By Stephen Wright
WELLINGTON, New Zealand--Two New Zealand electricity companies have proposed large investment in hydrogen production for export to fill a shortfall in power demand if the country's only aluminum smelter closes in the next few years.
Contact Energy Ltd. and Meridian Energy Ltd. say hydrogen production could also be a partial solution to the dry-year power crunch problem in New Zealand's hydro-dominated electricity system.
The companies have asked potential customers and producers to register interest in the project, which they say could be located in New Zealand's Southland region, close to big hydro lakes.
Hydrogen is increasingly regarded as a low-emission fuel option for transport and electricity generation. It can be produced through several methods, using a range of energy sources, and leaves only water as a byproduct when consumed in a fuel cell.
A Rio Tinto Ltd. aluminum smelter, that consumes about 13% of New Zealand's electricity production, may close in 2024 if the company fails to secure further subsidies for the remote plant at the bottom of New Zealand's South Island. Its immediate closure was averted last year by an agreement for lower power costs.
Contact and Meridian said their proposed production of hydrogen for export would be "green" because it would use renewable hydro-generation. In low-rainfall years, hydrogen production could be reduced and the released hydro capacity could lessen use of coal and gas to meet electricity demand.
New Zealand's government has been investigating the feasibility of a new giant hydro lake as a possible solution to overcoming vulnerability in the power system and to help reach a goal of 100% renewable electricity by 2030. The lake for the so-called pumped hydro scheme would be gradually filled by pumping up water during off-peak demand periods and largely only used in extreme dry years. Some power companies have said it wouldn't be a complete solution for renewable energy, which has ranged between 80% and 85% of New Zealand's electricity supply for several years.
Contact and Meridian said a McKinsey & Co. report they commissioned estimated that a 600-megawatt hydrogen export facility would make a one-off addition of 800 million New Zealand dollars ($557 million) to the economy and create thousands of jobs during construction.
Write to Stephen Wright at email@example.com
(END) Dow Jones Newswires