By Stephen Wright

WELLINGTON, New Zealand--New Zealand's government is investigating the feasibility of a 1,000-megawatt pumped hydro power plant that it says could remove the need for coal and gas in electricity generation.

Some 30 million New Zealand dollars ($19.9 million) has been earmarked for a study of a dual-reservoir hydro project on Lake Onslow in the country's South Island, according to a government statement.

Nearly 60% of New Zealand's electricity is generated by conventional hydro dams, which provide so-called clean energy but are more expensive and less productive in drought years. A pumped-hydro dam uses two reservoirs, with water pumped back to the upper reservoir during off-peak electricity periods.

A 2019 report on renewable energy options for New Zealand said a pumped-hydro project on Lake Onslow and the Clutha River would have storage capacity of about 5,000 gigawatts and generation capacity of 1,000 megawatts. It noted it would be "very difficult" for such a project to get consent under New Zealand's resource management law.

Energy Minister Megan Woods said the pumped-hydro project would be the largest infrastructure development in New Zealand since the 1980s. It would take four to five years to build and two years to fill the reservoir, she said.

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

Rio Tinto Ltd. plans to close New Zealand's sole aluminum smelter by August next year, adding impetus to efforts to reach 100% renewable energy production.

The smelter, which consumes 13% of New Zealand's electricity, is supplied by hydro power. The government wants the surplus energy to be used to electrify industrial processes such as chemicals manufacturing that rely on coal or gas. 



  Write to Stephen Wright at stephen.wright@wsj.com