Point of Order a week ago was serving up some commentary on the news that the Tiwai Point aluminium smelter will not shut down in 2024 — and could have a long-term future.
The question now is whether Meridian Energy, which supplies the bulk of Tiwai Point’s electricity from the big Manapouri station, will be willing to do so without a price hike. The last price negotiation was difficult, with Rio Tinto using the threat of closure to screw the price down.
When Rio Tinto some months ago was signalling it might keep the smelter open beyond the term of the current contract, there was a cool response from Meridian.
Chief executive Neal Barclay has been quoted as saying the company would no longer give the smelter rock-bottom prices, once the current contract expired, even if it wanted to stay open.
It’s an issue which should be engaging the government, because not only does the government own 51% of Meridian, it should also be developing a hydrogen strategy.
Low-carbon hydrogen can be made from water, using an electrolyser powered by renewable energy. Hydrogen can help decarbonise activities that cannot easily be electrified. These include industrial processes that require high temperatures, and forms of transport, including shipping.
As The Economist has reported, Britain has developed a hydrogen strategy which initially called for 5GW of hydrogen production, a goal since doubled. To do so, plenty of cash is on offer to help production projects get off the ground. Then a “hydrogen business model” will offer price support to low-carbon hydrogen producers.
Much of the money will go to two clusters, one in the north-west of England and the other on the East Coast. The Economist points out these regions not only have a big industrial base but already make use of lots of hydrogen: it is a component in chemical reactions for refining and the production of fertiliser and methanol.
Almost all this hydrogen, The Economist says, is currently the dirty “grey” sort, which is made from natural gas, but does nothing about the carbon dioxide thereby emitted. Producers of cleaner forms of hydrogen in these areas will be close to potential customers.
In the UK, there is talk of encouraging the use of hydrogen as an energy-storage medium to help overcome the peaks and troughs of an all-renewables grid. When renewable energy is plentiful, electrolysers can be turned on, producing hydrogen, which is then stored. When it is scarce, that hydrogen can be burned in a power station or used in fuel cells to generate electricity.
Here in NZ where the government is committed to the goal of 100% renewable electricity, it has not specified how the country may reach that target. Experts suggest that by 2050 electricity demand will have doubled.
So there will be pressure on the electricity production and transmission system from different directions; and there have been some signals Meridian is monitoring the issue of low-carbon hydrogen production.
Almost certainly, though, the government needs to be thinking – like the 12 others that have already done so – of formulating a hydrogen strategy drawn by the vision of a thriving hydrogen economy within a carbon-neutral future.