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Sunday, April 30, 2023

Stuart Smith: The Case for the NZ Battery Project


The Ministry for Business, Innovation and Employment recently released the Indicative Business Case (IBC) for the New Zealand Battery Project. However, the IBC has raised more questions than it has answered.

Last month, Energy and Resources Minister Megan Woods announced that the New Zealand Battery Project will move forward to a detailed business case, on two favoured options: pumped hydro at Lake Onslow and a portfolio option of alternative technologies. The portfolio option includes the combustion of biomass, a new geothermal plant used flexibly and interruptible hydrogen electrolysis. Despite this, the emphasis will be on the Onslow option, which Minister Woods is a strong advocate for.

However, it is evident that the IBC had limited scope, which devalues its findings. A good business case should compare the proposal against the counterfactual or status quo. Instead, the government compared the pumped hydro at Onslow and portfolio approach against a 100 per cent renewable electricity case, which tilted the playing field to predetermine the outcome.

The 100 per cent renewable electricity target is a distraction. Last year the Boston Consulting Group’s report “The Future is Electric” found that New Zealand will reach 98 per cent renewable electricity generation by 2030. BCG advised against the 100 per cent target because the exorbitant cost could not be justified.

The estimated cost of the pumped hydro option at Onslow is $16 billion, plus $3-4 billion for an additional Cook Strait cable that will be required. Large government projects have a tendency to go over budget and time. We only have to look at the City Rail Link in Auckland, where the expected cost has blown out by $1 billion. And the earliest Onslow would come on stream is 2037, so what is the dry-year solution in the meantime?

Minister Woods argues that the $16 billion cost of Onslow is justified because the status quo would cost $1 billion to keep the lights on in a dry year using fossil fuels (status quo). We can expect two dry years per decade or $200 million per year. The cost of capital of the $16 billion project would be around $800 million each year, or four times more than the status quo.

I would have thought that the additional $600 million for Onslow would be better spent on healthcare.

We also have to remember that as more renewable generation comes online, hydro generation will transition from baseload to dispatchable. This means that when the wind isn’t blowing and the sun isn’t shining, hydro generators will essentially keep the lights on. However, when it is windy and sunny, hydro generation will decrease, holding back water which will go a long way towards solving our dry year issue.

Energy projects are inevitably expensive long-lived assets and investment decisions should be based on the best available information, but this is not how the Battery Project has arrived at its recommendation.

As the Opposition Energy and Resources Spokesman, I have already ruled out a Government-built pumped-hydro scheme at Lake Onslow.

I do not blame officials for the shoddy process as they were following instructions. But, when there is almost $20 billion of taxpayers’ money on the line, we must do better than this.

Stuart Smith is a N Z National Party politician who has been a member of the House of Representatives for the KaikĊura electorate since 2014. This article was first published HERE


5 comments:

DeeM said...

Megan - I can't build a house to save myself - Woods is leading the charge to restructure NZs electricity supply.
We should all be very afraid.

Instead of using natural gas (a plentiful and relatively cheap low CO2 fuel source) we're going down the same disastrous path as Europe and most of the West.
NZ has a penchant for trailing years behind on new public policy initiatives but never fails to blindly make the same catastrophic mistakes as the front-runners, despite ample warning of the dire consequences.

The Onslow scheme is a great way to waste power since most people realise it takes a lot more power to pump water uphill, against gravity, than you generate when you let it go.

Wind and solar are a massive blot on the landscape, are very low energy density so you need squillions of them, have a short life, and are intermittent, unreliaible, largely unrecyclable and very expensive.

Hydrogen either needs a plentiful source of cheap power to electrolyse water (good luck with that) or, as is the case at present, is produced by reacting CH4 with Steam, producing CO2 as a bi-product. You end up with 28% of the energy that the original natural gas would have given you and the same amount of CO2. Duuuh!!

If this bunch get their way you can look forward to a hugely expensive, unreliable power supply that will do nothing to reduce global CO2 emissions.

Robert Arthur said...

The pumped scheme is intriguing. In the early days of the industrial revolution, before rotary engines, steam pumps were sometimes used to pump water back for the waterwheels which then powered infant factories. The pumps produced ouput just 1% of the fuel energy burned, and there was the pumping loss on top of that.....! (No worries about CO2 then) Presumably all non hydro or wind stations will have to be without load before back pumping is contemplated. Any change in leakage rates or evaporation would have huge impact on Onslow.

Rob Beechey said...

I’m with DeeM. Why do world leading eminent atmospheric and physicist scientists denounce the alarmists claim that man made co2 generates dangerous climate change but incredibly less qualified politicians and extremists claim otherwise? Why is our country preparing to spend billions to solve a problem that doesn’t exist? National and Labour are drinking the same cool aid. We have access to natural gas and there are opportunities to build traditional dams. And to hell with the Greenies concern for the impact on their endangered Giant Snails.

Anonymous said...

When assessing these projects do the advisers take into account whole of life, disposal and remediation costs and effects. For example disposal of solar panels and batteries have known unfriendly implications. Any machinery has the oil industry involved by way of lubricants - at least. And there is the whole question of ecology. No one has ever answered my question as to what happened to the fish when it was declared that under water atomic bomb tests were safe. Maybe fish and the underwater world just don’t count. This is called turning a blind eye.
As an aside, given the ferocious rape of the ocean and the abuse of other water ways, I choose not to eat sea and other water world living creatures and plants which others consider food. I avoid products derived from these as best I can.

Anonymous said...

Please go back and read
Bryan Leyland: Storage - the Achilles heel of wind and solar power
in BreakingViews on 2nd April
https://breakingviewsnz.blogspot.com/2023/04/bryan-leyland-storage-achilles-heel-of.html

There is no case under any circumstances for Lake Onslow.

Much better to consider some of the solar molten salt batteries operating elsewhere such as the US and Spain