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Energy and Resources Minister Megan Woods says the Government is investigating options for an ambitious "game-changing" energy scheme at Lake Onslow in Central Otago which could create thousands of jobs.

The Government is investigating options to "green the grid" as part of a new infrastructure plan for renewable energy to:

• Enable widespread electrification of transport and industry.
• Create thousands of jobs.
• Deliver more affordable power for New Zealanders.

The Government will fund an examination of hydro schemes which pump water to manage peak demand, dry hydrological years and wind power generation.

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"If a business case stacks up, pumped hydro would be a game-changer for securing sustainable, cheaper, low-emissions electricity for the long term," Woods said.

"This would be transformative for our energy system, and we would no longer be reliant on fossil fuels for meeting our electricity demand.

"Pumped hydro moves water to an upper reservoir when there is surplus renewable energy generation and demand for electricity is low. It is released back down to a hydro power station to generate electricity when demand is high.

"It works like a battery because the stored energy in the water is released when it is used in the hydroelectric dam. This opens up huge possibilities for cheaper electricity and increased supply.

"The project could create thousands of jobs, make wholesale electricity cheaper in the long run, and it would decarbonise the grid as we wouldn't have to rely on coal and gas to make electricity.

"Pumped hydro would also open up opportunities to electrify sectors across the economy, such as transport and industrial heat, as a lower electricity price would make it more competitive than fossil fuels."

'Biggest infrastructure project since the 1980s'

She said the project like the one proposed at Lake Onslow, east of Roxburgh, was "ambitious".

"It would be the single biggest infrastructure project since the 1980s. That's why it's important to get certainty on the costs, logistics and any environmental impacts of what would be a game-changing, long-life asset for many New Zealand generations to come."

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The $30 million will be put toward the development of a business case for a solution to address New Zealand's dry-year storage problem.

Existing Lake Onslow hydro scheme, dam and lake. Photo / Supplied
Existing Lake Onslow hydro scheme, dam and lake. Photo / Supplied

The funding for the project comes from the $3 billion tagged contingency set aside in Budget 2020 for infrastructure.

This will mostly focus on a pumped hydro storage project at Lake Onslow in Central Otago, but will also include the assessment of smaller potential pumped storage options in the North Island, as well as other alternative technologies.

Project would create thousands of jobs

The Lake Onslow project was expected to create thousands of jobs including ones for environmental and geotechnical assessments as well as in construction.

"The full Lake Onslow project at its peak could employ 3500-4500 skilled and semi-skilled workers, as well as thousands more in indirect jobs."

The multibillion-dollar build, which would require separate funding, was expected to take about four to five years, plus two years to fill the reservoir.

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Woods also announced a further $70m investment to increase electrification of industrial and process heat in the lower South Island, with transmission line upgrades, and direct support to industrial users to convert their coal boilers to electricity.

The potential closure of Tiwai Point's aluminium smelter provides a near-term opportunity to use some of that electricity for switching out coal boilers to low emission options.

A national direction under the Resource Management Act on renewable electricity to accelerate generation will also be established, with $2m of funding.