Documents show the Government's ‘portfolio’ alternative to the Lake Onslow power scheme has been slimmed down to just flexible geothermal energy and burning wood chips
Potential plans for a Crown-owned and operated hydrogen electrolyser which could turn off to free up electricity supply in dry years have been scrapped after officials determined the economic case didn't stack up.
The news was first released by the NZ Battery project – a government programme to find back-up electricity sources when hydro lake levels run low – in an August newsletter. Now, briefings and Cabinet papers released by the Ministry of Business, Innovation and Employment (MBIE) provide new details for the reasoning behind the move away from hydrogen and what else could be used instead.
In March, the Government announced the results of an Indicative Business Case into potential solutions for New Zealand's dry year problem. This 429-page report supported further consideration of a massive pumped hydro scheme at Lake Onslow in Central Otago, as expected, but also offered a potential portfolio approach combining several technologies. These included flexible geothermal power stations which could ramp up generation when needed, burning biomass in the form of wood chips in dry years, and a larger hydrogen electrolyser.
READ MORE: * Our electricity future is scary * Epitaph for Onslow
Though National has pledged to abandon work on Lake Onslow, the party's energy spokesperson told The Press it had yet to make any decisions about the portfolio option. That means the details of the portfolio approach could still be relevant to work by the incoming government.
The electrolyser would have produced green ammonia for export when it was operating under normal conditions, which would help make the business case for such a large investment stack up. Ultimately, officials said, there wasn't sufficient evidence to support the existence of a market for that ammonia in the timeframes relevant to the battery project, which aims to have a solution in place by 2030.
This isn't the death knell for hydrogen in New Zealand's transition to a low-emissions economy – officials were careful to specify it could still have use cases in industry and transport, among other sectors. It just means hydrogen won't help with dry year generation.
The electrolyser was to have provided 0.8 terawatt hours of electricity over three months in a dry year, out of the three to five terawatt hours needed. The difference could be made up through building out 0.6 terawatt hours of additional renewables and a slight increase in the number of green peakers than previously modelled, officials said.
The remaining two technologies are flexible geothermal and biomass burning.
Geothermal is a well-established technology and though there are technical risks to implementing the flexibility, officials said it should proceed to the next stage of a Detailed Business Case. It works by drawing steam from high-pressure hot water in underground reservoirs and spinning a turbine to generate electricity.
Traditionally, geothermal operates at a consistent maximum capacity, serving as baseload power. Flexible geothermal would work by modifying the valves on the wellhead to 25 percent of maximum capacity and spinning just one of four generators at a plant during normal conditions. Then, in a dry year, the wellhead would be opened up fully and the other three turbines would be spun up.
An analysis of this option during the Indicative Business Case was based on identifying five geothermal sites for power plants with four turbines each. The maximum capacity would be 400 megawatts across all five plants, though just 100 megawatts would be generated outside of dry years. That means an additional 300 MW would be on hand to compensate for low lake levels, which works out to 0.65 terawatt hours over three months.
The plants could be built in a staged rollout, with the first one online as soon as 2031 and the final one being commissioned in 2033.
One concern officials had was whether this was the best use of New Zealand's limited geothermal resource. In effect, it represents a decision not to use available resource during normal conditions and to rely instead on intermittent renewables.
"Renewable technologies that can provide firm baseload supply are scarce. As fossil-fuelled thermal plant retires, and the intermittency of wind and solar generation becomes an increasing feature of our grid, that baseload generation is likely to be highly valued, particularly if the emissions impacts can be managed through reinjection," they wrote in a May briefing to Energy Minister Megan Woods.
Electricity market participants would also need ironclad guarantees the plants wouldn't be turned on except when needed for dry years, otherwise they might risk dissuading investment in other renewables.
On biomass, officials were less certain about the final shape of the project.
One option is to build a brand new power station which would be fed wood chips from logs processed on-site during dry years and which would otherwise remain mothballed. The plant would need about 1.1 million tonnes of logs on site, stored across 60 hectares. Wellington's Centreport, for comparison, is roughly 46 hectares. This storage is equivalent to 8 percent of New Zealand's annual log export and it would need to be rotated out on a regular basis when the station isn't in use to ensure the logs don't break down.
The other option is to use existing thermal power plants, such as Huntly, and convert them to be able to fire wood pellets processed through a more intensive process called torrefaction. Though existing generators will eventually reach their end of life, this could delay the need for capital expenditure in a purpose-built facility. It would still, however, require the construction of a new torrefaction facility as New Zealand doesn't currently operate one.
Both options would produce about 1 terawatt hour of power over three months, though this could be scaled up if more logs were stored or sourced and more plants were built.
Though this would all technically be carbon neutral, because the CO2 emitted from burning the wood would be reabsorbed by re-planted trees, which would in turn then be harvested and sent for burning, officials said the public and our peers might not view it that way.
"Overseas, and Europe in particular, there appears to be a growing consensus among scientists and environmental groups that plans to convert significant numbers of coal-fired power plants to biomass (particularly wood pellets) would, on balance, have negative effects for the climate and environment. They argue that large-scale forest removal to supply biomass plants will drive the climate crisis, not avert it. However, this refers to the European context where they do not have large scale plantation forestry like New Zealand does and where native forests are harvested for biomass," officials wrote.
"The public may not perceive the proposed biomass solution, and particularly the burning of biomass, to be carbon neutral for [these reasons]. To counter this perception, assurances would need to be provided that large-scale biomass generation is carbon neutral (or better) over the full operating lifecycle by referencing carbon accounting standards. However, the transport of logs to the generation facility cannot be considered carbon neutral (unless transport trucks will run on non-fossil fuels/are electrified in future)."
With hydrogen gone from the mix, officials felt the portfolio option might perform better on a multi-criteria analysis than it did previously. The capital cost would also decrease, as would the operating costs. Compared with Onslow, the portfolio was already expected to be cheaper up front, but it would have cost more to run.
One of the key questions to be answered through the Detailed Business Case is how the portfolio may be delivered.
Three options were put up by officials: Crown ownership, Crown procurement of specific energy reserve services from private companies, or the creation of an energy reserve market. The first two options were preferred, but all three will be investigated in the next stage of work.
