The Government has announced it will partner with New Zealand Steel to deliver the nation’s largest ever emissions reduction project.
The deal will see half of the coal currently being used at New Zealand Steel’s Glenbrook operation replaced with electricity to recycle scrap steel.
Prime Minister, Chris Hipkins made the announcement alongside Energy and Resources Minister, Megan Woods and Climate Change Minister, James Shaw at the Glenbrook steel factory in South Auckland.
“The size of this project demonstrates how serious the Government is about reducing New Zealand’s emissions as fast as possible,” Mr Hipkins said.
“This project dwarfs anything we have done to date. Alone, it will eliminate 1% of the country’s 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, the Prime Ministers said.
“Partnering on this project with New Zealand Steel makes sense because it delivers such huge benefits for our environment. Without Government investment this wouldn’t have happened, so it’s fantastic to see what working together can deliver,” he said.
NZ Steel is New Zealand’s sole producer of flat rolled steel products for building, construction, manufacturing and agricultural industries. It produces around 670,000 tonnes of steel each year for mainly domestic consumption. Key products include roofing, structural beams, steel framing and reinforcing steel.
The company contributes more than $900 million to the economy per annum and adds $398 million in value to the Auckland region, the Government said in a statement. It supports the employment of 4,000 people across its New Zealand and Pacific Island operations, employing 1,400 directly and the remainder indirectly.
The conditional deal with NZ Steel will be part funded up to $140 million from the $650 million Government Investment in Decarbonising Industry (GIDI) Fund, which enables partnerships with industry to reduce their emissions. The remainder will be funded directly by NZ Steel.
“The Government is partnering with NZ Steel to reduce 800,000 tonnes of climate pollution from its Glenbrook mill each year. That’s the equivalent of taking approximately 300,000 cars, or all the cars in Christchurch, off the road,” Minister Woods said.
She said the Government will help co-fund an electric arc furnace to replace the existing steelmaking furnace and two of the four coal-fueled kilns.
“The installation of an electric arc furnace at Glenbrook means NZ Steel will cut its emissions by more than 45% and will produce 100% of its annual steel production as lower carbon steel.”
“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.
“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,” Dr Woods said.
“Steel is critical to our economy for manufacturing and construction. Lower carbon steel production at Glenbrook has massive wins for our materials supply chain. It also helps retain a significant local source of employment.
“We are proving once again that decarbonisation does not mean de-industrialisation. It demonstrates how the transition to a low emissions economy can not only be good for the climate, but also a win for minimising waste, retaining jobs, and improving New Zealand’s economic resilience,” she said.
Minister Shaw said melting scrap steel using electricity, instead of converting ironsands into steel using coal, will substantially reduce the emissions generated from NZ Steel’s current activities.
“It will also build a more circular, resilient economy. This will put New Zealand in a much better position to meet its climate target of net zero carbon by 2050,” he said.
“This deal is estimated to contribute 5.3% of the emissions reductions needed under New Zealand’s second emissions budget (2026-2030), and 3.4% within the third emissions budget (2031-2035).
“The economics of this really stack up, especially compared to current carbon prices. The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the Government and the country money.
“We must reduce our reliance on fossil fuels to help avoid the worst of climate change. Switching to cleaner ways of generating process heat is one of the biggest opportunities we have to reduce our domestic emissions and meet our international climate commitments.
“Adaptation to protect our communities against our changing climate is important. But we cannot underestimate the need to cut the pollution that causes climate change in the first place. We cannot underestimate the benefits a low emissions economy will bring for New Zealanders,” Mr Shaw said.
The supply of electricity required for the new furnace will also include a demand response arrangement in partnership with Contact Energy – where NZ Steel can scale down power supply from the electricity grid when needed to secure electricity supply in the region at peak times.
Details of the deal will be completed over the coming months, including various assurances on critical parts of the new operation, to make sure the proposal can be given the full green light and the agreement can become unconditional, the Government said in a statement.
