The conversion of the Te Awamutu dairy plant to run on wood pellets is the latest "proof point" of Fonterra's efforts to drive down emissions across its sites nationally, the company says.
The company, the country's second-largest coal user, is investing $11 million to convert the existing coal boiler at the country's sixth-largest milk processor to run on wood pellets from the start of the next dairy season.
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The investment will reduce Fonterra's national coal use by about 10 per cent and its emissions by about 84,000 tonnes annually.
Linda Thompson, Fonterra's sustainable energy and utility manager, said a number of factors came together to create a "really great opportunity" at Te Awamutu.
But she said other industries and the biomass sector should take note of what will be achieved there and the amount of money Fonterra is prepared to spend to transition its sites off coal over time.
The company has already completed a desk-top study across all its sites identifying the potential emission abatements available, she said. It is now working in detail at each site to firm up the next priority projects, starting with optimisation and efficiency gains, and then looking at ways to meet the remaining steam requirement with coal, biomass or electricity.
"It isn't going to be a fast transition," Thompson told BusinessDesk. "Each site has its own difficulties and complexities," including its physical configuration, the capacity of the existing utilities and access to other fuel types, she said.
Fonterra uses more than 500,000 tonnes of coal annually making it the second-largest user after NZ Steel at Glenbrook. Most of that is on the South Island where there is no piped gas supply. In 2019, coal met about 40 per cent of the firm's energy needs with the balance coming from gas, electricity and wood.
Fonterra aims to cut its processing emissions by 30 per cent by 2030 and to be net-zero by 2050. It started blending wood with coal at its Brightwater plant near Nelson in 2018 and is currently converting its Stirling cheese plant near Balclutha from coal to electricity.
The Te Awamutu conversion will reduce to two the number of North Island plants the company runs on coal.
The plant is the country's sixth-largest dairy processor, employs about 290 people and, at peak, can process three million litres of raw milk a day. It operates three dryers and will consume about 48,000 tonnes of wood pellets annually, supplied from Norske Skog-owned Nature's Flame in Taupo.
Last year, Nature's Flame secured an additional geothermal steam supply from Contact Energy to enable it to increase the plant's output to 85,000 tonnes of pellets a year.
Thompson said Fonterra could have converted Te Awamutu to gas relatively easily, but the emission reduction wouldn't have been as great.
It was fortunate to be able to convert the existing boiler to 100 per cent biomass, and the project would also not have been possible if Nature's Flame was not also able to increase its pellet supply.
Fonterra had always said it would rely on supply-side partnerships to make these kinds of projects work and this was a good example of that, she said.