The Tiwai Earthquake

Paul Goodeve, the Chief Executive of gas network operator Firstgas, believes that the departure of Tiwai smelter leaves a gap that can be filled by the fledgling hydrogen industry.

The end of the smelter at Tiwai Point is an earthquake-scale shake to New Zealand industry and the energy sector.

This aluminium egg in our industry basket uses about 12 percent of New Zealand’s electricity. It produces nearly $1 billion a year in exports of the purest grade aluminium, made with the greenest power. It employs about 800 people and indirectly supports over 3000 jobs.

Smelting is hot business; 570 MW of electricity is sent from the Manapouri hydroelectric power station to Tiwai Point by two double circuit 220kV transmission lines. It’s enough electricity for 680,000 homes.

Manapouri was built in tandem with the smelter in 1971. The pair are reminiscent of a time when Government thought big.

Our national ambitions have changed since then, but big commitments are sometimes still needed. In Christchurch we’ve rebuilt an entire CBD. In Auckland we are regenerating bus and rail infrastructure and investigating moving a port. In New Plymouth, where I live, we are transitioning to new forms of energy after ending offshore oil and gas exploration.

Now there is Covid-19. The scale of recovery needed to overcome the impact of the pandemic has encouraged us to consider projects that will help position our economy for a greener future. It is serendipitous that right at this moment the smelter land and a dedicated supply of zero-carbon electricity has become available.

There is currently no realistic alternative use for the Manapouri power – and it would cost hundreds of millions to upgrade transmission lines to move the power north.

I know one industry that could replace the smelter – at the right scale and with global environmental benefits.

That industry is hydrogen.

Hydrogen can be made by electrolysis, using electricity to split water molecules. The main challenge is the cost and quantity of electricity required. Tiwai and Manapouri can rise to that challenge.

Hydrogen gas can be used to power industrial heating units, generators, vehicles and even appliances in the home. Firstgas has a hydrogen BBQ at our New Plymouth base and Hyundai has demonstrated hydrogen-powered cars here too.

It’s a green fuel because it turns back into water when it’s burned. There are no emissions.

Japan and Korea have committed to using hydrogen to lower their emissions. The Tokyo Olympics will use hydrogen to fuel the Olympic torch and the village that houses the athletes. These Asian nations are massive energy importers and are already paying premium prices for hydrogen.

Hydrogen production in Southland could be a high value export earner. It could also be used decarbonise South Island process heating, such as that used at dairy factories to dry milk, currently fuelled by burning coal.

A hydrogen industry is no pipe dream. It is already being produced and used in New Zealand in small quantities. Moreover, we are planning out the ecosystem necessary to make a whole industry operable and commercially viable, including a pilot to deliver hydrogen through our existing pipelines.

People say they want hydrogen. But they are concerned whether enough will be generated, whether required infrastructure will be built, and whether others will convert to hydrogen.

That uncertainty can be resolved by Government involvement.

Governments are not scared of commitment. Last week the Government announced a $30 million investigation into pumped-hydro at Lake Onslow. The project would cost $4 billion dollars to complete and would carry us to the Government’s 100% renewable electricity target. Electricity transmission costs would drive that number even higher.

The energy sector is talking big. But investments like these can only be paid back via power prices. Trouble is, close to a quarter of Kiwis cannot afford to pay for their own power as it is.

Investment in Tiwai could be better value. We’re not starting from scratch there, and the resulting product will be exportable, better suited to local industry, and an alternative energy source. It would also create its own business ‘ecosystem’; sustaining high-paying jobs and generate export earnings for New Zealand.

Government does not need to pay for it. Instead, it could coordinate various players, perhaps by underwriting hydrogen sales or by providing incentives for energy users in New Zealand to convert to hydrogen heat systems.

The hydrogen sector will not be ready to take over from the smelter from next year. But with careful planning and the right focus, we could scale up from 2022.

The smelter’s departure will leave a large hole. I think the opportunity and the times call for its replacement with an industry equal in scale but also equal to the needs of a zero-carbon future and the public’s expectations about power prices.

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