Australian companies in the mix for $5 billion Southland hydrogen plant

Australian companies Woodside Energy and Fortescue Future Industries are counterparties in the final stages of negotiations to become lead developer of the world’s largest green hydrogen plant in Southland.

It is proposed that Contact and Meridian Energy will select the lead developer for the Southern Green Hydrogen project after more detailed proposals, expected by the end of August.

A hydrogen plant may offer an alternative use for all of the electricity currently used to power the aluminum smelter at Tiwai Point, depending on scale, should the smelter close in 2024.

A Meridian Energy spokesperson said the project was not dependent on the smelter shutting down.

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Professor Sally Brooker, co-leader of the German-NZ Green Hydrogen alliance, said the counterparts’ announcement was most exciting because it showed the project was commercially viable, Brooker said.

“That’s probably the best news of it all — at no point do the wheels fall off when commercial entities go, ‘no, we don’t have a bar of that,'” Brooker said.

“…to me that says it’s not just climate change activists and sustainability advocates driving this, it’s actually the sensible way forward in a commercial sense.”

A green hydrogen plant in Southland would use renewable electricity, primarily from Meridian’s Manapouri hydroelectric plant, to split water into hydrogen and oxygen, using the hydrogen as fuel.

One of the biggest challenges for the project would be investment, but there was a lot of interest internationally, Brooker said.

“It will be an economically transformative project. But it has to be done sustainably.”

Meridian and Contact Energy announced that Woodside Energy and Fortescue Future Industries have entered final negotiations to become lead developer of the world's largest green hydrogen production facility in Southland. [File photo]

GETTY IMAGES/Getty Images

Meridian and Contact Energy announced that Woodside Energy and Fortescue Future Industries have entered final negotiations to become lead developer of the world’s largest green hydrogen production facility in Southland. [File photo]

Because it’s a large factory, potential approval would be time-consuming, she said.

Brooker felt this project had a huge advantage because it closely aligns with iwi and Murihiku Regeneration.

Terry Nicholas, Hokonui representative and Ngāi Tahu leader for the green energy program, said green hydrogen is crucial for the future of Southland-Murihiku and for Ngāi Tahu.

“Southland will be a renewable energy engine room for New Zealand, I have no doubts about it.”

Nicholas has been closely involved in the project. Nicholas had been led to believe that the plant and wider infrastructure could cost $5 billion.

Hokonui Runanga Executive Coordinator Terry Nicholas says Southland will be a renewable energy engine room for New Zealand. [File photo]

Kavinda Herath/Things

Hokonui Runanga Executive Coordinator Terry Nicholas says Southland will be a renewable energy engine room for New Zealand. [File photo]

Four sites in Southland – which Nicholas could not disclose – had been identified, none of which were the Tiwai smelter.

The project could create 5,000 direct and indirect jobs, he said.

Meridian Energy chief executive Neal Barclay said both counterparts were in talks with customers about buying the high volumes the Southland plant would produce.

Mike Fuge, CEO of Contact Energy, said Woodside Energy and Fortescue Future Industries have demonstrated the engineering capabilities needed to develop the project in time to achieve “early mover advantage in emerging global markets.”

“The last two counterparties have the ability, experience and motivation to make this project move quickly. Importantly, they have both mapped out realistic paths to commercially exploit this project,” Fuge said.

The next stage of the process will be for iwi interests to work with Southern Green Hydrogen and the remaining potential developers to ensure the best possible outcome is achieved, a statement from Southern Green Hydrogen said.

In mid-2021, Contact Energy and Meridian Energy announced they were seeking partners to develop the world’s largest green hydrogen plant in Southland. a feasibility report noted that a green hydrogen plant had the potential to earn hundreds of millions in export revenue and to decarbonise economies here and abroad.

The report says Southland, for the most part: due to access to renewable energyhas the potential to be at the forefront of the growing green hydrogen market.

The Parliamentary Committee on the Environment Simon Upton warned a large green hydrogen factory earlier this year can cause more problems and emissions than it solves.

If hydrogen is made from renewable electricity, it is a low-carbon energy source and could one day be used for metal production, shipping and aviation. But it is based on an inefficient process: up to 30% of the energy is lost in the production of green hydrogen.

Therefore, renewable electricity could be used more effectively to electrify vehicles and boilers in the next decade, Upton wrote in a letter to ministers.

The Tiwai smelter consumes approximately 13% of the country’s annual electricity.

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