Fonterra a large scale coal user

Giant dairy co-operative Fonterra is New Zealand's third largest coal user.
PETER DRURY/FAIRFAX NZ

Giant dairy co-operative Fonterra is New Zealand's third largest coal user.

Fonterra, one of the country's three largest burners of coal and a leading greenhouse gas polluter, could switch to biofuels - but at a financial cost.

Former Green Party co-leader and environmental activist Jeanette Fitzsimons said Fonterra risked damaging its reputation "as a company that trades (on) being clean and green".

She said it could switch to more energy efficient and environmentally friendly biofuels to power their milk processing plants.

For the most recent year that data is available (2013) from the Ministry of Business, Innovation and Employment, New Zealand's largest company used 410,000 tonnes of coal to turn liquid milk into powder, earning total revenue of $22 billion in 2014. Altogether the dairy industry burns 512,811 tonnes of coal.

Based on one tonne of coal producing 2.86 tonnes of carbon dioxide, Fonterra's coal-powered factories pump out 1.17 million tonnes of the climate warming gas. Add to that its gas-powered plants and tanker fleet, and the company becomes one of New Zealand's top greenhouse gas polluters.

Wood waste is readily available close to a number of dairy factories. Photo: SANDRA CROSBIE/FAIRFAX NZ

Fitzsimons said that was "without mentioning cows and the methane they produce".

In 2013, 4.6m tonnes of coal was produced from New Zealand mines, of which 2.1m tonnes were exported. Of domestic users, the largest are the Glenbrook steel mill, Huntly power station and Fonterra.

Fitzsimons said Glenbrook had no other fuel options at present, although it was working on alternatives, and only half of Huntly was operating.

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If not for dairy factories, Australian coal miner Bathurst might find it hard to survive in New Zealand. About 200,000 tonnes of coal produced from its Takitimu mine keeps the Edendale plant in Southland and the Clandeboye factory in South Canterbury going, and 35,000 tonnes a year is extracted from the Canterbury Coal mine for its other Canterbury's dairy factories.

Other Fonterra factories use coal, including Brightwater near Nelson, Hautapu, Te Awamutu and Waitoa. Fonterra's subsidiary Glencoal has been investigating opening up an open cast mine in north Waikato to power the latter three plants.

Most other Fonterra processing plants, especially in the North Island, use gas, but rival dairy company Synlait, which recently opened a factory near Dunsandel in Canterbury, processes 550 million litres of milk each year, powered by coal.

The current low price of coal explains why companies continue to use it rather than invest in other technologies. In late 2011, prices for steel making went as high as US$330 a tonne, but by 2015 they had plummeted to US$109 a tonne. Thermal coal for boilers to dry milk is around US$60 a tonne.

Fonterra expert Mike Suggate told a hearing into the proposed Glencoal mine in 2013 that it would cost $15m more to use wood waste than coal in its Waikato plants. With the plunge in coal price since then, that cost difference is sure to have risen.

Robert Spurway, Fonterra's managing director global operations, said the company was committed to reducing environmental impacts across its operations "through the use of new technologies and optimisation of our energy mix towards cleaner, more efficient forms of energy".

Based on energy intensity per tonne, it set the standard within the New Zealand dairy sector, he said.

"Despite expansion across our manufacturing plants to keep pace with rising New Zealand milk volumes, we have delivered year-on-year improvement in energy intensity resulting in a 16 per cent reduction in energy intensity since 2003.

"Investigation of options for cleaner burning, more efficient energy sources form a key part of our energy strategy, and include our recent trials of miscanthus and the assessment of technologies that allow us to co-fire biomass in a number of our newer plants," Spurway said.

Coal was used by a third of Fonterra's manufacturing sites – the majority in the South Island where it did not have the option of using natural gas.

Giant miscanthus grass growing on trial at a Kirwee dairy farm, Canterbury. Lincoln University researchers Steve Wratten (left) and Chris Littlejohn at one of the miscanthus trial plots. Photo: Fairfax NZ

WASTE NOT

Fonterra recently conducted some small scale trials of a "wonder crop" called Miscanthus giganteus, a north Asian grass with one of the highest biomass properties of any plant.

At 34 tonnes of biomass per hectare, miscanthus surpasses switchgrass (17 tonnes), maize (17 tonnes), pine woodchips (10 tonnes)  and wheat straw (3.5 tonnes).

A hectare of miscanthus yields 15,893 litres of ethanol, compared to maize with 7479 litres a ha.

The grass also holds the promise of being able to be used for shelter belts and to soak up nitrogen from overloaded pastures.

But Fitzsimons says there is sufficient wood waste to use without planting new crops.

Westland Milk Products and DairyNZ have also been trialling miscanthus in Canterbury, and have overtaken Fonterra in the field as the dairy giant has put a halt on its trials, where it has been growing the crop on two hectares of land.

Miscanthus NZ chief executive Peter Brown said Fonterra risked missing the bus on biofuels.

"The number of miscanthus plants that are able to be produced - and hence the area that will be able to be established - is relatively limited and without some forward planning cannot be ramped up very quickly at all," Brown said.

"We already have international interest being shown in purchase of rhizomes from New Zealand in significant quantities and if that goes ahead, we will be hard-pressed to supply this export market as well as supplying the demand for miscanthus and for other uses such as renewable diesel plants, which I am now certain will be commencing construction within the next 12 months. We have already successfully exported some plants to India."

Work needed to be done on the best way to harvest and package miscanthus so it fitted in with Fonterra's existing fuel handling systems. It was likely it would be used initially as a mixture with coal.

Brown described miscanthus as being the energy equivalent of low quality coal, but about half the energy of high quality coal.

Whatever product is used to create biofuel - it could also be wood waste - needs to be close at hand or else the costs of transport make the technology too expensive.

Fitzsimons says she does not understand why companies would bother growing new crops using new land when wood waste was plentiful, relatively close to hand (at least in the North Island) and could provide substantial extra income and jobs in forestry.

It was important to dry it before trucking it, though, as timber was 50 per cent water, she said.

Brown says miscanthus would not be used in competition with other land uses but would supplement them.

"For example, as shelter on centre pivot irrigation dairy farms, it would help enhance returns. If you had miscanthus shelter along every dairy fence in Canterbury, you would have sizeable quantities," Brown says.

Other benefits of the plant include that it grows well on marginal land, does not need fertiliser after a year, and is sterile, so will not become a weed pest.

The trials have also shown that nitrogen leaching from below miscanthus is considerably less than nitrogen leaching from any other recorded crop, including pine trees.

And in Canterbury, where centre pivot irrigators march across the countryside, they can travel unimpeded through miscanthus. 

 - Stuff

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