Australian firms in mix for $5 billion hydrogen plant in Southland

Australian companies Woodside Energy and Fortescue Future Industries are counterparties in end-stage negotiations to become the lead developer of the future world’s largest green hydrogen plant in Southland.

It is proposed that Contact and Meridian Energy select the lead developer for the Southern Green Hydrogen project after more detailed proposals, expected in late August.

A the hydrogen plant could potentially provide an alternative use for all electricity currently used to power the Tiwai Point aluminum smelter, depending on its magnitude, should the smelter close in 2024.

A Meridian Energy spokesman said the project was not contingent on the smelter closing.

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Sally Brooker, co-head of the German-New Zealand Green Hydrogen Alliance, said the quid pro quo announcement was most exciting because it showed the project was commercially viable, Brooker said.

“That’s probably the best news of all of this – at no point are the wheels collapsing with business entities saying ‘no, we don’t have a bar of that,'” Brooker said.

“…to me that says it’s not just climate change activists and sustainability advocates who are driving this, it’s actually the sensible way to go business-wise as well .”

A green hydrogen plant in Southland would use renewable electricity, primarily from Meridian’s Manapouri Hydroelectric System, to split water into hydrogen and oxygen, with the hydrogen used as fuel.

One of the biggest challenges for the project would be investment, but internationally there was a lot of interest, Brooker said.

“It will be an economic transformation project. But it must be done in a sustainable way.

Being a large factory, potential consent would take time, she said.

Brooker felt that this project had a huge advantage being closely aligned with iwi and Murihiku Regeneration.

Hokonui representative and Ngāi Tahu’s head of green energy program, Terry Nicholas, said green hydrogen was essential for the future of Southland-Murihiku and for Ngāi Tahu.

“Southland will be a renewable energy engine room for New Zealand, I have no doubt.”

Nicholas was closely involved in the project. Nicholas had been led to believe that the factory and wider infrastructure might cost $5 billion.

Four Southland sites – which Nicholas could not divulge – had been identified, none of which was the Tiwai smelter.

The project could create 5,000 direct and indirect jobs, he said.

Meridian Energy chief executive Neal Barclay said the two counterparties were in talks with customers about buying the large volumes the Southland plant would produce.

Contact Energy chief executive Mike Fuge said Woodside Energy and Fortescue Future Industries have demonstrated the technical capability to develop the project in time to capture “the first mover advantage in emerging global markets.”

“The last two counterparties have the capacity, the experience and the motivation to bring this project to fruition quickly. Importantly, they have both mapped out realistic pathways to bring this project to commercial operation,” Fuge said.

The next step in the process will be for iwi interests to work with Southern Green Hydrogen and the remaining potential developers to ensure the best possible outcome, a statement from Southern Green Hydrogen says.

In mid-2021, Contact Energy and Meridian Energy announced that they were seeking partners to develop the world’s largest green hydrogen plant in Southland, after a feasibility report noted that a green hydrogen plant has the potential to earn hundreds of millions of dollars in export revenue and help decarbonize economies here and abroad.

The report says Southland, largely because of its access to renewable energyhas the potential to be at the forefront of the growing green hydrogen market.

However, the Parliamentary Environment Committee Simon Upton earlier this year warned a large green hydrogen plant could create more problems and emissions than it solves.

If made from renewable electricity, hydrogen is a low-carbon energy source and could one day be used for metallurgy, shipping and aviation. But it is based on an inefficient process: up to 30% of the energy is lost in the production of green hydrogen.

Therefore, renewable electricity could be used more efficiently to electrify vehicles and boilers over the next decade, Upton wrote in a letter to ministers.

The Tiwai smelter consumes about 13% of the country’s annual electricity.