Gas scarcity may hinder Fonterra’s coal switch
Dairy manufacturer Fonterra has signalled it may not be able end its use of coal by 2037 in line with a Climate Change Commission proposal, due to current and forecast gas scarcity.
In a 28-page submission on the commission’s draft advice to government, New Zealand’s largest company and exporter said the proposed pathway to ending coal use for industrial heat by 2037 is “ambitious and will be challenging to meet”.
“While we are working to transition our manufacturing operations on to renewable energy sources and off coal by 2037, the current and forecast gas scarcity issues in the North Island pose a significant material risk to completing this transition within this timeframe.”
Fonterra said over the past 18 months there had been significant disruptions in the gas market.
“With a disruption with the Kupe gas field, the decline in the Pohokura gas field and no new significant gas fields planned, there is a significant risk of gas supply interruptions at our gas-fuelled sites.
“If there isn’t certainty of gas supply, we may need to start transitioning our 76 gas boilers and air heaters to renewable alternatives sooner than the commission’s pathway of 2037 onwards, which would almost certainly impact the speed at which we transition off coal.”
Fonterra has 27 manufacturing sites across New Zealand. Nine rely on coal as a primary energy source, including one that also fires wood biomass. Seven of the sites are in the South Island where reticulated natural gas is not available.
The submission said while noting the gas scarcity issue, Fonterra accepted the commission’s proposed pathway for decarbonisation of industrial process heat, including an end to industrial coal use by 2037. It strongly supported an immediate ban on installation of all new coal boilers, regardless of the heat they produced.
It supported development of a government and industry plan for the bioeconomy, alongside a national energy strategy to scale up the provision of low-emission energy sources.
The submission was broadly supportive of the commission’s ambitions but warned significant investment in research and development was required from the Government and the dairy industry to find practical steps farmers can take to meet their 2030 and 2050 methane reduction responsibilities.
Owned by 10,000 dairy farmers, Fonterra said it recognised it produces 20 per cent of the country’s greenhouse gas emissions — 90 per cent from farmers’ businesses, 9 per cent from manufacturing operations, and 1 per cent transporting products to world markets.
It was committed to achieving a 30 per cent reduction in its absolute emissions from manufacturing sites by 2030, based on 2018 levels, and to being net zero by 2050.
Those commitments aligned with the commission’s recommended pathway for decarbonisation of industrial process heat, and Fonterra had made good progress on them — but substantial challenges remained.
It had achieved its first target of a 20 per cent reduction in energy intensity. The energy saving to this point was enough to power all households in New Zealand for 1.5 years. The emissions reduction was equal to taking 1.28 million cars off the country’s roads.
The company was about 20 per cent of the way to achieving its 2030 emission reduction target.