Thinking Old-Style Big

By Bryan Walker 23/08/2011


A full page feature recently appeared in the Waikato Times in which Press journalist John McCrone interviewed Solid Energy CEO Don Elder on the Southland lignite proposals. It was a thoughtful piece of journalism, and I wish I could provide a link to it but it doesn’t seem to have appeared on the Stuff website. It provided a good overview of the thinking behind Solid Energy’s pursuit of lignite development, along with objections levelled against it. I’ve already written on the question but it’s important enough to keep returning to.

Lignite is big. Briquetting should be under way next year in a factory which has been consented by Environment Southland. Hospitals, commercial greenhouses and Fonterra are expected customers. But that’s just a groundbreaker. On the drawing board is a phase two briquetting plant that will be ten times larger.

Then come the ‘truly humungous’ developments. First, the $1.4 billion lignite-to-urea conversion factory which could be operational by 2015, producing enough fertiliser for New Zealand to become a $2b a year exporter. Second, a $10b to $15b lignite-to-diesel conversion plan which could be producing enough synthetic fuel by 2018 for New Zealand to be self-sufficient in road transport and agricultural machinery fuel for the next few hundred years. There’s a third prospect, thankfully looking unlikely, a 2000-megawatt lignite-fired power station, double the size of anything else that has been built to supply the national grid.

Elder sees New Zealand as fantastically fortunate. 10 billion tons of lignite reserves, the equivalent in energy to 30 Maui gasfields. Yes, he completely agrees, there’s climate change to be concerned about. But that’s not the problem it looks. Solid Energy holds a trump card. Carbon capture and storage (CCS).

’Solid Energy’s proposals include the siphoning off of all CO2 produced during the urea and diesel conversion processes. This captured carbon will then be sequestered — liquefied, piped deep underground into aquifer formations, or even down oil wells if Southland’s off-shore petroleum fields ever get developed.

’Elder says under the right kind of rock it will remain sealed. ‘It stays liquid under pressure and barely moves. We’ve had a team working on geo-sequestration for eight or nine years now and we’re very comfortable with the technology.’’

McCrone points out that others like the Parliamentary Commissioner for the Environment Jan Wright and Lincoln University researcher Shannon Page consider the idea of CCS is still unproven. There are no guarantees that it works in practice or that Southland even has room for the volume of gas involved.  That doesn’t faze Elder who has a fall-back option of offsetting carbon emissions by regenerating native forest and says Solid Energy has been working on a carbon sink trial with the Conservation Department.

Elder’s assurances about CCS look premature to me. I’ve seen no evidence that we’re ready to put it into operation within four years. The fact that he offered an alternative of offsetting by native afforestation suggested that he was by no means sure that CCS was a goer. Afforestation proposals are to be welcomed, but as attempts to lower the CO2 already in the atmosphere, not to open the way for large and unnecessary additional emissions. Elder’s preparedness to rely on offsets in this way suggests that he has little appreciation of how dire the current greenhouse gas levels already are. And there was no suggestion that the afforestation proposals had been quantified relative to the expected level of emissions.

Elder did assure McCrone that Solid Energy would not be seeking free credits under the ETS for its proposals. They’ve already said no to such a possibility. ’We’ve got a very clear view on this. We won’t get to do these projects unless we can pay for our own carbon.’ Not that that’s a big call under a government seemingly prepared to keep the price of carbon at a comfortable level for industry.

On the fertiliser question Elder said that nitrogen fertilisers have to be made from fossil fuels. I presume when he says ’have to’ he means it’s the cheapest way to make them. In future, because of the better economic uses for natural gas, it will be made from coal, and China has been building coal-to-urea plants. So, if we make urea from our own lignite we’ll just be displacing the fertiliser we would have bought from China. No recognition here, incidentally, that there’s any problem surrounding the overuse of cheap nitrogen fertiliser on New Zealand farms and globally or that human modification of the nitrogen cycle has been even greater than our modification of the carbon cycle. (See Planetary Boundaries)

Diesel has to be generated somewhere else in the world and imported at cost to us. Much better to make it ourselves. Elder presumably discounts the possibility that we can make it ourselves in a climate-friendly manner by using biomass, as outlined, for example, in the 2006 report of the Royal Society Energy Panel or explored by Kevin Cudby in his recent book From Smoke to Mirrors.

This argument that if we don’t do it someone else will is much favoured by those who want to keep exploiting our fossil fuels. It is an abandonment of responsibility for our greenhouse gas emissions. It displays no sense of the urgency of the need to find alternatives to fossil fuels. It is conventional business-as-usual thinking which seems unable to even imagine how we could do some things differently, let alone set about achieving it. Basically it is a failure to recognise the imperative that rising levels of greenhouse gases have imposed upon us.

That is where Solid Energy’s plans founder. They are cavalier about the risks of catastrophic climate change. And they are consequently risky even as economic propositions. Consider this outcome: as the realities of climate change begin to bite society will turn decisively away from greenhouse gas-emitting industry and the prosperous future prophesied by those who look to keep mining fossil fuels will not eventuate.

But look, protests Elder, we’re the lucky country. We’ve got everything Australia has — land, minerals, sunshine — but we’ve also got water, and it’s water which is essential to adding value to mining. It’s massive amounts of water which can enable us to turn coal to fertiliser or to diesel. Australia is stuck with commodity mining, but we can focus on added-value mining. We’ve hardly begun to scratch the surface of what coal can do for us. For good measure he adds the theme often sounded by the Minister for Economic Development Gerry Brownlee, that with the returns we earn we’ll be able to pay for top environmental practices. Indeed Elder’s thinking generally is very much in harmony with Brownlee’s Draft Energy Strategy.

It’s yesterday’s thinking. The dreams of wealth from coal are a chimera. If Solid Energy stays on that track investors would do well to be wary when it’s partly privatised. The company could have a much more secure and profitable future by turning its attention to the rapid and full development of our renewable energy potential. Elder says it’s time for realism rather than idealism, and adds that opponents to lignite have to consider the science. Surely science and the realism which flows from it say unequivocally leave the lignite undisturbed.