As part of its transition toward an aspirational goal of 100% renewable electricity generation, New Zealand had been investigating an option of replacing the need for dry-year fossil fuel power generation with the world’s largest pumped storage scheme by energy storage measure. The scheme was to be located at Lake Onslow in the southern South Island. It would have an energy storage capacity up to 5 TWh for a construction cost of 16 billion dollars. However, the 2023 change of government means the scheme is not presently under active evaluation. Evaluation may well be restarted with a subsequent change of government, depending on party policy. While aiding emission reduction, there would be local environmental impact from expanding the existing Lake Onslow reservoir, which will flood over nearby wetlands. This study considers a range of potential environmental mitigation measures that might counterbalance the scheme's ecological impact. Consideration is also given to the large water volume in the Onslow reservoir potentially able to act as insurance against future extreme regional droughts that may arise from climate change. The possible offsets include the restoration of two existing scenic hydro storage lakes – Lake Monowai and Lake Hawea. An argument is made that the large amount of new hydro storage capacity at Lake Onslow means that the relatively small storage contributions of these two lakes no longer justifies their inundation environmental impact. This would start a change in national thinking because to date no hydro storage lake in New Zealand has been restored for purely environmental reasons. In addition to lake restoration, discussion is also presented about the possibility of a hypothetical partial flow restoration of the depleted Waiau River. It was New Zealand’s second largest river by discharge prior to diversion into the Manapouri power station. It is tentatively suggested that new wind power in Southland buffered by Onslow pumped storage would enable partial closure of the Manapouri station, restoring about half of the original flow the lower Waiau River downstream of Lake Manapouri. Onslow water storage would involve cubic kilometres of water, so some water could be used to offset extreme droughts without impeding pumped storage energy functionality. A narrow-diameter rock tunnel could also be constructed between the expanded Lake Onslow and the Dunedin city water intake at Deep Creek. This would make Dunedin drought-resilient against climate change because presently the city water supply is derived just from small local catchments with little storage. Some Onslow water might also be used to maintain water flow of the eastern Otago Taieri River in an extreme drought. However, this would raise cultural and ecological issues that would need to be considered prior to any water release.