NZ Battery Project

Cabinet has approved funding to investigate pumped hydro against other possible energy storage solutions to New Zealand’s dry year electricity problem.

Finding a solution to our dry year problem

The ‘dry year problem’ is that New Zealand’s existing hydro-power catchments sometimes don’t receive enough rainfall or snowmelt and the level of the storage lakes run low. When this occurs some form of back-up is needed, and this is currently provided by fossil fuel generation.

As we transition away from fossil fuels and increasingly rely on hydro, wind and solar, the dry year problem may expand to become a dry, calm and cloudy problem.

The NZ Battery project will provide comprehensive advice on the technical, environmental and commercial feasibility of pumped hydro and other potential energy storage projects.

The name NZ Battery refers to the manner in which the intended solution will provide stored energy for the New Zealand electricity system in an analogous manner to a battery.

The first phase will evaluate the viability of pumped hydro schemes of various sizes at Lake Onslow, as well as at other possible locations, and will consider these solutions against alternative methods to resolve New Zealand’s dry year electricity storage problem to achieve 100% renewable electricity and help to decarbonise the wider energy system.

In its ‘Accelerated Electrification’ report, the Interim Climate Change Committee (ICCC) recommended further investigating pumped hydro as a possible solution to the dry year problem. The NZ Battery Project will identify and investigate possible sites for pumped hydro, as well as at Lake Onslow in Central Otago, as part of the feasibility study, and other alternative technology approaches as comparators. Following rigorous assessment of all options, a feasibility study will be developed for the preferred option or options. 

Read the electricity report:

Accelerated electrification: Evidence, analysis and recommendations [PDF, 1.5MB](external link)

Phase 1 of the NZ Battery Project will likely include:

  • Initial assessment of the Lake Onslow option and other potential projects
  • Feasibility-level project development and design
  • Developing plans for consenting and assessing implications on the electricity network
  • Investigating environmental impacts and options for project to generate net ecological gains
  • Analysing commercial feasibility and designing procurement methodology
  • Early engagement with Iwi
  • Securing land access for geotechnical investigation and potential project use

The feasibility studies will inform a decision on whether to proceed to a next phase, which would be a detailed final engineering design and preliminary works to provide firmer knowledge of costs and capabilities to inform a Cabinet decision whether to proceed to construction on the chosen solution.

The final phase of the project will, if approved, be the construction of the selected option.  

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Technical Reference Group

A Technical Reference Group has been established to provide the NZ Battery Project team with independent expertise, sector knowledge and advice as it investigates all options under Phase 1.

Find out more about the Technical Reference Group

Pumped hydro storage

The Lake Onslow option and other smaller scale pumped hydro options will provide comparisons for other technologies during Phase 1 of this project.

Pumped hydro schemes are used internationally as a way of storing and using water independently of natural inflows. They are able to be specifically designed to meet daily demand peaks, and/or store a large amount of energy for a long period to meet dry year energy storage requirements. As such, they are an alternative to the flexibility provided by fossil fuel generation.

Pumped hydro can generate to provide additional energy from stored water in the upper reservoir when there is high electricity demand and/or low levels of renewable generation. Conversely, when there is low electricity demand and/or high levels of renewable generation, water can be pumped up hill for storage and later use.

How pumped hydro storage works
Image demonstrating pupmed hydro storage

Where is pumped hydro storage used?

Pumped hydro storage is used throughout the world as a stored energy option for hydroelectricity with large schemes in the US, China and Japan. Scotland has two pumped hydro storage hydroelectric power stations, which pump water back up to a storage reservoir during periods of off-peak demand. Australia is currently building a large pumped hydro storage project, Snowy 2.0.

Find out more on the Snowy 2.0 website.

Snowy 2.0(external link) — Snowy Hydro

Pumped hydro at Lake Onslow is one option that will be investigated:

Read more about the Lake Onslow option

Identifying and assessing other options

In addition to pumped hydro, the ICCC examined 4 other options for renewable dry year security in its 2019 study ‘Accelerated Electrification’.

'Accelerated Electrification' on the ICCC site(external link)

The other options are:

  • 'overbuilding' renewables
  • biomass
  • hydrogen
  • indicative large scale demand interruption

The ICCC considered the marginal emissions abatement costs of the options relative to continuing to use natural gas-powered generation as in the diagram below.

Graph showing how much it could cost to remove the emissions that would be produced if gas-fired power stations provided dry year security.

Accelerating Electrification, Interim Climate Change Committee, 2019

The NZ Battery Project will look at these and other potential options in detail as comparators against pumped hydro. Other options may also be assessed as they arise through the course of the investigations.

Environmental considerations

A renewable energy battery solution would significantly reduce New Zealand’s reliance on coal and gas, and make major strides towards our climate change goals. However the environmental impacts associated with each of the possible solutions need to be considered in the course of this project.

To date, the Department of Conservation (DOC) has been commissioned to undertake a comprehensive study of environmental and conservation values at Lake Onslow and its surrounding area, and how these might be affected by a pumped hydro scheme. This will be achieved by a mix of reviewing existing resource information and detailed field work. DOC is expected to provide initial findings to MBIE by the end of the year.

Further work is scheduled to assess the hydrology and ecology at Lake Onslow, and how these could change if a pumped hydro scheme was to be developed.

The potential environmental impacts associated with other possible pumped hydro sites and other technologies or solutions will be considered as and when specific locations or concepts emerge.

Indicative project timeline

Scope Estimated cost Estimated timeframe Decision required
Phase 1: Investigation and evaluation of pumped hydro and other dry year storage solutions, and early field work including potential geotechnical and environmental investigations. Feasibility study to inform a decision on whether to proceed to the next Phase. Up to $30 million 2021 – April/May 2022 Agreement to proceed to Phase 2
Phase 2 dependent on findings of feasibility study
Phase 2: Engineering design and further field work to understand any environmental, geotechnical and seismic aspects of dry year solution option or options agreed at the end of Phase 1. Up to $70 million  May 2022 – late 2023/early 2024* Decision whether to proceed to construction and agreement for funding mechanism
Phase 3 dependent on design work and securing of funding mechanism
Phase 3: Construction Unknown until dry year solution or solutions selected Early 2024 onwards*

*Depending on the chosen option or options


The NZ Battery Project adheres to the New Zealand government’s procurement guidelines when commissioning work. This means work is procured from the relevant All-Of-Government panel, when possible. Work that is out of the scope of these panels, such as the field geotechnical studies, are sourced from the open market.

The government’s guidelines also allow for smaller pieces of work to be procured directly from a provider on the All-Of-Government panels. Where relevant, we also seek advice from others such as mana whenua, and prioritise local services.

Key documents

Project management

Updates will be provided on this page as they become available.

If you have any questions please email the project team at:

Last updated: 30 July 2021