16 Jun 2023

Not enough info to compare Lake Onslow to other power options - Parliamentary Commissioner for the Environment

11:42 am on 16 June 2023
Simon Upton

Simon Upton. Photo: [https://www.flickr.com/photos/eu2017ee/35725837402flickr]

The need for and alternatives to the proposed $15 billion Lake Onslow hydro storage lake in the Central Otago have not been fully explored, according to the Parliamentary Commissioner for the Environment (PCE).

PCE Simon Upton commissioned a comprehensive economic cost analysis of the government's Lake Onslow plan, hoping the energy industry would come forward with alternative proposals which could be assessed on a like-for-like basis.

The report by economist Scott Kelly, PCE's former chief economist, offered a number of common assumptions and pathways which could be used to compare Lake Onslow to other proposals designed to backup hydro generation in dry years.

Lake Onslow would act as a storage battery which could be drawn on to smooth out price volatility and reduce power shortages, when hydro lake levels were low.

Upton said there needed to be an even-handed treatment of options to Lake Onslow, such as investment in the addition of high capacity transmission across Cook Strait or battery storage facilities in the North Island, where most of New Zealand's population lives.

He said much of what was being considered by various energy sector leaders was undefined and therefore difficult, if not impossible, to be compared with the government's plan to build Lake Onslow, which could take perhaps 100 years to pay for itself.

"There is no perfect solution to today's decarbonisation challenge," Upton said, adding there would not be full agreement, no matter what options were chosen."

For example, the report compared the government's Southern Green Hydrogen project to Lake Onslow and found it to be the poorest performing pathway against a range of indicators, with a negative return across all capital assumptions and discount rates indicating the benefits would not outweigh the costs.

"If all the people in this game would commit to subjecting what they are doing to [the] same analysis and same assumptions, we can have a debate," Upton said.

"Once we are using common assumptions we should be able to fairly compare the options on the table."

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Lake Onslow. Photo: Shellie Evans 2014/Wikipedia

Upton said all major investments with potentially system-wide impacts should endeavour to use similar assumptions to those set out in the market report, available on the commission's website.

"The most we can hope for, and expect, is high-quality decision making based on even-handed treatment of the options," he said.

"The scale of investment needed, no matter which path we choose, will be immense. That is why we need a better way of weighing up the options."

Upton said Lake Onslow would smooth out volatility in the system, which might not be in the interests of an industry that does well out of volatility.

"There are strong private interests at stake here and I wouldn't expect them to advocate for those. Fine. There is also a public interest that needs to be weighed."

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