Opinion: Tiwai Point and NZ’s energy strategy

Jeffrey Clarke, chief executive of GasNZ

The recent "20-year" electricity pricing deal just agreed for the Tiwai Point aluminium smelter is a notable milestone for energy sector stability in New Zealand.

And having participated in two previous Meridian/NZAS negotiations, I expect it is also a very welcome milestone in the personal lives of every single person involved in the negotiations!

At some stage, the global aluminium price will fall and New Zealand Aluminium Smelters will once again threaten to close the smelter, but, for now, this new certainty will enable a new round of energy sector investment decisions – all made in the context of New Zealand’s commitment to reach net-zero carbon emissions by 2050. 

If we have the will, we can achieve net-zero carbon emissions in New Zealand within the next 26 years. But it will not be easy or cheap. And it will require us to attack it from every angle we’ve got.

Many Kiwis wrongly believe that net-zero “decarbonisation” of our economy mostly means “electrification” of all energy use. This overlooks at least two factors. 

First, only 37 per cent of our emissions come from energy use: electrification alone will not address the 53 per cent of emissions from agriculture, the 6 per cent from industrial processes or the 5 per cent from waste. Our solutions need to go well beyond energy, and lots of them need to be focused on agriculture.

Second, it underestimates the scale of the challenge: to electrify all the energy we use today (without accommodating any growth), our electricity supply and infrastructure would need to be four times larger than it currently is, because electricity accounts for only about a quarter of New Zealand energy use. In addition, many energy uses, such as high-temperature processing, are hard to satisfy with electricity.

Broader thinking needed

We absolutely do need to significantly increase our use of renewable electricity. But to reach net-zero in the next 26 years, we need to expand our energy thinking well beyond “electrification.”

This means also investing in renewable energy solutions including renewable gases like biomethane and hydrogen, in renewable biomass, as well making significant improvements in energy efficiency, energy from waste recycling, and use of smart technology.

Together, these strategies will help address the staggering scale of change needed, while preserving – or indeed increasing – the diversity of available energy options.

Recently I attended the Gas Energy Australia Forum, a two-day event focused on renewable LPG advancements.

At the forum, experts shared presentations showing that several forms of renewable LPG – boasting low or zero net carbon emissions – are not only feasible but are also being produced in increasing volumes. The World Liquid Gas Association forecasts that by 2025, global renewable LPG production will reach 1.8 million tonnes. For a sense of scale, this is about nine times the amount of LPG New Zealand uses in a year.

For those passionate about reducing carbon footprints, this news is particularly exciting. Renewable LPG is a direct substitute, which offers the high heat and flexibility that users value, without the environmental cost. As global production scales up and carbon pricing becomes more impactful, renewable LPG – alongside biomethane and renewable hydrogen – is set to play a crucial role in replacing traditional gas fuels. 

That is, if we let it. 

Challenge

If we go on assuming that “decarbonisation” means “electrification,” and that “renewable energy” means “renewable electricity”, our path to net zero will be steeper and narrower, and more costly than it needs to be.

GasNZ is committed to ensuring that policymakers and the public understand the significant role that renewable gases can play in meeting our nation's emission reduction targets, offering a cost-effective, flexible part of the overall solution.

It is imperative that this understanding translates into supportive laws, regulations, and standards that encourage rapid investment in renewable gases. This will accelerate our collective journey towards a net-zero future by 2050.