Fonterra says $100m in carbon credits could help pay for clean energy

Wed, May 24

Fonterra, one of the country's largest greenhouse gas emitters, says it will be a decade before it will abandon coal altogether, and it wants more government assistance.

Last week NZ Steel said it would halve its coal use in 2027 after a government boost to help cut coal-powered operations.

NZ Steel received $140 million to create an electric arc furnace at its mill in Glenbrook, Auckland. The company said this would save cut 800,000 tonnes of carbon a year from day one.

Fonterra chief operating officer Fraser Whineray told Morning Report today that it was working to reduce emissions, but more government assistance would help.

"Between 2018 and 2030, we'll be down 30%, which means [by 2030] coal will be down about 60%."

At the moment, for each tonne of greenhouse gases, the company must pay into the Government's Emissions Trading Scheme. Still, Whineray said he would like to see more of that be given back to Fonterra to help it introduce more clean alternative energy sources.

"Our total off-farm emissions in New Zealand at the moment is about 1.5 - 1.6 million tonnes [per year], and so you times that by the carbon price, and that's roughly the cost of surrendering carbon for our emissions in New Zealand each year.

Fonterra's Fraser Whineray.

"We surrender more than $100m in carbon credits each year for our off-farm emissions, and so we are talking with ECCA [the Energy Efficiency and Conservation Authority] about what can be done to use some of that for ... decarbonisation."

Fonterra counted both its on-farm greenhouse gas emissions as well as the off-farm greenhouse gas emissions from the organisation.

"On-farm emissions are about 10 times what Fonterra the entity emits. Our coal is about 800,000 tonnes of emissions [per year] at the moment... Coal is about half our farm emissions.

"The ETS is supposed to recycle funds back into decarbonisation. And if we're spending more than $100m a year on carbon credits, getting a little bit of that back to help pay for the actual projects - some of which we've got underway and some much larger ones in front of us, that sounds like a pretty reasonable starting point."

So far, Fonterra had received just under $3m in government grants for two "relatively small" projects, Whineray said.

"We've done some of the largest decarbonisation projects so far... and we've got three projects simultaneously underway at the moment.

"Ultimately, in the very long term, we have to imagine a future without coal, gas and diesel."

The company was looking into a variety of types of clean energy to see what might work for them, Whineray said.

"We're looking at biomass which we've already installed. We've got projects at Stirling in Otago, the Stirling cheese factory there, which turned on Tuesday, that's now running on biomass.

"You can use white pellets, which are a form of tricking an existing coal boiler into thinking it's getting coal and that's made of sawdust and things like that, and that's at Te Awamutu, that's our largest decarbonisation project to date. You can also look at black pellets. We did a trial with Genesis on that, which is great because you can store them outside."

And they were considering new European heat pump technology that could use renewable energy in a much more energy-efficient way.

"Obviously diesel - we've got our electric truck running around in the Waikato now, and that's part of a precursor to a larger look at our trucking fleet of 450."

Whineray said one key factor when considering how to power their operations was reliability and diversification to ensure resilience.