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Increasing focus on low-emission supply chains an NZ opportunity

Monday 29th April 2019

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Increasing pressure on firms globally to reduce emissions throughout their supply chain is a genuine opportunity for New Zealand, Contact Energy says.

Chief generation and development officer James Kilty says there has always been a level of interest from firms overseas keen on seeing whether they could establish businesses here to take advantage of the country’s geothermal energy and its high – and growing – share of renewable electricity.

But he says there is also a growing focus among international firms to reduce emissions from within their suppliers’ products and services – so-called scope 3 emissions. That broader pressure across global supply chains could present opportunities here, both for existing firms and potentially from new businesses coming here.

“We’ve got people genuinely interested in establishing industry here,” Kilty told BusinessDesk. “We are pursuing that.”

Successive governments have talked up the potential for increased international investment here by firms keen to capture the benefits of the country’s ample renewable energy resources.

But while existing firms, including paper giant Oji Group, Red Stag Timber and Sequal Lumber have expanded their operations in recent years and promote their environmental credentials, newcomers have been less obvious.

China’s Fenglin Group spent two years investigating a potential processing plant near Taupo before last year being approved for a $180 million particle-board plant development at Kawerau on land leased from the Putauaki Trust.

Contact, as part of its own emissions reduction targets, is aiming to remove about 60,000 tonnes of CO2 by 2022 by helping its industrial customers displace about one petajoule of fossil fuels with electricity.

It is also aiming to reduce its own emissions from generation by 30 percent by 2030 – from a 2018 base year – and is seeking a 37 percent reduction in emissions per megawatt-hour of generation over the same period. It is targeting a 15 percent reduction in scope 3 emissions from sold products.

The targets – which are separate from Contact’s carbon sequestration initiatives - have just been endorsed by the Science-Based Targets initiative as consistent with achieving the 2015 Paris agreement goal to limit global warming to less than 2 degrees above pre-industrial levels.

Contact shut its gas-fired 400 MW Otahuhu plant in 2015 and has signalled it may not extend the life of the 377 MW Taranaki Combined Cycle plant beyond 2022.

Kilty says the firm’s reduced reliance on gas, and development of more renewables, will go a long way to meeting that target. But he said the firm is also looking at other options, such as using biofuel at its diesel-fired Whirinaki plant.

The company is also trialling at “reasonable scale” software the firm developed in-house to help its bigger industrial customers shift load to avoid peak period demand and reduce the call on – and emissions from - the country’s gas- and coal-fired generation.

Kilty says there is no single answer to emissions reduction and firms need to be prepared to take some risks and experiment with new technologies and ways of working.

He says the country has huge potential to benefit from the electrification of transport and industry, but only if it can keep its low-carbon power system affordable and reliable as well.

The country’s share of renewable power generation - almost 84 percent last year - is likely to reach the “low to mid” 90 percent mark relatively easily, he said.

But maintaining affordable supplies is going to be a challenge if the government persists with a 100 percent renewables target.

“Those last few percent could get very expensive.”


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