Contact CEO Mike Fuge

Responding to the spectre of climate change is the biggest energy and infrastructure challenge we will face in our lifetimes — this will come through loud and clear at next week's Future of Energy session at the Apec CEOs Summit beaming out from Auckland next Thursday.

But wrapped up in the challenge is a fantastic opportunity for New Zealand to seize. We can become a trailblazer in the emergence of a new global industry that can be an important contributor to emissions reductions goals: green hydrogen.

Our ongoing investigation into the potential for green hydrogen in Aotearoa, working alongside the team at Meridian Energy, has provided strong indicators of several benefits that green hydrogen can deliver. This includes economic activity in the form of investment and jobs, reduced emissions in parts of the economy where such reductions are expected to be fraught, delivering a greener electricity grid, and punching above our weight as we help overseas economies wean themselves off their heavy reliance on fossil fuels.

Sectors and export

Around two-thirds of global carbon emissions are energy-related, and emanate from electricity, heat and transport. Driving these emissions down via renewable electrification is widely accepted as the key method for delivering reductions. But there are significant "hard to abate" sectors including chemical manufacturing, petroleum refining, steel making, heavy transport, shipping, air travel and high-temperature industrial heat where this is easier said than done.

It is here that green hydrogen comes into its own as it is also the only environmentally friendly solution for these "hard to abate" sectors. Green hydrogen's diversity has led to some commentators to describe it as the "Swiss army knife" of decarbonisation. In addition, hydrogen and hydrogen-based chemicals like ammonia are highly versatile and transportable forms of energy that can be stored for future use.

This flexibility also extends to hydrogen (and its compounds) being exported to countries that do not have enough access to renewable energy options. Indeed hydrogen is potentially the only decarbonisation solution for countries with scarce renewable energy resources.

Green hydrogen has the potential to become a global commodity that links "renewable rich" countries like New Zealand to countries that are currently dependent on fossil fuels.

Around the globe confidence in hydrogen is growing — the recent The New Zealand Hydrogen Opportunity report we co-commissioned identified more than 30 countries have developed hydrogen roadmaps and more than NZ$100 billion in financial support has already been committed to the industry. Propelled by a combination of decarbonisation commitments and a concentration of hard-to-abate sectors, we expect Japan and Korea to emerge as key centres of demand for green hydrogen as early as 2030. The supply shocks currently affecting the availability and price of fossil fuels globally are a potential harbinger of long-term reliability and highlight the need to switch to reliable renewable forms of energy such as hydrogen.

Local opportunities

On the domestic front, there is much potential for hydrogen-driven decarbonisation too, with a focus on "hard-to-abate" sectors such as heavy transport, chemical manufacture, steel production and shipping. Green hydrogen pilots are already under way with trials of hydrogen-powered trucks and buses, and fertiliser companies are exploring hydrogen as a feedstock in the production of urea.

More broadly, the Government has made its ambitions very clear about its desire to see New Zealand transition from an 85 per cent renewable electricity grid to as close to 100 per cent as we can get.

Green hydrogen can provide a catalyst for a massive — and much needed — increase in the development of renewable electricity generation assets for New Zealand over the coming decades.

For many other countries, fully decarbonised electricity generation is nothing but a pipe dream and simply won't be feasible. But here in New Zealand it is possible — of course it will still be challenging — and a pathway paved with green hydrogen offers us a compelling way to get there.

No, we won't be using hydrogen to generate lots of our future renewable electricity here in Aotearoa, as countries like Japan and Korea are contemplating. We won't need to, given the other rich renewable generation options we have at our disposal. Instead, we see green hydrogen production stimulating a massive increase in the upstream renewable generation we are going to need to cover peaks in demand — peaks where New Zealand electricity users currently rely on imported Indonesian coal being burned at the Genesis-owned Huntly power station.

Much of the massive increase in renewable generation we need will come from new wind farms (complemented by geothermal, solar and grid-scale batteries). We think it's very unlikely many more hydro dams will be built. Hypothetically, we could build enough wind farms to cover our peak demand, even during periods when Aotearoa's hydro dam lakes are low on water.

But of course, it's not that simple. The sheer number of wind farms we'd need to build will not be economically viable, despite the appeal of the reduced emissions. The practicalities are problematic: wind farms are complex to plan, expensive to build, you don't want them sitting idle when demand isn't there for the electricity they generate and we don't get to choose when they generate.

The balancing of supply and demand is probably our toughest challenge as we head aim for an as-close-to-100 per cent-as-we-can-get renewable grid, but it's here that green hydrogen could provide a realistic and workable solution. Rather than shutting wind farms down during periods of low demand or wasting valuable wind energy, the excess capacity from the turbines could be used to electrolyse green hydrogen for export or domestic markets. Similarly, hydrogen production could flex up to reduce spilling of surplus water at hydro dams, and ease back when the prospect of high demand and a dry year is on the cards.

This flexibility of hydrogen production could offer a substantial and valuable contribution to support New Zealand's decarbonisation goals, with its ability to produce to suit conditions within the electricity system and ultimately reducing emissions to assist in the battle against climate change.

Mike Fuge is the Chief Executive Officer of Contact Energy