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taken advantage of the fact it had the government over a barrel at the time. The government was about to sell off Meridian Energy. The loss of its biggest customer would have shattered its share value. In effect the government chose to hand over taxpayer money to a multinational mining company so it could go ahead with its plan to sell off a state asset — even though the plant’s closure would have released another 13 percent of the nation’s generation capacity onto the local power market once the transmission network had been reconfigured. What’s more, selling power to the smelter at heavily reduced prices actually holds up the price New Zealand taxpayers have to pay for electricity to Meridian and all the other generators. It’s interesting to wonder what investing that same stop gap $30 million in the region would have produced in the way of jobs. Yet eight years later in 2021, Rio Tinto and the smelter are still there, even though the company again pleaded hardship last year after floods threatened tonnes of a toxic waste product called Ouvea premix stored in the former Mataura paper mill. The bill for disposing of that material properly is assessed conservatively at $300 million.
AWKWARD CUSTOMER The government is still trying to get the company to agree to clean up after itself, yet Rio Tinto secured another deal on power from state-owned Meridian in January. Rio Tinto apparently maintains that it regularly updated closure plans for all its smelters but government documents released to the New Zealand Herald following an Official Information Act request showed that “despite repeated requests, Rio Tinto has never provided any detailed information about its closure study [at Tiwai]”. Currently the price of aluminium is increasing so the government has suspended talks with Rio Tinto, probably until much closer to the end of the current contract in 2024. So, if Rio Tinto actually does want out, would a hydrogen plant be a better alternative? The government remains keen to preserve the
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Auto Channel Issue #39 September 2021
2000-plus direct and indirect jobs in the region and the estimated $400 million annual input to the local economy. However, University of Waikato Associate Professor Earl Bardsley describes the hydrogen plan as “a flawed think-big project” that shouldn’t proceed without challenge. The electricity brown-outs experienced last month focused attention on electricity supply. Some sceptics blamed electric cars for the brownouts, or at least suggested a transition to an electric fleet was obviously doomed, even though the problem was a high winter evening peak demand. Most electric cars are charged off-peak, overnight, when electricity is plentiful. Professor Bardsley said: “A Tiwai 2.0 industry will still suck up renewable electricity, simply replacing aluminium with hydrogen. That means we will need expensive construction of new generation capacity sooner, if the green transition is to proceed.”
FLAWED LOGIC He said the report by McKinsey & Co also used flawed logic claiming the ability to turn down the rate of hydrogen production would reduce dry year impacts by as much as 40 percent. If that were true, then New Zealand’s dry year supply issues could be avoided entirely by constructing three large hydrogen plants, he said. Shutting down hydrogen plants is not going to make it rain. “The best that can be hoped for is that the remaining water in the hydro lakes will last a little longer,” he said. The report also raised an implication that enhanced hydrogen generation in spill years might offset dry years. “This implies hydrogen storage for later electricity production. But as the report itself notes, there is at best a 25 percent efficiency when switching from electricity to hydrogen and back to electricity. Based on that, hydrogen storage will never be an option in New Zealand for dry year mitigation.” Associate Professor Bardsley said there were serious issues with the plan being put forward by Contact and Meridian and it shouldn’t proceed unquestioned.
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