in the wholesale market is generated by expensive ‘per unit’ power stations -often generators that burn fossil fuels.

The Interim Climate Change Committee (ICCC), a ministerial advisory committee created by the New Zealand Government, has taken an interest in the pumped hydro proposal because it helps New Zealand transition to 100% renewable electricity supply. The committee recommended in its 2019 report a more in-depth study be done on pumped hydro from a technical, economic, cultural, environmental and social perspective.

It is good that the government has followed this official advise.

The next article on New Zealand’s Green Grid details the various responses to the pumped hydro announcement and outlines some of implications.

2. New Zealand’s Green Grid by Brendon Harré

Nation-building is back!

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Readers will know I have advocated for New Zealand to build pumped hydro. Back in May I wrote the article -Electrifying the Recovery published in the Greater Auckland website that described how electrification could be a boost to the economy. I also wrote Rebuilding New Zealand by Reinventing Public Works which had a similar theme. Pumped hydro was a key practical component of these papers.

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Source: Transpower report Whakamana i Te Mauri Hiko — Empowering our Energy Future P.23

The significance of pumped hydro for the urbanism topic which I usually write about is that it helps secure the needed low-cost renewable electricity supply required to meet the expected ramp of demand coming for vehicle electrification.

Since writing those papers, I compiled a detailed report on pumped hydro (which I am now further updating), including a very popular extended comment on the proposed Onslow pumped hydro scheme written by hydrologist Prof Earl Bardsley.

There was the significant announcement regarding pumped hydro at the end of July.

The government will fund a $30 million business case that addresses New Zealand’s dry year storage problem. The analysis will mostly focus on a pumped hydro storage project at Lake Onslow in Central Otago but will also include the assessment of smaller potential pumped storage options in the North Island, as well as other alternative technologies.

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Brian Fallow from the NZ Herald reports that Lake Onslow hydro storage scheme is no pipe dream, it “may well be an idea whose time has come”.

If the Onslow pumped hydro business case is successful it is estimated construction would take about four to five years to complete, plus two further years to fill the reservoir. There would need to be a one-off energy input of around 2,000 GWh to pump up to a minimum operating level, and perhaps a further 2,500 GWh to increment up to mean operating level. In this sense, closure of Tiwai is helpful if Manapouri power can get across to Onslow.

During the construction phase an estimated 10,000 direct and indirect jobs will be created. It will be a multi-billion-dollar project, perhaps as much as $5bn if the costs of electrical grid upgrades are included. It would be New Zealand’s largest single infrastructure project since the 1980s.

The Onslow pumped hydro project can remedy ‘dry year’ risk, when for example, a 15 percent reduction in water inflow into the southern hydro lakes translates into a deficit of 5,000 Gwh over a six month period. Onslow offers multi-year storage that could provide 5,000 Gwh of dry-year energy as well as intermittency support for any amount of wind and solar expansion.

On the whole, the announcement has received good feedback. The few disagreeing voices have either been vested interests or they have not understood the capital cost of the project will be offset by savings from lower wholesale electricity prices.

Both the current and a former co-leader of the Green Party -James Shaw and Russel Norman -support the pumped hydro business case announcement. They believe the environmental benefits to climate change will outweigh local environment effects. Although they do believe the local environment effects need to be fully mitigated against.

Possible mitigations suggested in Prof Bardsley’s extended comment include -creating floating wetlands to replace flooded swamps, a large predator free wildlife sanctuary around Lake Onslow, and returning lake level variability in the other southern hydro lakes to more historic patterns which will be helpful for a number of reasons, not least that the more erosion prone hydro lakes will be better protected.

Vector, New Zealand’s largest distributor of electricity, has welcomed the government’s announcement. They state, “as fossil fuelled generation plants retire, pumped hydro would provide a smooth and reliable transition to a 100% renewable system alongside customer investments in solar and other technologies.”

Business journalist Rod Oram spoke about the wider climate change and economic picture in an RNZ interview. While in another RNZ interview Prof Bardsley the originator of the Lake Onslow project gave a good summary of the proposed scheme.

Onslow + grid upgrades + smaller North Island pumped hydro can collectively be called the ‘Green Grid’ as a short-hand description.

In the coming years, the Green Grid will be important to a Jacinda Ardern government because it gives practical intent to the statement “climate change is my generations nuclear free moment”.

When the Green Grid is built, Huntly and other peaking coal and gas electricity generation plants will close. Pumped hydro will provide lower cost peaking electricity generation. New Zealand will achieve 100% renewable electricity. The green electricity economy will not suffer the approximate 1-in-10 dry winter risk that would otherwise close down the renewable energy economy. The Green Grid will provide a secure supply of low-cost renewable electricity. In a sense it is like insurance that protects the electricity system against variable rainfall i.e. the dry year risk, and against the intermittency of wind and sun.

Pumped hydro will buy electricity for storage when wholesale electricity prices are low and sell electricity for generation when prices are high. The effect of this arbitrage buying and selling is it decreases the variability of electricity wholesale prices (seen in the every 30 minute electricity spot market). The floor price will be higher, the ceiling price lower and the average price will be lower because the ‘dry-year’ risk premium built into the market will be gone. This will make wind and in the near future solar electricity generation more financially viable. Thus, it brings forward investment in renewable electricity to match the coming ‘ramp’ of demand.

If the Onslow scheme proceeds it will give generation constructing firms the certainty and confidence to invest in renewable energy construction on a larger nation-wide basis. Therefore this decision will boost construction employment more broadly than that directly or indirectly associated with constructing the Central Otago scheme.

If the New Zealand governments commits itself to Green Grid investments this might have a similar catalyst effect as New South Wales government’s plan to establish a renewable energy zone which received a “phenomenal” response, attracting 113 registrations of interest for projects totaling a massive 27 gigawatts and valued at $38 billion.

The Green Grid puts New Zealand on a pathway towards a zero-carbon economy. The Green Grid would be a significant start to a national energy plan covering the next 30 years that the Climate Change Commissioner Rod Carr says New Zealand needs. The Green Grid will provide a positive example to the rest of the world for what is possible. New Zealand can again take the role of being the world’s laboratory.

Being an early starter in electrifying the economy will give New Zealand firms and workers an advantage in creating and selling globally the products and services needed to maintain the electrified economy.

If New Zealand genuinely embraced the 100% Pure brand with practical initiatives, such as the Green Grid, this could reward the country handsomely.

The government can borrow at exceptionally low cost. Currently New Zealand 10-year Government Bonds have a 0.750% yield. Therefore a $5bn price tag for the Green Grid is not as expensive as it appears. If the government debt funded the entire project at a 1% interest rate, then the interest cost is only $50m a year. If the debt was repaid over a 50-year period in equal instalments, then the capital repayments would only be $100m a year. Note the business case will give a better accounting of these financial costs.

In comparison the motorway project Transmission Gully was planned to cost the country $125m per year over a 20-year period due to the public private partnership arrangement that the previous government signed the country up to. Since then costs have risen by a further 40%. I believe the benefits to New Zealand from pumped hydro far exceeds many of New Zealand’s recent infrastructure projects, such as Wellington’s motorway project. For a quite modest cost the country gets a clear pathway to a carbon-zero economy that is fully protected from its most significant risk factors.

Yet even the modest debt cost for building pumped hydro could be offset by significant savings in wholesale electricity prices. It is possible that pumped hydro’s arbitrage operations will lower prices to such a degree, that in effect, there is no cost for this climate change initiative.

Dr Keith Turner, the former chief executive of Meridian Energy from 1999 to 2008, has given his professional opinion that if the cost of the Onslow pumped hydro scheme was spread across all electricity consumption, like an insurance premium, it would be only 0.5 to 0.75 cents per kilowatt hour. That is about $50 a year for an average household. Whereas wholesale electricity prices would likely drop by twice this much once the scheme begins operating. Note Turner’s opinion piece is a great read and fully demonstrates how large a nation-building opportunity the Onslow pumped hydro scheme is.

Constructing the Green Grid will likely require the use of tax-funded debt. The initial benefit is the boost to employment and incomes to construction workers and firms which is helpful for recovering from the Covid Recession. Yet importantly the assets once completed will benefit future generations that we are borrowing from. The borrowing will provide them with a low-cost domestic energy supply that is secure against major risk factors whilst also taking a significant step towards addressing climate change.

There are different funding options for the Green Grid. The government could pay the capital and interest costs from the consolidated fund and ‘gift’ the Green Grid, including a completed and filled Onslow to a crown entity to manage. The most obvious entity being Transpower who would manage the operating costs and revenues resulting from the buying and selling arbitrage operations on a financially neutral basis (non-profit/non-subsidy over the long term).

In this case, Transpower’s legislated public purpose should be security of supply, lowest possible transmission costs and facilitating competition of supply for new entrant renewable generation. Over time renewable electricity generation is tracking down in price (unlike coal and gas which is tracking up). Facilitating the competitive entry of new renewable generation into the electricity market should result in wholesale electricity prices falling. Which should mean consumers gaining an even greater advantage, as electricity prices will over time be lower than they would otherwise have been.

More competition is certainly needed in New Zealand’s electricity market. The Electricity Authority recently found Meridian Energy guilty of manipulating the electricity market at a cost of $80m to consumers.

Other funding models could include Transpower gaining the right to borrow like Kainga Ora. That it repays the debt for building the Green Grid by either a higher line charge levy or through its buying and selling arbitrage operations. The second option meaning the effect on electricity per unit charges would be higher than the other counter-factuals.

The business case will fully analyse the overall market effect of replacing high cost peaking coal and gas with lower cost renewables that is fully buffered by pumped hydro.

Megan Woods the Energy Minister has discussed the business case process, she highlights how pumped hydro will allow New Zealand to take full advantage of its abundant renewable natural resources to produce some of the lowest cost and cleanest electricity in the world.

Whatever funding model the business case lands on I am satisfied the correct process is in place to determine the right option.

3. A Credit Injection to the Electricity Grid Would Boost New Zealand’s Economy by Brendon Harré

What would New Zealand’s version of the Hoover Dam look like?

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Hoover Dam in the US was built during the Great Depression

New Zealand’s economy due to the corona virus pandemic is heading towards a recession that will be worse than the global financial crisis by some margin. The government in an effort to sustain the economy is quite rightly borrowing to invest in ‘shovel ready’ projects. Another option along this theme would be if state-owned enterprises had their debt limits raised so they could invest too.

This paper recommends Transpower be given the power to issue bonds or debt like housing authority Kainga Ora has been. The purpose being to invest in the electricity grid in order to better transmit and store electricity.

The economic activity of building various civil works would provide the short-term benefit which the economy needs. When the projects are completed there would be long-term benefits as some of the flaws in the electricity market would be addressed.

New Zealand’s free market reforms to the electricity industry since the 1990’s have overall been successful. New generation has come on stream when needed and this supply has been the lowest cost provider.

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Less positively residential electricity consumers have experienced significant real price increases (inflation adjusted).

An examination of New Zealand’s electricity industry shows that Transpower investing in better systems for transmitting and storing electricity could help better regulate the electricity market, especially as the industry heads towards its goal of 100% renewable electricity supply.

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Huntly Power Station on the banks of the Waikato River

The Huntly Power Station is the biggest carbon dioxide greenhouse gas emitter in New Zealand’s electricity system.

If Huntly is permanently mothballed this will be a big step towards New Zealand achieving its 100% renewable electricity by 2035 goal. New Zealand will only terminate Huntly when it is confident it has enough generation and stored capacity so that it can produce 100% of its electricity from renewable sources regardless of adverse conditions.

The Huntly Power station is operated by Genesis Energy Limited (currently 51% owned by the New Zealand Government). It is capable of supplying over 31% of the country’s electricity needs.

Huntly is the largest electricity generation facility in New Zealand by capacity. It is made up of two modern gas fired and two gas/coal fired generating units. The power station has access to energy in the form of coal and gas supplies that are not affected by adverse weather conditions. Huntly is therefore frequently the electricity supplier of last resort.

Genesis has announced a plan that from 2025 it will only use coal thermal generation in abnormal market conditions. Probably meaning some combination of high demand and low supply, so a fairly meaningless statement, as that is what they currently do. Genesis further announced that they intend to stop using coal completely from 2030. Genesis has made no announcement about discontinuing the use of gas fired generation.

In other words, Genesis is not planning on stopping its Huntly Power Station greenhouse gas emissions, but it will transition over the next ten years to a less emitting option (gas).

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Vestas to install 27 Wind Turbines at Turitea Wind Farm for Mercury Energy near Palmerston North. Credit: Anna Jimenez Calaf on Unsplash

Will the electricity market deliver more renewable generation? Yes. New wind power generation only costs $60 per MWh versus $200 for gas.

Electricity market analyst Neville Gluyas -author of Market delivers the power and cuts carbon for the NZ Herald -states that renewable generation now makes up 84% of generation compared to 71% 20 years ago. He notes that wind and geothermal power are much cheaper than 10 years ago and much cheaper than the current forward wholesale price of electricity. It is predicted that renewable generation will increase to over 93% by 2035 in a business as usual scenario by the Interim Climate Change Committee.

The way the electricity generation market works in New Zealand, the marginal provider -the last most expensive generation bid needed to meet demand -in every half-hour period, sets the wholesale price for all generators for that period.

Whenever demand for electricity is high and supply is low, then the high wholesale prices are likely to have been set by thermal generators, such as Huntly. At other times, when prices have been low, it is likely to have been set by renewable generation.

Eventually, over time wholesale prices filters through to the retail price.

Since the market was deregulated in the 1990’s it is estimated that $10 billion has been invested in new generation, mostly in renewables. The electricity market has successfully matched supply with demand. When demand has increased supply has followed. When demand settles so has supply. In the coming decades there will be tens of $billions of further capital investment into renewable power generation.

The electricity market has effectively allocated resources for new generation capacity and is likely to continue doing so. Unfortunately the market is less effective at allocating resources for transmitting and storing electricity.

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Older readers may remember the anger about the five weeks in 1998 when Auckland’s central business district lost power. At that time there was a more laissez faire attitude to the electricity market. Since then electricity retailers and government transmission provider -Transpower have been more diligent about ensuring transmission infrastructure is maintained and upgraded.

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Transmission costs are set nationally and users are charged equally regardless of distance and cost of supply. Some users such as Rio Tinto argue this is unfair as they are paying for the transmission capital costs of New Zealand’s expanding population. In reality it is residential consumers who are paying the most and energy efficiency efforts have minimised demand growth in recent years, so the issue is not as unfair to Rio Tinto as it makes out.

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Greenpeace has been campaigning for Fonterra to stop burning coal to dry milk for a decade.

Rio Tinto has threatened to close down its aluminum smelter at Tiwai Point unless they get cheaper power. There would be economic and environmental costs for closing down a clean energy aluminum smelter but there would also be gains.

The smelter uses 13% of New Zealand’s electricity supply and if this was released onto the market, electricity prices would fall for residential users, especially in the South Island. This will require a grid upgrade which is currently being undertaken. Potentially other industrial users could also utilise this energy to become less polluting -such as replacing Fonterra’s coal fired milk dryers -if they had secure access to lower priced electricity. An international commentator has said that drying milk using coal is insane.

There is a policy making effort by the Electricity Authority to move to a more free market users pays system for allocating transmission costs, but the issue is hotly contested, even among the big industrial major energy user group.

Storage capacity is another flaw in New Zealand’s electricity market. Existing generators have little incentive to increase storage capacity because that would lead to lower prices for the electricity they supply.

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New Zealand doesn’t have high electricity prices compared to many OECD countries but Norway the country most like New Zealand from a electricity perspective has much cheaper prices.

Norway uses a similar marginal pricing market model to New Zealand and it has a high proportion of its generation capacity as hydro power too. The main difference between the two countries is Norway has many months of stored generation capacity and New Zealand has a little over a month i.e. if the feeder rivers dry up, the hydro lakes in New Zealand would be empty in about 5 weeks versus many months in Norway.

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Alta dam, one of Norway’s 937 hydro power stations that provide 98% of the nation’s power.

Hydro power stored energy can be calculated by multiplying the stored water volume by the height difference between the storage lake and the outlet power generator. Many of Norway’s hydro lakes are high up in the mountains with long tunnels between their lakes and power turbine generators. It is this height difference in particular which gives Norway the advantage of greater energy storage.

Norway’s greater storage capacity means electricity supply is more stable and so is its marginal prices.

It has been suggested that Norway’s hydro-electrical system could be Europe’s battery that could soak up the continents excess wind and solar power and release it on demand. The article -Norway could be Europe’s green battery -interestingly describes this opportunity, while others say Norway Can’t Become Europe’s Battery Pack.

Norway is in the fortunate position where its large store of energy in its hydro lakes means it can cover the country’s natural variation of supply and demand for electricity. It can even consider extending this cover to neighbouring countries.

Low electricity prices, high gasoline prices and generous support for buying electric vehicles mean that over half of Norway’s car sales in 2019 have been plug-in electric.

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The effect of New Zealand’s lack of lake storage capacity can be seen on its wholesale spot prices in the above and below graphs.

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Effect of March 26 2019 rain event on wholesale electricity prices. Prices are median daily values at Haywards node (excluding weekends). Daily storage values provided by NZX.

The sudden increase in hydro energy storage at the end of March 2019 is an example of how storage affects marginal wholesale prices, as it led to a quick price drop to around $120 per MWh. In other words, if electricity storage had been at 3,200 GWh from the start of March then prices would have been $80 per MWh cheaper.

There was also an environmental effect because it meant more coal-fired power generation. In the two weeks prior to the flood events the rate of coal burning at the Huntly Power Station was never less than 7,000 MWh per day.

Note in this scenario, if a carbon tax was implemented, then the coal might not have been burnt but the electricity price would have been even higher, and some consumers would have been priced out.

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Source. Note full hydro storage capacity in New Zealand is 4000 GWh. The Lake Onslow scheme would more than double that.

New Zealand does have the option of moving towards the Norway situation by building more hydro storage capacity.

Pumped hydro storage schemes can significantly increase storage capacity by pumping water to a sufficiently large and/or sufficiently high new storage lake when there is a surplus of generating capacity (and low prices) and reversing the pump to generate electricity when there is a shortage of electricity supply in the grid (when prices are high).

A proposed pumped hydro storage scheme in Lake Onslow, Central Otago near Roxburgh has a realisable potential energy in excess of 5,000 gigawatt hours that could buffer the country’s electricity system during a dry year.

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Picture of the existing Lake Onslow dam. Unlike the Hoover Dam the proposed Onslow pumped hydro scheme would be a low earth dam. It could be built in stages and landscaped into the environment. The biggest civil works component of the scheme would be the 24 km tunnel.

The Lake Onslow scheme could also address intermittency for new North Island wind generation, such as Turitea Wind Farm, that may be required for growing North Island demand. But that would necessitate an upgrade of the Inter-Island HVDC link. Smaller backup ‘peaking’ generators near the wind generation sites, such as, battery storage or smaller local pumped storage schemes may be the better option for intermittency of wind, as the scale of the required backup generation is much less than for the ‘dry year’ hydro problem.

If these transmission and storage issues were addressed then low cost renewable generators would receive a good price even when there is a ‘surplus’ of electricity generation because that additional supply can be stored. This will lower entry costs for new electricity suppliers thus enabling a more competitive market.

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Lake Onslow Reservoir. The small dam creating the existing lake flooded the original wetland. If a bigger lake for the pumped hydro scheme was constructed it is suggested new wetlands could be created to mitigate the environmental effect.

With an estimated capital cost of around $4 billion, the Lake Onslow project has a strong economic case, due to its low kilowatt per hour capital costs for storing energy. It would be large ‘battery’ that is more competitive than any of the other storage options, especially for long-term storage, at the scale New Zealand needs. The economic competitiveness of the Lake Onslow scheme is acknowledged by the April 2019, Interim Climate Change, Dry Year Storage Options Analysis report.

Within the energy industry it is widely known that pumped hydro is the only viable option for storing the amount of terawatt-hours that New Zealand needs to cover its unique dry year risk. There is unfortunately in public circles a lack of technological understanding of the problem. Meaning that conversations about solutions are easily diverted toward illusions like seasonal hydrogen storage, electric battery storage, over building of renewable generation plant or dry year closure of industrial plants such as Tiwai Point Aluminum smelter.

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Source: Transpower report Whakamana i Te Mauri Hiko — Empowering our Energy Future P.69

A close examination of the options, such as Transpower has undertaken shows the only real choice is sticking with the status quo of using gas peaking plants which emits carbon or building pumped hydro which might have difficulty getting consent. All other options are more expensive.

The consent issue essentially hinges on public support. Further discussion of this issue is in the paper Build the Dam -Save the Planet.

The capital cost efficiency of New Zealand using pumped hydro to store energy is illustrated by New Zealand’s Lake Onslow scheme compared to Australia’s Snowy 2.0 scheme which is part of Australia’s ‘battery of the nation’ initiative. The schemes are roughly the same in terms of construction cost, but at 5 TWh the Onslow scheme would have 14 times more energy storage capacity than Snowy 2.0.

Tasmania is forecasting that the combination of low-cost wind and solar energy backed by flexible hydro power will be the lowest cost form of energy available to consumers in the future. They believe investing in pumped hydro will trigger a big growth phase that would mean more regional jobs and more investment. Feasibility studies involving community consultation have already started and a decision about which pump hydro scheme to commence is expected to be made by the end of 2020.

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Water spills over the Waitaki Dam in this June, 2019. Source -Stuff article -Hydro scheme water spill warnings for those in Waitaki and Mackenzie districts

Pumped hydro storage has low operating costs. The round trip efficiency rate of pumped hydro is considered to be about 75%. The Lake Onslow scheme would be more efficient because it would allow the existing hydro storage lakes in the Waitaki river system to run at lower lake levels so they can store more water during flood events. The net effect of Lake Onslow coupled with improved Waitaki flood storage options could mean the round trip efficiency of Onslow is in excess of 100%. Prof Bardsley further describes these hydrological considerations in his Extended Comment paper.

For ease of demonstration this paper assumes that Onslow pumped hydro scheme is 80% round trip efficient. Meaning once Lake Onslow was operational, electricity could be purchased for $60 MWh from a wind power generator when they have surplus power and later sold for $75 MWh when grid power supply is short. This would be the pricing that breaks-even when considering only the ‘energy loss’ factor. Note $75 MWh is much cheaper than $200 MWh that thermal gas generators would charge for backup electricity supply.

Potentially the pumped hydro storage option could provide a transition to 100% renewable electricity whilst delivering lower and more stable electricity prices than the business as usual option.

As discussed earlier, it is unlikely that any existing generator will build dry year energy storage because it devalues their future revenue by lowering wholesale electricity spot prices.

For this reason, Transpower should build and operate energy storage schemes. If the state-owned enterprise borrowed the capital costs it could repay the debt by either adding a ‘security of supply’ line charge for electricity users, or it could increase the spread between the scheme’s electricity buying and selling prices to cover capital as well as operating costs.

For ease of demonstrating the approximate size of the cost to electricity users, if only New Zealand’s 1.5 million households (so not the industrial and commercial users) paid $4.5 billion in capital costs for Lake Onslow and transmission line upgrades and the debt was repaid over 35 years at an interest rate of 1% (low because of the economic recession) then the cost per household would be less than $10 a month.

In exchange for this higher line charge, per unit household electricity charges would be lower and more stable, as wholesale electricity spot prices would not rise above $75MWh, possibly even lower if renewable generation costs continues to fall.

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Example of the NZRB providing direct monetary stimulus to the real economy. Source -Stuff -Housing on the State. The above quote originally sourced from ‘State Housing in New Zealand’ published by the Ministry of Works in 1949

If the economic downturn becomes more extreme then Transpower directly accessing Reserve Bank credit to stimulate the real economy should be considered as explained by a recent Interest.co.nz article -Raf Manji urges the RBNZ not to make the mistake of previous overseas QE programmes by focusing entirely on supporting the financial markets. Reserve Bank credit could be extended until inflation becomes more concerning than the costs of the economic downturn.

Greater investment by Transpower in the transmission network and security of supply may end the thirty year above inflation rise in electricity prices for residential households as it will allow greater entry into the market by lower cost generators. In the coming decades tens of $billion will be invested in renewable generation. Meaning Transpower investment in security of electricity supply and the national grid will provide a significant stimulatory effect to the economy.

Lower electricity prices and more stable supply will lead to a faster ‘electrification’ of the economy, for example by the greater uptake of electric vehicles, as seen in Norway or by big industrial users, such as Fonterra converting from fossil fuels to renewable electricity.

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Transpower predicts 68 per cent growth in energy demand between now and 2050 as ‘the ramp’. Figure 3 shows why. The ramp in energy demand is slow in the five years between 2020 and 2025, from 42 to 44 TWh, but materially grows in the 2025–2030 period, in which total energy demand increases by approximately 10 per cent from 44 to 48 TWh. Source: Transpower report Whakamana i Te Mauri Hiko — Empowering our Energy Future P.23

Transpower in its recent report described this ‘electrification’ of the economy. They already see evidence of this occurring. Their prediction is it will continue to ‘ramp’, especially from 2025. Transpower also commented that managing dry year risk (P.75) is the energy industry’s biggest challenge which could jeopardise the electrification process.

Transpower further stated in the past, such as 1992, 2001, 2003 and 2008, dry years have been severe enough for New Zealand consumers to be asked to conserve electricity. As New Zealand transitions to a decarbonised economy, this risk increases and requires much greater focus to manage. Drivers for this increasing risk are growing peak and energy demands, combined with retirement of baseload gas capacity and growth in weather-dependent renewables.

Transpower clearly describes that New Zealand needs to make a decisive decision on how to manage the dry year risk.

The dry year risk is a unique and significant challenge that has the potential to disrupt our journey towards a decarbonised economy and materially set it back. This is the biggest challenge we face. It requires clear and decisive ownership of the decision around what New Zealand must do to address it (P.76).

$4 billion in capital costs for the Lake Onslow storage scheme may seem like a lot of money but if it is evenly spread across New Zealand’s roughly 1.5 million households it is less than $3000 per household. Because such a large-scale energy storage project would be an inter-generational piece of infrastructure, it should be considered like a mortgage that is paid off over many decades. This means the cost for transitioning to 100% renewable electricity is not significant in any one budgetary year and the costs even in the near term will be much less than the benefits.

For those vulnerable New Zealanders who might not use a lot of electricity (so not benefiting as much from lower per unit prices) the approximately $100 per year in extra line charges could be mitigated by increasing the winter energy payment grant.

For the government having a SOE capable of independently planning and implementing a large public infrastructure programme takes the pressure off the Infrastructure Reference Group having to manage the process, which is useful given the pressure they will be under managing stimulatory infrastructure provision elsewhere in the economy.

Before Transpower can plan and implement this work programme a more in-depth study on pumped hydro from a technical, economic, cultural, environmental and social perspective as recommended by the Interim Climate Change Committee (ICCC) needs to be completed. This study should be progressed with urgency.

4. Build the Dam -Save the Planet by Brendon Harré

As environmental concerns go from local to global “Stop the Dam -Save Manapouri” becomes “Build the Dam -Save the Planet”

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A 1:600 scale model of the Manapōuri Power Station showing the pipes (blue) which transport water from the lake to the generators, and the vehicle tunnel (yellow) accessing the turbine hall

New Zealand’s environmental movement as a nationwide entity was established 50 years ago to stop the Lake Manapouri dam. This dam intended to raise the lake level 24m to create a super lake with Lake Te Anau that could generate a large amount of electricity once the Manapouri power station was built.

The ‘stop the dam’ campaign was successful. Lake Manapouri kept its original lake level and a smaller power station that generates less electricity was built.

This paper calls for the building of a dam. Specifically, a dam that would raise the level of Lake Onslow Reservoir in Central Otago. This would allow the creation of a large pumped hydro scheme for the purpose of increasing energy storage capacity within the electricity system so that fossil fuel peaking generators that are currently fulfilling the ‘backup’ storage role can be closed down.

Once the first stages of pumped hydro are built this would gradually allow the building of more ‘buffered’ renewable generation to shift New Zealand from its current 82% to a 100% renewable electricity system. Even in the periodic abnormal hydrological years that New Zealand experiences the country would not require the ‘back up’ electricity generation capacity that fossil fuels have historically provided. There would be security of supply.

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Source: Interim Climate Change Commission: Accelerated electrification Evidence, analysis and recommendations report 30 April 2019

Large storage capacity pumped hydro schemes, such as Lake Onslow, would also provide downward price pressure on generation thus speeding up the ‘electrification’ of the economy and it would assist in providing a ‘just transition’ to a zero-carbon society. In this way New Zealand could tackle its energy trilemma.

Why am I advocating for building a dam when the environmental movement in New Zealand has such a successful history stopping dams being built? Because the same motivation exists as those stop the dam protesters 50 years ago. The New Zealand Geographic in their article Manapouri Damning the Dam details this motivation.

A member of a Save Manapouri street march in Wellington spoke for many when, in answer to a television interviewer’s question, he said he was “marching for his children”

Those early environmental protesters wanted to save the pristine Lake Manapouri environment which was in a national park so that future generations could treasure (taonga in Maori) undisturbed-by-man environments.

This century the biggest threat to the environment is climate change. If global warming cannot be stopped then as the world warms past two, three, four degrees life for our children and their children will become very bleak.

The plan to save the planet is to stop burning fossil fuels. To that end the government has announced commitments for New Zealand to achieve a 100% renewable electricity system by 2035 in a normal hydrological year and for the economy to be zero carbon by 2050.

The most exciting practical idea I am aware of that would allow New Zealand to achieve 100% renewable electricity supply is pumped hydro. Because it doesn’t require the overbuilding of renewables which would be idle for much of the time that the Interim Climate Change Committee described as prohibitively expensive, it doesn’t require the creation of an unproven hydrogen economy and it doesn’t require the invention of new technology that radically shifts global energy markets.

Pumped hydro is known technology. The technology is doable. We just have to decide whether the best scheme in New Zealand -Lake Onslow -is worthwhile doing or not.

In March 2020, I contacted Associate Professor Bardsley (Hydrology) at Waikato University who is the originator of the Lake Onslow scheme to enquire about developments in pumped hydro for New Zealand. He drew my attention to released information indicating the Minister of Energy and Resources would report back to Cabinet by the end of 2019 on who would be an appropriate agency or agencies to undertake the investigation into pumped hydro, and by when and at what cost.

The Minister was responding to the Interim Climate Change Committee 2019 report, which recommended a more comprehensive investigation of pumped hydro storage to meet dry year, intermittency and peak capacity requirements. The committee found that pumped hydro was the lowest cost option for abating CO2 emissions. The executive summary stating;

A pumped hydro scheme at a scale that could solve New Zealand’s dry year problem shows promise. Such a scheme could also help manage demand peaks and increased levels of intermittency. The Committee recommends that the Government investigates the potential for pumped hydro storage to eliminate the use of fossil fuels in the electricity system.

Prof Bardsley provided me with an extended comment he has written that he expects to be publicly available on MBIE’s website in response to the question. “What is the best way to meet resource adequacy needs as we transition away from fossil fuelled electricity generation and towards a system dominated by renewables?”

This details a strong case for how the Lake Onslow pumped hydro scheme could assist New Zealand transitioning to 100% renewable electricity, including for abnormal hydrological years.

Australia has clearer thinking and is more advanced on pumped hydro policy making. You can read detailed government plans and explanations on government websites such as this.

Australian politicians in previous years have been more supportive of pumped hydro. For example in an article titled -It’s time to win climate wars -right wing NSW Environmental Minister Matt Kean is quoted as saying renewables backed up by pumped hydro offered the cheapest way to deliver electricity, adding, “It’s not nuclear, it’s not coal, it’s not gas.”

Australia have selected several pumped hydro schemes to build. For example, Snowy River 2.0 is budgeted to cost $5 billion. Lake Onslow compared to Snowy River 2.0 will have a lot more energy storage capacity and is possibly less expensive to construct. In terms of cost for energy storage capacity gained Onslow comes out much better.

Australia uses inspirational language such as ‘battery of the nation’ to describe their pumped hydro and electricity grid upgrade opportunities. Perhaps it is time for some inspiration in New Zealand? The Green Grid could be a good short hand term for pumped hydro and the part it can make towards New Zealand becoming carbon-zero.

Further Reading

The world’s water battery: Pumped hydropower storage and the clean energy transition: International Hydropower Association working paper, December 2018

5. Pumped Hydro: Extended Comment by Prof Bardsley

Paper written in response to the following question from the Ministry of Business, Innovation and Employment (MBIE).

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Lake Onslow

Question: What is the best way to meet resource adequacy needs as we transition away from fossil fuelled electricity generation and towards a system dominated by renewables?


I would like to suggest a multi-faceted study, including community involvement, to be carried out for a possible pumped storage scheme in Central Otago, using Lake Onslow as the upper reservoir. A single 5 TWh pumped storage scheme at Onslow could enable an end to all coal use in New Zealand for industrial heat and power generation, provide resilience of electricity supply for accelerated electrification, produce net power gain to the national grid, provide buffering to enable 2,400 MW of new wind generation capacity, and create downward pressure on electricity prices.


The current (February 2020) situation is that following the ICCC (1) report’s recommendation for pumped storage investigation in New Zealand, the Government Response (2) was that Cabinet would be notified by the end of 2019 as to suitable agencies who could carry out the task. Whether this resulted in investigations of specific sites had not been made public at the time of this submission.

An in-depth study of pumped storage possibilities in New Zealand is overdue, taking into account the intended shift to more renewables and our ongoing vulnerability to dry year risk (3). We presently lag behind Australia, where the Government has association with pumped storage (4), research funding explicitly includes pumped storage (5), and discovering good pumped storage sites can be a cause for celebration (6).

New Zealand Engineers (7) have been advocates of large-scale pumped storage as one of the components to aid transition toward reduced carbon emission. Unfortunately, at New Zealand Government level there has been an element of diversion into an unrealistic belief that hydrogen might play a significant role in seasonal energy storage (8). Also, rather than support research on better application of existing energy technology, the current $50 million Advanced Energy Technology Platform is restricted to research proposals that will “have the potential to radically shift the global energy landscape”. It may be that something akin to practical cold fusion will be discovered in a New Zealand university basement. However, and with no disrespect to my Engineering colleagues, it is more likely that nothing of note will emerge after seven years when the funding ends. By then, the Australians will have completed their $5 billion Snowy 2.0 pumped storage scheme in support of increased use of renewables there (9).

As part of the New Zealand Government Response (2) to the ICCC recommendation for pumped storage investigations, it was noted that a major energy storage scheme would involve flooding a large extent of land. There is therefore need to consider environmental, social, and cultural implications — not just technical and economic. However, public consultation requires specifics of a given scheme in order to gain a sense of environmental impact and serve as starting point for discussions.

The main purpose of this submission is therefore to give some detail of a purely hypothetical pumped storage scheme at Onslow, although any actual scheme would have similarities.

The potential of the Onslow Basin for pumped storage was first noted by this author in 2005 (10). A number of simulation studies were subsequently carried out as part of a 2019 PhD thesis study at the University of Waikato (11). No external funding was received. In addition to the University of Waikato studies, the ICCC report (1) incorporated a preliminary overview of Onslow pumped storage for a scheme with 5 TWh of energy storage capacity.

The energy storage potential of the Onslow basin is huge, resulting from a fortunate combination of topography, hydrology, and geology. Given an Onslow scheme with 5 TWh of storage, this would be 14 times larger than the Snowy 2.0 scheme. Put another way, the world’s largest battery (in South Australia) would have to be replicated 38,000 times to give the same energy storage. Developed to its fullest extent, the Onslow Basin would represent much of the total world’s energy held as pumped storage. Energy storage capacity could be increased even further by including the nearby Manorburn basin (10), though this is not a great amount of energy gain and would be at the expense of increased evaporation loss and extent of flooded land.

A Pumped Storage Scheme at Onslow

To give an indicative picture of the appearance and operation of pumped storage at Onslow, a hypothetical scheme is described here. Storage capacity is 5 TWh, with 1,200 MW of installed pump /generating capacity — say 10 machines of 120 MW each. This extent of energy storage would more than double the national hydro storage capacity. Water would be moved to and from an expanded Lake Onslow through a 24 kilometre rock tunnel connecting to Lake Roxburgh, with a maximum tunnel flow of 200 cubic metres per second.

For construction, the existing Onslow reservoir is first raised from its present 700 metres above sea level (8 square kilometres of lake surface area), up to a new minimum level of 730 metres (45 square kilometres of lake surface). This filling process is a one-off energy expenditure of 2 TWh and would require a year or more because pumping would be discontinuous, depending on electricity prices.

The enhanced energy storage capacity is achieved by a large permitted vertical water level range of 50 metres, with the maximum water level at 780 metres elevation (lake surface area 70 square kilometres). The extent of the new lake at various levels can be visualised by zooming in to the Lake Onslow region using the online New Zealand topographic map (12).

The operating range is essentially for dry year buffer and there is no implication of a seasonal range of this extent. An operating range of this magnitude would nonetheless appear to be environmentally irresponsible in the extreme. For example, the Lake Tekapo operating range is about 9 metres. Even this range for Lake Tekapo is questionable in terms of environmental impact, as an internet search for images of “Lake Tekapo low level” will show.

There is, however, a significant difference between the Lake Onslow operating environment and that of controlled former natural lakes like Tekapo, Pukaki and Hawea. These hydro lakes have shorelines of soft erosion-prone glacial till and lowered water levels expose extensive silt flats or gravel regions. In contrast, the water of the new Lake Onslow would always be lapping against schist rock over the entire 730–780 metre range. The impression would be something like parts of the Cromwell Gorge rock sides extending into Lake Dunstan, except that the Onslow rock slopes would generally be gentle.

A necessary environmental requirement here would be that all 25 square kilometres of land within the operating range would first have the present thin soil cover cleaned away. Otherwise there would be dust generated at the times when lake levels are lowered and the wetted soils dry out. The resulting extensive schist rock landscape would have its own attraction and around-lake cycle tracks at various levels could be popular for recreation, similar to the Lake Dunstan and Roxburgh Gorge trails.

With respect to creating the initial 45 square kilometre lake, there would be flooding of extensive areas of pastoral land and also of about 8 square kilometres of existing wetlands at the southern end of the present Lake Onslow (Fortification Creek, Teviot River south branch and Middle Swamp). Some financial settlement with the few existing landowners would be a necessity of course, should the scheme ever happen.

From the wetland aspect, when billions of dollars are being spend on a large civil engineering project then that is the time to argue for millions spent on ecological improvements beyond the present situation. For example, the Lake Onslow region might be surrounded by a predator-proof fence as protection for the wetland bird population. Also, 16 square kilometres of the new lake could be set aside for a constructed floating wetland with intricate waterways amenable to eco-tourist ventures. The new wetland would offset the loss of both the southern wetlands and also the Dismal Swamp wetlands that were drowned when creating the present Onslow reservoir. A demonstration square kilometre of floating wetland could be established on Lake Onslow, giving a feel for how the final wetland would appear.

The completed picture of the new Lake Onslow could therefore be one of a large lake with extensive wetlands, located within a surround of craggy Central Otago schist rock.

There are many other aspects that would need to be considered as part of environmental and social evaluations, including lake access for boating and possible effects on trout spawning streams. It could happen that the new lake creates even better trout fishing conditions in terms of both size and abundance. For example, the artificial Lake Otomangakau in the Tongariro Power Scheme still enjoys a reputation for excellent trout fishing.

The other visible environmental factor would be the earth dam at the Teviot River outlet of Lake Onslow. This will be a little greater than 80 metres in height at the river itself, given a lake with a 780 metre maximum elevation above sea level. However, the small Teviot River at the lake outlet in no way resembles a major river valley like the Waitaki at Benmore Dam. It would be necessary for the Onslow dam to extend over a few kilometres. However, for much of this length it would be low dam that could be contoured and vegetated to merge with the surrounding landscape.

A construction-related environmental factor would be what to do with the tunnel excavation spoil. For the channel tunnel, a coastal park was created on the British side. Similarly, the schist tunnel spoil might be used to create flood-free linear parklands along the east bank of the Clutha River between the Roxburgh Dam and the town.

With respect to local tectonics, there would need to be checks made against the possibility of induced seismicity from water loading. In this regard, it is encouraging that the filling of Lakes Roxburgh and Dunstan have had no evident seismic effects in the form of induced small earthquakes.

Onslow and Otago Hydrology

The hydrological impact of Onslow operations would be minimal, given a maximum tunnel flow of 200 cubic metres per second. The reason is that power generated from water released into Lake Roxburgh will generally be required in winter, when the Clutha River flow will be below average. Conversely, pumping is most likely to happen when power prices are lowest, which will generally correspond to above-average Clutha flows. That is, Onslow pumped storage will result in Clutha low flows being a little higher and high flows being a little lower. For high flows, this would have the effect of a small reduction in Clutha flood peak discharge at Balclutha.

Onslow operation would not involve permanent diversion of water away from the Clutha River. Apart from the initial water fill and some evaporation loss, all water pumped to Lake Onslow is later returned to Lake Roxburgh. In this respect, storing water in Lake Onslow is no different to storing water in Lake Dunstan. The only change is that the various streams within the Onslow catchment would now meet Clutha water at Lake Onslow.

Teviot River flow would not be affected by Onslow operations because a requirement would be that the Teviot discharge remains unchanged from the present.

If constructed, Onslow pumped storage at maximum efficiency would result in modified seasonal river flow regimes for the Waitaki River, and also the Clutha River to a lesser extent. This arises because there would be no point in pumping water up to Lake Onslow storage and then holding it as a static water volume until the next dry year. In this static mode there would be ongoing loss of about 5 MW for pumping to offset evaporation loss to maintain Teviot River mean discharge. Instead, the most efficient use of Onslow storage would be buffering wind generation on an intra-day basis and also, importantly, active seasonal operation coupled with seasonal operation the main South Island hydro lakes, particularly Tekapo, Pukaki, and Hawea.

Presently, the South Island hydro lakes gain most of their water from high spring and summer inflows, stored to be released later for winter power generation when electricity demand is high and winter inflows are low. That is, the lakes are managed to have high water levels toward the end of summer. However, if unexpected major flood inflows enter already-full hydro lakes then lake spills occur, leading to spill at hydro stations downstream. For example, lake spill from Lake Tekapo represents spill from the bypassed Waitaki power stations: Tekapo A, Tekapo B, Ohau A, Ohau B, and Ohau C, as occurred in December 2019 to January 2020.

Lake spills are infrequent and are of no great environmental significance unless there is downstream flood damage. However, spill represents lost generating opportunity and is thus an energy source. For example, over 2009–12 there was about 5 TWh lost to spill in the Waitaki scheme. Such losses could be significantly reduced when there is coupling with Onslow pumped storage operating in seasonal mode. That is, summer inflows to the hydro lakes are now mostly released downstream to generate surplus power above demand. This power is used to pump Lake Roxburgh water up to Lake Onslow, to be utilised later in winter by running the water back. Because the existing hydro lakes will then not be used to the same extent for seasonal storage, their frequencies of high levels are reduced and there is capacity to hold flood inflows when they do occur, thus reducing spill and energy loss.

For this operating mode to apply, there would need to be summer water releases from the hydro lakes in all years, because major flood inflows cannot be anticipated very far in advance. Most years are spillfree and so for most years the Onslow scheme would be an energy sink. This is because the pumped storage round trip efficiency will probably be around 75%. However, even allowing for both this and evaporation loss, our simulations indicate the long-term energy gained from spill reduction creates a net positive result. The overall time-averaged effect of seasonal pumped storage operation at Onslow would therefore be to provide a net power gain to the grid rather than being an energy sink. The market mechanisms of achieving the seasonal integration are left open. It could happen that the present market is sufficient, or possibly a slight change may be required to the Electricity Authority’s Code allowing for pumped storage demand to be dispatched.

The hydrological environmental gain from the new seasonal lake management would be seen as reduced periods of high water levels in the South Island hydro lakes. This in turn means less wind-wave erosion of the soft-sediment shorelines of those scenic lakes. At the other extreme of low hydro lake levels, water would now be drawn down instead at Onslow with its bedrock shorelines, rather than the present situation of unsightly low scenic lakes in dry periods.

The regional hydrological improvement from new seasonal management also extends to some rivers. In particular, the summer flows of the Hawea and lower Waitaki Rivers would be higher and more suited to recreational activities. Those river flows thus move back more toward their original pre-hydro seasonal flow regimes with water flows high in summer and low in winter.

Onslow and Existing Otago Hydro Power Operation

There are two power generators that would be directly affected by Onslow pumped storage. Pioneer Generation operate a cascade of small hydro power stations on the Teviot River below Lake Onslow, while Contact Energy operate the Clyde and Roxburgh dams and use Lake Hawea as their main controlled hydro storage.

The impact on Pioneer operation would be minimal because there would be an environmental requirement to maintain the flow of the Teviot River. It may be possible for Pioneer to negotiate greater winter flows from an expanded Lake Onslow, gaining some financial advantage from higher winter electricity prices.

As the operator of the Clutha hydro scheme, it would seem a requirement that Contact Energy should be a partner in constructing pumped storage at Onslow. At times of high Clutha flow and low electricity prices it would be helpful commercially for Contact to be able to pump from Lake Roxburgh. Sometimes such pumping operation will reduce or avoid spill at the Roxburgh station, thus reducing lost generating opportunity. As mentioned earlier, Lake Hawea could be operated at a lower average level. This would reduce spill at both the Roxburgh and Clyde stations. In the 4.5 years prior to this submission, Onslow in operation would have saved Contact Energy at least 0.7 TWh of lost generation opportunity on the Clutha.

It may also be possible for Contact and Wanaka township residents to engage in a win-win development at the Clutha outlet at Lake Wanaka. Wanaka lake levels are presently uncontrolled and protected by statute. However, there is a disadvantage to this in that high inflows over a period can exceed the natural outflows and lake water can rise into parts of the town, as happened in December 2019.

A change would be required to the Wanaka Preservation Act, but engineering the Wanaka outlet to enable greater discharge when required would reduce the frequency of shoreline floods. The permitted lake level control would only be within the narrow normal water level range so there would be no evident shoreline change. However, slightly lowering the lake before flood inflows would spread the flood impact over a longer period and so reduce the lake level maximum rise. Reduced peak Wanaka outflows would reduce spill at the Clyde and Roxburgh stations, with the excess power used to pump to Lake Onslow. In normal times, Contact would be able to use within-day controlled outflows from Wanaka to better match hourly power demand variation.

Onslow and Emissions Reduction

Following recommendations of the ICCC report (1), the national strategy for carbon dioxide emissions reduction is to move toward accelerated electrification and away from fossil fuels, as part of our signing of the Paris Agreement. This would include switching to EV use and replacing coal and gas with electricity for industrial heating. Some of the electrification of transport might be via the intermediary use of hydrogen for heavy vehicles and perhaps even for power in some trains.

In addition, there remains an aspirational goal to have 100% renewables-based power generation by 2035 in a normal hydrological year.

Concurrent with the renewable electricity transition, there is a need for reliability of supply and also power prices not rising so as to deter making the transition.

With respect to the 100% renewable power generation in a normal hydrological year, that is not a practical goal that should even be “aspired” to because it implies that generating plant and specialised staff do nothing in every normal year. A better aspiration is for 100% renewable power in all years. This means closure of gas peakers and, in particular, closure of the Huntly station and ending its role of using coal and gas in seasonal hydro firming and dry year backup.

Genesis Energy has cited “five Taupo lakes” (13) as the additional New Zealand energy storage capacity that would be needed if Huntly was retired. This translates to approximately 4.3 TWh, which is less than the 5TWh new storage capacity proposed here for Onslow. In addition, the Onslow scheme as proposed has a further 2 TWh to total drawdown. However, for environmental reasons this would only be used in the rare instance of a dire national climate emergency. As part of daily operations, Onslow might also act as a substitute for gas peaking, though this may be better handled by some smaller pump storage schemes in the North Island, or perhaps through purchasing suitably large batteries.

Onslow pumped storage could aid emission reduction in an indirect way also. Extensive future wind power developments are seen as an important part of the New Zealand transition to renewables, helping to meet additional future power demands arising from accelerated electrification. However, there comes a point when further wind power development may lead to grid instabilities. The 1,200 MW installed capacity at Onslow could provide a useful role here by providing buffering for a further 2,400 MW of new wind generating capacity, of which at least 1,200 MW would be in the South Island. This reinforces that Onslow is not simply static water storage held at high elevation against a future dry year. If would in fact be in continuous operation to buffer wind power fluctuations, as well in operation for seasonal use as mentioned earlier.

With respect to a “just” transition to renewables and reasonable electricity prices, Onslow would certainly have significant one-off construction costs, perhaps 4 billion dollars. However, large-scale Onslow energy storage can be anticipated to have a permanent downward influence on what would otherwise be high electricity prices. This arises from the general tendency for high water levels in the present hydro lakes to be associated with low wholesale electricity prices. Maintaining 1,200 MW of dispatchable power from significant additional storage would therefore have a long-term lowering effect on prices.

Lowered wholesale electricity prices will not necessarily be welcomed universally. It is not beyond possibility, for example, that the significant civil engineering of the Onslow scheme is supported by environmental groups as a major step toward eliminating our carbon dioxide emissions. But at the same time, there might be opposition from some generators who see disadvantage in reduced selling prices for their product.

The reduced electricity price scenario differs from the ICCC (1) conclusion that converting to the last few percent of 100% renewable power would be costly. The argument was based on an expensive “overbuild” of renewable resources such that for much of the time going into the future, there would be generating capacity unused (except perhaps in the unlikely event of producing green hydrogen for export). With Onslow pumped storage energy capacity at 5 TWh there is no need for overbuild to achieve renewables-based seasonal firming.

Related to this is the use of Onslow as an international exemplar for the transition to renewables. Many nations will be facing similar issues with regard to both pricing and resilience of power supply. In this regard, it is best they seek large Onslow-type high rock basins rather than construct smaller schemes that can only buffer against relatively short weather-related fluctuations in renewable power output. For example, Australia’s Snowy 2.0 scheme has generating capacity of 2,000 MW, but only sustainable for a week. In contrast, 5 TWh of Onslow storage translates to 1,200 MW power output that is sustainable for almost 6 months.

The Transmission Issue

Onslow energy storage and the locations of power demand are at opposite ends of the country, giving rise to concerns over sufficient transmission ability to move power north when needed. There is in fact not a great deal of transmission upgrade required for Onslow buffering against a South Island hydro dry period. This is because at such times there will only be relatively small power output from the Waitaki and Clutha schemes, giving spare capacity over much of the length of the existing South Island lines. There is already a plan to upgrade the circuit from Roxbugh through Naseby to Livingstone to relieve the present lower South Island constraint. This work alone would enable almost full operation of the proposed Onslow generation. This is because full Onslow generation would only be required when there is minimum output from Manapouri, Roxbugh, and Clyde power stations, the very stations that at present cause the constraint to bind.

Other transmission line upgrades may be likely, given the closure potential of the Tiwai Point aluminium smelter.

Onslow Economics

There have been some cursory previous economic examinations of Onslow pumped storage. However, there has never been a detailed economic examination which also takes climate change effects into account. It is unfortunate that the $ 8 billion infrastructure spend announced in January did not include funding for a full economic/social evaluation Onslow development possibilities. This would have helped offset a North Island bias in the funding distribution.

Quantifiable Onslow costs would be concerned with land purchases and the main scheme construction components: tunnel building, dam construction, and generating plant. Quantifiable benefits are the enabling of 2,400 MW of new wind power generating capacity, increased summer flows in the Lower Waitaki for irrigation developments, some net hydro power gain, and reduced flood peaks in the Waitaki and Clutha Rivers. There is also the economic gain of cheaper electricity to aid competiveness of electricity-intensive exports like pulp and paper. For a number of years there would be development and employment opportunities around Roxburgh as part of construction activity, perhaps to be followed later by eco- and engineering tourism.

There are also benefits that are not so readily quantifiable in economic measure, including higher recreational summer flows in the Hawea and Waitaki Rivers, reduced seasonal fluctuation at the shorelines of the scenic hydro lakes of the South island and, importantly, laying the basis for transition to a low-emissions economy as far as carbon dioxide is concerned.

It was noted in the Government Response (2) that the expense of pumped storage schemes would make it unlikely that they could be built without government input. This applies in particular to a scheme as large as Onslow. However, this also means that the government is not “crowding out” private investment opportunity. If pumped storage at Onslow were to be constructed it would presumably be some form of public / private partnership. The scheme could be built in stages with stage 1 being the tunnel, first 30 m of dam height, and first 4 generators installed. The next 30 m of dam height and next 3 generators would comprise stage 2. Stage 3 would be the last 20 m of dam height and last 3 generators. In this way, construction and cost could be spread over some 15 years.

Other Pumped Storage

This submission has been concerned with the possibility of Onslow pumped storage, essentially as seasonal and dry year buffer, and in support of wind power. However, some combination of small-scale pumped storage and battery technology might also replace gas peaker stations. Such initiatives would be concerned with a few hundred MW of power released over short time periods. For example, Lake Moawhango in the Tongariro Power Scheme could serve as a lower reservoir, with the upper reservoir being a new small lake in the upper Moawhango valley. This would be subject of course to all cultural and ecological considerations.


Onslow pumped storage has sometimes been dismissed in the past as potentially useful but unlikely in reality because of probable significant community and environmental opposition. In fact, it would be doubtful if development could proceed without significant support both from local communities and national environmental groups. The comments presented here are therefore not aimed to advocate pumped storage at Onslow as such, but hopefully to generate sufficient interest that a detailed study can be undertaken with full opportunity for community input as a proper gauge of public opinion.

One certainty is there can be no small Onslow scheme, because the investment of drilling a 24-kilometre rock tunnel would require significant energy storage at the other end to make the cost worthwhile. The New Zealand energy situation is therefore at a crossroads at present, because an energy future with Onslow pumped storage will be very different to one without.

Cited Works

(1) Interim Climate Change Committee (2019). Accelerated Electrification. Evidence, analysis and recommendations.

(2) Ministry of Business, Innovation & Employment (2019). Proposed response to Interim Climate Change Committee recommendations on accelerated electrification.

(3) Transpower (2018). Te Mauri Hiko Energy Futures. Transpower White Paper.

(4) Government Priorities (2019). https://www.energy.gov.au/government-priorities/energy-supply/pumped-hydro-and-snowy-20

(5) Government of South Australia (2019). http://www.energymining.sa.gov.au/clean_energy_transition/grid_scale_storage_fund

(6) Australian Water (2018). https://watersource.awa.asn.au/technology/innovation/pumped-hydro-research-bags-anuacademics-eureka-prize/

(7) Newsroom (2018). https://www.newsroom.co.nz/2018/11/22/332986/engineers-name-10-climate-priorities

(8) New Zealand Government (2019). A Vision for Hydrogen in New Zealand. Green Paper.

(9) Snowyhydro (2019). Snowy 2.0. https://www.snowyhydro.com.au/our-scheme/snowy20/

(10) Bardsley, W.E. (2005). Note on the pumped storage potential of the Onslow-Manorburn depression, New Zealand. Journal of Hydrology (NZ) 44, 131–135. https://researchcommons.waikato.ac.nz/handle/10289/2702 9

(11) Majeed, M.K. (2019). Evaluating the potential for a multi-use seasonal pumped storage scheme in New Zealand’s South Island. University of Waikato PhD thesis. https://www.dropbox.com/s/z2zaidfwa0482m1/Majeed%20thesis%20final%20version.pdf?dl=0

(12) LINZ. NZ topo map. http://www.topomap.co.nz/ (13) Stuff (2019). https://www.stuff.co.nz/business/112551375/moving-to-100pc-renewable-generation-could-wait-tothe-2040s-genesis-boss-suggests Earl Bardsley, Science & Engineering, University of Waikato March 2, 2020 Comment on Accelerating renewable energy and energy efficiency MBIE report, December 2019

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