Government announces massive emissions-cutting deal with NZ Steel, Contact Energy
The Government has announced New Zealands largest single emissions reduction project, with a deal that will subsidise a new electric arc furnace for NZ Steels Glenbrook plant. The three-way deal, between the Government, NZ Steel and Contact Energy to provide flexible and cheaper off-peak power to the steel giant, has been hailed by all three parties. The new furnace to which taxpayers are contributing up to $140 million through the Government Investment in Decarbonising Industry fund (GIDI), will dwarf the other Government projects. The total cost is expected to be $300 million. READ MORE: * Prime Minister Chris Hipkins opens a hole in the carbon budget * Hospitality industry warns of closures if alert level 2 remains * Covid-19 NZ: Could the vaccine roll-out have been quicker? The Government is also claiming it as a win for keeping domestic steel production in New Zealand. NZ Steel is owned by Australian parent company, Bluescope Steel, which is listed on the Australian stock exchange. The furnace will remove 800,000 tonnes of CO2 from the atmosphere, which the Government says is the equivalent of taking every car in Christchurch off the road. The conversion of the furnace to electricity will meet over 5% of all NZs required emissions reductions between 2026-2030, in one project. The new furnace will replace coal and iron sands with electricity and scrap steel. The announcement was made at the Glenbook plant, about 60km south of Auckland by Prime Minister Chris Hipkins. This size of this project demonstrates how serious the Government is about reducing New Zealands emissions as fast as possible, Hipkins said. This project dwarfs anything we have done to date. Alone, it will eliminate one per cent of the countrys total annual emissions. The plan means New Zealand businesses will have access to locally produced, cleaner steel, and high value jobs are protected that otherwise might have gone offshore. Minister for Energy Megan Woods said the furnace conversion would reduce emissions more than all the Governments other projects combined. To understand the scale of this project, it reduces more emissions on its own than all the other 66 GIDI projects we have approved to date. She also defended the subsidy saying that the conversion would not have happened without the Government. Our partnership with NZ Steel shows we can tackle the challenge of decarbonising even our hardest to abate and largest emitting industries. This investment would not happen without government support. NZ Steel chief executive Robin Davies said that the reduction in 800,000 tonnes of emission per year was significant for the company. Thats a reduction of over 45% in New Zealand Steels emissions or a total of 1% of New Zealands total annual emissions. It also sets the platform for further carbon reductions and is a significant step towards our goal of net-zero by 2050, he said. These reductions will come from replacing Glenbrooks existing oxygen steel-making furnace and two of the four coal fuelled kilns. As part of the deal, contact energy will provide 30 megawatts of renewable generated electricity to NZ Steel in a flexible off-peak arrangement. Contact said it would enable the steel producer to scale down production in times of peak demand or supply shortages. Today's announcement is hugely significant, Contact Energy chief executive Mike Fuge said. Not just because it is a massive step towards decarbonisation but also because together Contact and NZ Steel can make a meaningful impact in our fight against climate change. This is our watershed moment. The GIDI fund recycles revenue the Government gathers from the emissions trading scheme and then recycles it back into climate-related measures. The Greens argue that this means "taxpayers" don't pay for it, but NZU unit holders. However, it is widely accepted that the incidence on the ETS falls on consumers through higher prices. Speaking at the announcement, Climate Change Minister James Shaw said there were still many people displaced from the recent storms and floods . The frequency [of flooding] is giving us a lived experience of being on the front lines of climate change. That is why this deal matters.