Electricity key to Fonterra's 2050 net zero target

Monday 29th October 2018

Electricity is probably Fonterra’s best long-term energy option, but the company says it will need a combination of fuels at its sites as it works toward its 2050 net zero emissions target.

New Zealand’s biggest exporter operates 30 plants nationally and is a major user of gas and coal for its milk powder drying.

It expects to start running its Brightwater plant near Nelson on a mix of coal and wood chip next month. In August it announced plans to convert the boiler fuel at its cheese plant at Stirling – south-east of Balclutha - from coal to electricity.

Global operations chief operating officer Robert Spurway said Fonterra is serious about meeting its 2050 target.

Getting there will involve combinations of fuels and incremental changes as new capacity is added or old plant replaced. The choices available will vary regionally and will need to evolve over time as the cost of renewables come down, he said. Energy efficiency gains also remain key.

In the North Island, where the company has more fuel options, Spurway said the company would probably like to move away from coal sooner rather than later.

But whether that will require gas to play a transition role at those three sites is hard to assess right now.

“If we can jump straight to full renewables without gas – we will,” he said in an interview earlier this month.

“Electricity is probably the most sustainable option for thermal heat over time.”

Electrification of transport and heavy industry, alongside large-scale afforestation, will be key planks of New Zealand’s efforts to meet its 2050 target net-zero emissions, the Productivity Commission reported in August.

But Spurway said electrification of the firm’s biggest sites is not a short-term option. Changing Fonterra’s Edendale plant, north-east of Invercargill, to electricity would have increased the site’s operating costs by about 50 percent and would have required an investment from Fonterra of about $160 million in upgrading the supply to the site.

He said Stirling was selected for the company’s electrode boiler trial because the local OtagoNet grid could absorb it without a major upgrade. The change, now in detailed design work, would also make a meaningful contribution to the firm’s emissions reduction by displacing about 9,700 tonnes of coal annually.

As part of its sustainability target, Fonterra has committed to getting its 2030 emissions 30 percent below a 2015 baseline. The company has also pledged to open no new coal-fired capacity from 2030.

Spurway said energy efficiency would also be a core focus in the next 10 to 15 years, with the installation of more efficient boilers, greater use of heat recovery and more use of industrial-scale heat pumps to reduce the company’s total thermal energy requirements.

Fonterra’s starting point for any plant expansion, he noted, is whether it can be achieved without increasing on-site energy demand.

The installation of new water treatment capacity, a new milk protein concentrate plant, and an anhydrous milk fat plant at Edendale in 2015 had been achieved within the site’s existing energy load.

He noted the firm’s energy reductions since 2003 are equivalent to 43 years’ supply for a city the size of Tauranga.

Spurway said coal remains a fuel of last resort on the South Island, and he would be disappointed if the firm failed to meet its commitment on new boilers.

But he noted that when setting that target, the company had been conscious of its regulatory obligation to take any additional milk volume coming into the market.

Spurway said woody biomass does have a role to play in getting emissions down, but will generally be limited to co-firing.

Dairy farms and dairy factories don’t tend to be where there are a lot of trees, he said. And emission reductions can be quickly eroded – or turn negative - the further biomass has to be trucked.

New Zealand Oil & Gas and its partners in the Barque prospect off the Oamaru coast have talked up the potential for a major offshore gas find to reduce coal use by South Island food processors, or to supply an export methanol industry or displace imported fertiliser.

Spurway said Fonterra would have found South Island gas “fairly interesting” a few years ago as a low-emission alternative to coal.

While he would “never say never,” that option may now simply be too far off – given it may take more than 10 years to develop any such find – and then get the gas to any of Fonterra’s sites.

Fonterra is still assessing what the government’s proposed ban on new offshore exploration may mean for its North Island gas options.

While the ban could reduce gas supplies long-term, Spurway said that volume is more likely to be surrendered by large-scale users that may have other options internationally.

He said Fonterra could invest in gas to reduce its coal use – and emissions - even if gas does not remain in its fuel suite longer term. But that’s why a clear understanding of emissions rules and the broad policy framework around energy is so important, he said.

Whereas the government tends to place a big emphasis on rising carbon costs, Spurway said the company is counting much more on the cost of alternative energy supplies coming down to help meet its emission goals.

Geothermal is another area it thinks about, and not necessarily in terms of direct steam use.

While electricity is not currently 100 percent renewable, it can be distributed around the country.

He said the company is keen to work with energy suppliers and come up with the best strategic options that would meet its requirements for sustainability, viability and security of supply.

And that could include under-writing new renewable generation developments – at the right price.

(BusinessDesk)

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