The new government is stopping work on investigating pumped hydro energy storage at Lake Onslow in Otago.
The project was floated as a solution to New Zealand's "dry year" problem - which happens about every seven years, when wind, solar and existing hydropower are insufficient to maintain electricity supply and we have to fill the gap with fossil fuels.
The scheme would pump water from the nearby Clutha River into the lake then release it when other hydro-electric lakes became depleted.
Government estimates say it would have cost New Zealanders $16 billion if it went ahead.
Instead, the National-led government plans to cut red tape and encourage more investment in wind, solar and geothermal energy projects.
Energy Minister Simeon Brown spoke to Corin Dann.