Fonterra closes door early on coal
Fonterra has committed to not install any new coal boilers or increase capacity to burn coal, 11 years ahead of target.
Chief Operating Officer of Global Operations Robert Spurway says this will be a challenge, but one that the Co-operative is up for.
Getting out of coal is not as easy as flicking a switch but making this decision now is the right thing to do, underlining our commitment to a new energy future and helping New Zealand meet its obligations under the Paris Agreement and New Zealand’s ambition of being carbon neutral by 2050.
This commitment is the latest in a series of targets we have set as we look to embed sustainability at the heart of everything we do.
Our farmers are some of the most efficient producers of milk in the world, so we owe it to them to ensure our manufacturing operations and wider supply chain are efficient as possible.
Like most New Zealanders, we would like to replace coal immediately but that’s not feasible.
A staggered, site by site, approach, is prudent as we juggle significant considerations. We need to ascertain what is the best replacement for each site and then manage the transition while remaining competitive internationally so as not to adversely affect exports and the country’s economy.
We have 32 manufacturing sites across the country, 23 in the North Island and nine in the South Island. Three North Island sites use coal, the rest natural gas and electricity. With gas not available in the South Island, it’s a different story where we will be using coal for longer than we would like.
Secure supply is a key consideration. Milk is a perishable product and it must be processed within 24 hours of collection. During peak season, we collect more than 80 million litres each day. As you can imagine, a power cut to a site could have significant impact.
Transitioning out of coal is not something we can do alone. By working with partners we have made progress in trialling alternatives and have been given the confidence to make this announcement as we move towards achieving zero net emissions by 2050.
We have been trialling alternative sources of energy for some time.
At our Brightwater site near Nelson we are co-firing our boiler with wood biomass. This will reduce emissions by 25%, the equivalent of taking 530 cars off the road. At Te Awamutu we recently trialled wood pellets. There are a few kinks to be ironed out, such as keeping them dry, but we’re encouraged by the results.
We are electrifying our site at Stirling in South Otago where the change-over will take three to five years to complete. With electricity, significant transmission and distribution line upgrades are required so it is a challenge, particularly for some of our bigger sites. For example, a feasibility study to convert our Edendale site in Southland to electricity indicated it would cost around $160 million while our annual operating costs would increase by at least 50%.
We know transitioning to cleaner fuels will require some additional investment and we need to balance this with remaining competitive, that is why we need to take a staged approach.
Brightwater co-fired boiler
Fonterra is not the only business facing these challenges. I represent the Co-operative on the Climate Change Leaders Coalition which has just marked its first anniversary. From a group of a dozen or so of us, the coalition now numbers more than 100 New Zealand companies representing more than half of the country’s carbon emissions. Companies have committed to measure, report on and reduce their emissions of greenhouse gases like carbon dioxide, methane and nitrous oxide. The exchanging of ideas, insights and information is valuable and a reminder that the climate change challenge is one that all New Zealanders and businesses re grappling with.
Our resolve to transitioning to renewable energy sources is firm. With our size and scale there are many challenges, but we know the changes we make will have a real and positive impact.
Rob Spurway
Fonterra's Chief Operating Officer, Global Operations.