Can New Zealand Electrify Industry?

20 May 2019

The Government has set a target for New Zealand’s economy to be net-zero emissions by 2050. Does our current approach stack up?

Methanex – adding 15% to national electricity demand?

In a recent submission to the Ministry of Business, Innovation and Employment (MBIE), Methanex, New Zealand’s largest single gas user suggested that should the company transition from gas-based manufacturing of methanol to electricity, this would increase New Zealand’s national electricity demand by around 15% (5,800 gigawatt-hours). In other words, there would be a Rio Tinto Aluminum Smelter-sized electricity user in Taranaki.

Methanex currently consumes around 88 petajoules of gas and 84 gigawatt-hours of electricity and produces about 2.4 million tonnes of methanol per year.

Located away from New Zealand’s main generation sources, this would place increasing pressure on the North Island generation mix. With only limited new baseload generation planned for the North Island, electrification of methanol production would require more coal and or gas being used by thermal generators.

Methanex says that should conditions become nonviable to remain in New Zealand, they would relocate to China. Because of China’s current generation mix and energy sources, this could increase global emissions by four to six million tonnes of carbon dioxide a year.

The hydrogen solution

Last year the New Zealand Government signed a memorandum of understanding with Japan to develop hydrogen production in the Taranaki region with the view to pave the way for a transition away from Natural Gas and LPG.

However electronic hydrogen production will further strain the New Zealand energy system as 41.4 kWh of electricity is required to produce 1 kg of hydrogen from water.

In a recent article, Centrica (owner of British Gas) warned a move to make the gas grid run on hydrogen is “unlikely to be practical”.

Centrica chief executive Iain Conn said natural gas would be “crucial” in the transition to reducing carbon emissions, and that Britain and other countries would need to start using more of it before it could wean off the fossil fuel.

“It is quite clear that we cannot get from A to B without using more natural gas,” he said at a speech at the Aurora Spring Forum in Oxford.

“I don’t believe in the mass use of pure hydrogen, I think it highly unlikely to be practical,”

Iain Conn

Conn said, but said he was open to injecting around nine per cent hydrogen into the grid.

“We have done a lot of decarbonising power generation, but heating and cooling will be key,” he added.

Heating and Cooling in Britain

The remarks come just a week after chancellor Philip Hammond announced a plan to ban fossil fuel boilers from new homes built after 2025.

“We will introduce a future homes’ standard mandating the end of fossil fuel heating systems in all new houses from 2025, delivering lower carbon and lower fuel bills too,” Hammond told parliament during last week’s Spring Statement.

Conn said that heat pumps would eventually start taking British homes off the gas grid. He also said the world would be able to add around one gigawatt of renewable power capacity each day for the next 30 years.

Heating and cooling in New Zealand

Heat pumps in New Zealand have only added to electricity demand in recent years as more are installed and being used for cooling in Summer as well as heating in Winter. While more efficient than electric fan heaters, gas heaters and oil column heaters, the added cooling load has counteracted the savings in many cases as large numbers of New Zealand homes are moved away from wood burners.

These concerns were echoed in New Zealand by Paul Goodeve, First Gas Chief Executive, saying that, “A key element is affordability. We need to find affordable ways to meet winter electricity peak demand and maintain the competitiveness of large industries that use gas for production. Would New Zealanders find it palatable to pay substantially more for their electricity to upgrade infrastructure which will be underutilised to cover large energy use sectors and peak winter use? These are considerations we believe policymakers need to take carefully into account when making decisions.”