Meridian and Contact hype potential and seek interest for hydrogen plant in Southland

Meridian and Contact have been studying the feasibility of producing hydrogen in Southland if the Tiwai Point aluminium smelter closes. Photo / supplied.

Meridian and Contact, two of New Zealand's largest electricity generators, are seeking interest for what could be the world's largest hydrogen plant.

On Thursday the two companies, which have large hydroelectricity assets in the lower South Island, released a report from consulting firm McKinsey & Co to investigate the potential to produce hydrogen.

The companies are facing major distribution constraints if the Tiwai Point aluminium smelter was to close. Currently, the smelter, owned by mining giant Rio Tinto and Japanese industrial company Sumitomo, has a supply agreement until the end of 2024.

"The plant has the potential to earn hundreds of millions in export revenue and help decarbonise economies both here and overseas," the two companies said in a statement to the NZX this morning.

"Green hydrogen is regarded as the most promising energy source to decarbonise sectors such as heavy transportation and industrial processes that currently rely on fossil fuels. It is produced by using renewable electricity to split water into hydrogen and oxygen."

According to the companies, more than NZ$200 billion has been committed by governments and the private sector to support the development in hydrogen.

"The report estimates global demand could increase more than sevenfold to 553 million tonnes by 2050. Southland has the potential to be at the forefront of this growth opportunity."

Meridian Energy Chief Executive Neal Barclay said developing a hydrogen economy based on large-scale production in Southland "could deliver significant decarbonisation, economic and energy independence benefits" for New Zealand.

"Our renewable energy gives us a valuable head start and competitive edge as markets for green hydrogen develop. Early, large-scale production will allow us to build a domestic hydrogen supply chain and kickstart demand around the country."

The report claimed potential benefits from a 600 megawatt green hydrogen export facility include a one-off addition of up to $800 million to New Zealand's gross domestic product, thousands of jobs during construction "as well as up to $450 million and hundreds of additional jobs on an ongoing basis" the companies said.

Contact Energy chief executive Mike Fuge said green hydrogen production could support New Zealand producing 100 per cent of its electricity from renewable sources.

"This can be achieved by reducing hydrogen production when the country's hydro lakes are running low, allowing electricity to flow back into the national grid to support local homes and businesses.

"In this mode of operation, green hydrogen could solve up to 40 per cent of New Zealand's 'dry year' problem. This flexibility would see hydro generation replace coal and gas-fired generation and reduce carbon emissions.

Two further reports will be released as part of the feasibility study this year. The registration of interest process will run for two months through to October.

- More to follow