By Jeanette Fitzsimons

In April,  the media reported that Fonterra has carried out a trial of burning 100% waste wood in one of its boilers at Te Awamutu, a large coal-fired milk drying plant in the Waikato. (The rest of the boilers at that plant run on gas.)

We very much hope that this is the start of Fonterra delivering on their promises to reduce their fossil fuel use in meaningful ways.

For some six years CANA has been challenging Fonterra to replace the coal in its milk drying plants with renewables, especially with waste wood which is abundant in the forestry industry, much of it left to rot on skid sites after logging. The dairy industry is the second largest user of coal in this country and most of that is Fonterra. But our efforts over the years have been answered by claims that it isn’t technically possible; then that it is too expensive; then that there isn’t enough waste wood, none of this accompanied by any numbers.

Three years ago CANA met at his request with Robert Spurway, Chief Operating Officer, Global Operations, who reports directly to the CEO, and his Fonterra colleagues.. We were hopeful of finding some common ground, but there seemed to be none.  He repeated that Fonterra’s growth was paramount. We replied that the climate we leave to our children is paramount for us. I met with the late John Wilson, chair of their Shareholders’ Council, and put our case to him. He replied that his farmer shareholders just wouldn’t accept our suggestions.

As climate change became front and centre of public debate, Fonterra announced it would convert its smallest plant at Stirling to electricity.

Meanwhile the company had sought and received consent for a huge new drying plant at Studholme which would burn “up to” 20% wood in a mix with coal. “Up to” means they could use anything from 0% to 20%. They refused to answer our questions – or release advice – about what information they had  on how much wood there was within a reasonable distance of the plant (up to 100 km is the usual cut off), and would not release their “request for proposals” they issued to the wood industry.

We suspect Fonterra  only asked for quotes for 20%. Any benefit from that wood would have been swamped by the huge increase in their coal burn in two very large boilers. We remain confused about why, when they cut the boilers down from two to one, the remaining boiler couldn’t co-fire with 40% biomass, if, as they said at the hearing,  availability of wood was the problem.

Next, Fonterra announced it would reduce emissions at its  tiny Brightwater plant near Nelson, co-firing its coal boiler with wood (funded by the taxpayer). CANA has had extensive discussions with engineers who design and work with wood fired boilers and we are told that co-firing is an inefficient and not very clean burning option. Boilers work best when they are designed for a particular fuel and are fed that consistently. They don’t perform well on mixes, particularly if the mix is changed according to prices at the time.

That the company managed to get precious EECA funding for this conversion is extraordinary. What’s more disappointing is the fact that this plant is right in the middle of Nelson’s horticultural area and in a forestry region: a biomass bonanza in terms of availability.

CANA has been in email discussion with Fonterra’s Carolyn Mortland, Fonterra’s Director of Sustainability, who says the newly-converted boiler at  Te Awamutu is 43MW – much larger than anything else they have attempted, and will be 100% run on wood pellets.

Pellets were chosen rather than the much cheaper wood chip or green waste because Fonterra doesn’t have the capital to buy a new, purpose-built boiler and are converting an existing coal boiler. This means  they must keep the fuel very dry to get the high temperatures they need. So: a very high running cost boiler, but minimising the capital cost of the conversion. (Fonterra has always struggled with the requirement to pay out most of its earnings to the shareholder farmers in the milk price. It therefore has little in the way of retained earnings, as well as very high debt so can’t borrow the capital it would need to finance a new high quality boiler.)

Wood pellets being used by Fonterra instead of coal.

Pellets also have a very high embedded energy cost, from grinding, compression, drying and transport.

We enquired whether the plant could revert to running on coal if that was the cheapest option. We are told that would take a re-conversion of the hardware – possible but not fast enough to change from day to day. So it seems we can assume that boiler will run 100% on wood, which is good news and a step in the right direction.

But there won’t be sufficient pellets for Fonterra to entirely “Quit Coal”, which is our ask of the company in the face of the climate crisis..   

Fonterra has promised a 30% cut in emissions by 2030 and net zero by 2050.   For that to happen, it needs to do several things:

  • The Fonterra Board needs to make the decision to never build the huge coal-fired Studholme plant, consented but not constructed, and to never build any more coal boilers at all. Fonterra’s commitment at the moment is to build no new coil boilers from 2030.
  • instead, Fonterra should focus on less volume and higher value milk products
  • Improve its financial management to the point where a bank will lend the company  enough to replace its oldest boilers with new ones designed to run cleanly on any kind of biomass waste, much cheaper in the long run, with no risk of insufficient fuel;
  • Support their farmer suppliers to reduce cow numbers by 20%, as some already have, leading to more milk production per cow, healthier animals, lower greenhouse gases, and higher profits.

We would like to see a schedule of proposed plant conversions and replacements, starting obviously with the oldest and least efficient, and eventually including their gas fired plant, leading to carbon zero in 2050. It is a very big ask, but that is NZ policy now, and essential to get the climate on a safe track.

Replacing 43 MW of coal (about half the size of the Darfield plant and much bigger than Stirling and Brightwater combined) with 100% wood is not trivial, but there is still a long way to go.

In terms of quitting coal, Fonterra is 8% down, 92% to go. CANA looks forward to welcoming the next step along this path – soon.