Oji promotes $600m bio-energy development

Friday 28 Feb 2020

Pulp and paper maker Oji Fibre Solutions has cited a potential NZ$600 million investment at its Kinleith mill near Tokoroa as the type of long-term bio-energy project the country could miss out on if the government isn't prepared to match supports being offered by other countries.

The concept project would increase the site’s recovery of lignan – an organic polymer extracted from wood – for use as fuel for zero-carbon process heat and renewable electricity generation. That would slash the plant’s gas use, reduce emissions and free up surplus renewable power generation for export to the grid.

Longer term, the project could enable further expansion of the plant’s capacity – subject to fibre availability – and make its production almost fully renewable, as similar, modern mills are overseas, environment and external relations manager Philip Millichamp told BusinessDesk.

But in the current environment, the project isn’t viable, he said, and can’t deliver the sort of six-year payback expected from an investment of that scale. Instead, Oji is competing against overseas firms that are benefiting from support being provided by other countries also working to reduce their emissions.

“Really, the only difference between our project and those overseas ones, as far as we can understand, are those incentives that are being provided by countries like Canada and Japan and some northern European countries.”

Oji also operates the Tasman pulp mill at Kawerau, a string of packaging plants here and in Australia, and the Fullcircle recycling business. Earlier this month, it told Parliament’s environment select committee that New Zealand risked losing investment in green technologies to other jurisdictions if it did not also consider wider policy measures to encourage ongoing development.

The committee is considering law changes to tighten the emissions trading scheme and introduce new carbon budgets in line with the country’s 2050 net-zero carbon target. Among changes planned are tougher rules for heavy manufacturers such as Oji, papermaker Norske Skog, glass-maker O-I, and NZ Steel, which are currently shielded from the bulk of their carbon costs to help keep them competitive against overseas rivals that either don’t face carbon costs or are subsidised.

Green MPs are pushing hard to get that support – in the form of free allocation of emission credits – cut back to help meet the government’s early carbon budgets and take pressure off other parts of the community. Millichamp said the firm is not expecting fixes to the ETS to make the project viable. But the ETS is one of a range of policy levers the government has to reduce emissions and drive wider development of renewables, including the longer-term development of bio-energy from the country’s expanding wood resources, he said.

“We are getting interest from politicians,” he said. “We’ve been encouraged by the reaction of a number of people - from a range of different parties actually – that we have spoken to.” The project would involve installing new boilers and generators fueled with wood waste. A new evaporator would be installed to concentrate liquid wood lignin, along with a new boiler to burn it.

Those units would deliver about 15 million gigajoules of process heat and about 2.5 gigajoules of electrical energy. The latter is equivalent to almost 700 gigawatt-hours of electricity, roughly the demand of 100,000 homes, and up to half of that could be exported to the grid. In its paper on the project, Oji highlights the need for complementary policy actions to encourage greater investment in domestic wood processing and regulation to increase collection and use of forestry residue.

“Currently, the Kinleith mill is competitive but, in the long-term, it will need to expand. This is constrained by the supply of wood residues and limited by the massive volume of unprocessed logs exported offshore.” It notes that, if the project was built in British Columbia, it would qualify for renewable energy feed-in tariffs worth the equivalent of NZ$40 million annually – sufficient to make the project viable.

Millichamp said there is a risk when discussing a highly technical, “fairly esoteric” bill on changes to the ETS, that the broader issues of emission reduction and long-term industry development are lost sight of. And he noted that, while the technology proposed for the project is sophisticated, it is in no way experimental, with parent company Oji installing it in several recent projects in Japan.

“This project is not just about renewable energy and reducing emissions. It’s also about the processing sector in general,” he said. “The Kinleith mill is a key part of the wood processing sector.”

Source: BusinessDesk

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