Meridian gets draft approval to use contingent lake storage

Meridian Energy has been granted a provisional go-ahead to access additional water in Lake Pūkaki for electricity despite opposition from government ministers and the national grid operator.

Power giant Meridian has gained draft approval under the Fast-track Approvals Act to allow access to water stored between 518m and 513m above sea level prior to the point where Transpower estimates there is a 4% risk of electricity shortage.

“We’re very pleased with the panel’s draft decision. When the pressure’s on like it was in winter 2024, every extra metre makes a big difference,” Meridian chief executive Mike Roan said.

“Access to contingent storage will lower the price of electricity traded in the wholesale market by increasing the amount of renewable, lower-cost fuel available. This will in turn put downward pressure on the fixed rates retailers offer to residential and business customers, which is our number one priority.

Meridian said the proposal to temporarily ease the restrictions on access to contingent storage down to 513m in Lake Pūkaki over the three consecutive winters would lead to a reduction in the wholesale spot market over the three years and reduced cost of electricity to consumers.

It would also bring a nationally significant increase in retail competition, lower spot-price volatility and hydro spill and lessen the need to reduce energy consumption. The extra power was valued at $80 million.

Minister of Energy Simeon Brown had made a late submission to the fast-track panel, saying he did not support the proposal.

‘‘The contingent hydro storage provides an important reserve of energy, that can be used in stressed system conditions. If access is provided to water currently held as contingent storage, and this storage is drawn down, it would reduce the volume reserved for rare but critical periods of system stress,’’ he said in comments to the fast-track panel.

The electricity system was in a state of flux and New Zealand’s thermal generation fleet was ageing and prone to outages, he said.

Mr Brown said it was appropriate to take a cautious approach to proposals that materially altered the management of hydro storage at this time.

Minster for the South Island James Meager said he supported Transpower and its stance on the proposal.

Transpower said Lake Pūkaki’s contingent hydro storage would eliminate significant contingent storage from the electricity system and therefore increase the risk that, in potential short-supply contingencies assessed under the Electricity Authority’s risk tests, the adverse consequences for the power system and New Zealand economy would be very significant.

Mackenzie District Mayor Scott Aronsen said the issue was how low could the lake go?

‘‘My main concern is if you go down well past 218m in a dry year then how long will it take to get the lake back to when it is full,’’ he said.

‘‘How long is that going to take and what mitigation has Meridian got to help do that?’’

Mr Roan said he respected the views and concerns around eased access to contingent storage.

Meridian was proposing for this winter, if the draft decision was confirmed, it would continue for the rest of 2026 to treat half of the 5m of contingent storage as only accessible when there was a heightened risk to security of supply

The company planned to hold further discussions with key electricity industry stakeholders during the year,.

The draft decision also granted Meridian permission to permanently install rock armouring at Pūkaki Dam to ensure its resilience to wave erosion when operating the lake at lower levels.

A final decision is due early next month.