By Earl Bardsley*
This year has been tough for Energy Minister Simeon Brown. After the election, he quickly terminated the NZ Battery Project team that was set up by the previous government to seek options for handling reduced hydro power in dry years. The team was not even given time to complete a report on the best alternatives that had been identified to date.
Ironically, Brown and the coalition government are now dealing with the consequences of the worst dry year since 1992.
Along with immediate responses to the energy situation, it might have been hoped there would be government motivation to bring back the NZ Battery Project group.
Instead, their effort has diverted toward scoring political points.
For example, the current limited amount of gas for backup power generation was somehow supposed to link to the 2018 restriction on gas and oil exploration. Similarly, the present lack of sufficient renewable generation supposedly indicates some form of negative influence from previous considerations of the Lake Onslow pumped storage scheme.
To the extent that dry year solutions have been considered at all, the government maintains faith that the electricity market will find a way. That is, high electricity prices in dry years give a market signal that there is money to be made in solving the problem.
This approach has failed in the past. The high wholesale electricity prices and industry impacts in the 2008 dry year were not followed by any developments that would keep prices down when the next dry year came along.
Government intervention in 2024 is just to the extent of making consenting easier for new renewable projects. The intention is that this will provide the proverbial “doubling of renewable generation”.
As far as dry years are concerned, the worth of easier consenting can be checked against an extreme hypothetical. Suppose there is no consenting needed for any onshore or offshore renewable project. All submitted applications are accepted on a same-day basis, with an absence of any red or green tape.
This would be of no help with the dry year problem.
The reason is that dry years don’t happen so often. No gentailer or overseas investor is going to construct wind or solar generation beyond meeting the anticipated power demands of normal hydrological years. That is, those years when hydro power generation is about average. There is little money to be made by having new generating capacity that earns minimal income except in dry years.
Nor is there any moral obligation involved. Some commentators have expressed indignation that the gentailers should have been better prepared for the dry 2024 winter. That is the type of question that would be raised with a regional council in the event of unexpected damage caused by a flood event destroying a flood bank.
Despite what may be written down in mission statements, the major generators are commercial entities that cannot be expected to provide national insurance against dry years. Meridian Energy is not about to build the Lake Onslow pumped storage scheme.
In short, a final solution to the dry year problem must come from some form of government-funded new infrastructure. Neither the electricity market nor the gentailers are going to be of help.
The question is – what is the best infrastructure? This is what was being considered by the NZ Battery team prior to its abrupt termination after the election.
A new factor has come into play in all this, with the recent announcement by Simeon Brown that facilities for LNG importing will be in place no later than the winter of 2026. That is, before the next election.
LNG imports offer energy security but little else. There is a carbon footprint involved and dry year high power prices will remain. It is therefore not surprising that renewable energy with storage has been proposed as a better solution.
Building significant renewable energy storage capacity has the disadvantage of needing lengthy construction time.
However, LNG importing is going to happen anyway. This suggests the interesting possibility of concurrent development of a renewable energy storage system. In this way, LNG imports and perhaps local gas supply can cover dry year risk in the meantime.
On completion, the storage system would largely remove the need for further LNG imports. The LNG port facility remains for rare contingencies such as several dry years in sequence.
One renewable energy storage candidate is the Lake Onslow scheme, which would provide reliable dry year power and peaking capacity at less cost than gas or coal. However, its long construction time to 2035 or beyond has always been a negative factor. Having LNG availability to provide temporary dry year security could change the equation.
This is not to say that the Lake Onslow scheme must be the best solution. For example, Onslow or an alternative backup geothermal power scheme both have respective geographical advantages. The geothermal region is not far from the main locations of power consumption in the North Island. The Onslow scheme is well placed in Otago to buffer the South Island main hydro lakes.
Ideally, the NZ Battery Project should be restarted and its dry year infrastructure proposal, whatever it may be, gets slotted with high priority into the coming 30-year National Infrastructure Plan.
It comes back to the politics of the moment. Left to itself, the coalition government is not going to restart investigations for dry year infrastructure of any form. However, it is also needing an energy accommodation with Labour and might be willing to give up on waiting for market-based solutions. Would Labour redefining its 100% renewable electricity policy as a long-term aspiration goal be sufficient to enable a restart of the NZ Battery Project?
*Earl Bardsley is Associate Professor at the University of Waikato School of Science. He is the original proposer of the idea of pumped storage at Lake Onslow in Central Otago, as an alternative to burning coal and gas in dry years when hydro lakes are low. Bardsley spoke about the Lake Onslow idea in an episode of the Of Interest podcast in 2022.
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