There had been speculation the project could be dropped as part of new Prime Minister Chris Hipkins' policy bonfire, but today Energy and Resources Megan Woods announced it would develop a detailed business case for the project aimed at finding solutions to the "dry year" problem.
Ms Woods remained enthusiastic about pumped hydro technology despite the high price tag.
“Until we address the dry year problem, we will continue to rely on burning expensive and polluting fossil fuels to produce our electricity. That’s bad for the climate and our power bills.
“Pumped hydro is an ingenious way of storing energy in a big reservoir, which is released into a lower reservoir when more power is needed, like a giant battery.
"A dry year solution would be a huge step towards our mission to move towards more renewable energy generation and power more of New Zealand in New Zealand."
She said phase one investigations had shown a pumped hydro scheme at Lake Onslow would take about seven to nine years to build, with an estimated building cost of $15.7 billion.
The next stage would involve developing a detailed business case, which would also look at other potential solutions to the dry year problem, which could include a smaller pumped hydro scheme in the central North Island and looking at biomass, flexible geothermal energy, and hydrogen technologies.
Investing in a portfolio made up of these alternatives to Lake Onslow was expected to cost $13.5 billion, but with significantly higher ongoing operating costs.
“We always knew that any dry year battery storage solution will require significant investment, that’s why it’s important we thoroughly test these scenarios and get it right.
“Now some more detailed work has been done we have a much clearer picture of the projected costs which differ significantly from the 2006 high level costings.
"The next phase will be to dig even further before we look at spending such a huge amount of money, but one thing we do know is that doing nothing to plan for climate change is not an option.
“We have a choice to take a short term view and continue to pay for the increasing costs related to climate change or to be bold and take a long term view, for the good of the country.
“But there’s still a long way to go. We will continue to work with our key stakeholders including mana whenua, and landowners, as well the technology experts,” Ms Woods said.
The detailed business case was expected to be developed by the end of next year, followed by a final investment decision, which is expected to take a further two years.
