Cabinet documents and a 429-page indicative business case reveal new details of the costliest energy project proposed in New Zealand, Marc Daalder reports
A multi-billion dollar pumped hydroelectric station at Lake Onslow in the South Island won't be commissioned until late 2037 and could take another one to three years to fill to maximum capacity.
The new date raises questions for the Government, which sees Lake Onslow or an alternative portfolio of renewable electricity options as crucial to reaching 100 percent renewable electricity by 2035.
It comes from the $24 million Indicative Business Case for the New Zealand Battery Project, released at the end of March. That 429-page document sheds further light on the process the Government has undertaken as it tries to solve New Zealand's dry year problem.
The country's heavy reliance on hydro for most of our electricity places us in good stead when it comes to greenhouse gas emissions - we're already 80 to 90 percent renewable. But it's a major risk in years when there is less precipitation than usual, leaving hydro lakes low and threatening power supply.
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Currently, New Zealand plugs dry year hydro shortages by burning fossil fuels, but the Government is aiming for a fully renewable electricity system by the end of the decade. It must find a renewable energy option that can store as much as five terawatt hours of electricity, or one eighth of the power the country uses in an average year.
The multimillion dollar NZ Battery Project business case explored 28 potential solutions to the dry year. They ranged from nuclear energy (which officials said faced practicality and social licence concerns) to hooking up New Zealand to Australia's grid (which is less renewable than ours and would require a cable three times longer than the longest ever undersea cable).
Officials even looked into a concrete version of pumped hydro, in which a crane raises concrete blocks when power prices are low and then drops them to generate electricity from kinetic energy in a dry year. They concluded that the 12,500 individual crane systems required to add up to just one terawatt hour of storage weren't practical.
The long base load list was whittled down to a shortlist of 10 options, which was then cut down further to five, getting us to where we are now. One of the five is Lake Onslow (which received 80 percent of the funding put into the business case) while the others are pumped hydro elsewhere in the country, burning biomass, state-of-the-art flexible geothermal stations and green hydrogen demand response. The latter three have been dubbed the portfolio option.
Lake Onslow would store five terawatt hours of electricity and have capacity of 1000 megawatts to ease dry year pressure. It could help to address calm and cloudy days when wind and solar generation drops off too, but may face limitations in doing so because of the capacity of the HVDC cable connecting the North and South Islands. A second cable could be constructed at a cost of $3-4 billion.
The project has a 50 percent chance of being completed and commissioned by the end of 2037. While it would be operational at that stage, it will take another one to three years to fully fill the basin and reach the five terawatt hours of storage.
Collectively, the non-hydro schemes could provide 2.4 terawatt hours of electricity over three months in a dry year, with output reducing after that. Because it consists of different technologies, it could be introduced in a staged approach and has a better shot of enabling 100 percent renewable energy in the early 2030s.
In the indicative business case, one possible formulation of the portfolio was laid out. That includes a 500 megawatt biomass burner; a geothermal plant that continuously generates 100 megawatts in a base load role and can ramp up to 400 megawatts in a dry year; and a green hydrogen export industry that can be switched off to free up 220 megawatts of generation and which is accompanied by a hydrogen combustion turbine with a capacity of 150 megawatts.
One terawatt hour of wood would be stored for the biomass option, the geothermal option could generate 0.6 additional terawatt hours in three months and the combination of demand response and burning hydrogen could free up 0.8 terawatt hours of electricity over three months.
The capital cost of the portfolio option is cheaper ($13.7 billion as compared to Onslow's $16.1 billion) but the overall operating costs are expected to be much more significant, according to a Cabinet paper that accompanied the business case.
Energy Minister Megan Woods wrote that, over 42 years, the portfolio option is expected to cost $49b, against Onslow's $28.7b over the same time frame. She added that more certainty was needed about the potential makeup of the portfolio approach.
The cost of pumped hydro at Upper Moawhango in the central North Island wasn't quantified, because talks with iwi are still in very early stages. The scheme could produce 570 megawatts of electricity and store 2.7 terawatt hours, according to a report by consultancy Stantec.
All options were compared to a counterfactual scenario in which fossil fuels are phased out but no large storage project is introduced. This scenario sees an extra 1.2 gigawatts of renewable generation built, almost all of which would go to waste except in a dry year. So-called overbuild is uneconomic and would likely require some Government intervention to achieve, officials found. They said both the Onslow and portfolio option performed better.
A separate report by Boston Consulting Group into New Zealand's electricity system last year said 98 percent renewables could be achieved by the end of the decade, with fossil gas covering 40 percent of dry year risk into the 2040s and the remaining 60 percent by renewable overbuild.
A "do nothing" scenario, in which fossil fuels remain the dry year solution, wasn't entertained by the NZ Battery Project business case. Officials said it should be considered before any final investment decision is made.
