NZ’s biggest ever emissions reduction project hits milestone
New Zealand is on track to have greener steel as soon as 2026 with New Zealand Steel’s electric arc furnace project reaching a major milestone today.
The Government announced a conditional partnership with New Zealand Steel in May to deliver the country’s largest emissions reduction project to date. Half of the coal being used at Glenbrook steel mill is being replaced with electricity to recycle and reuse scrap steel.
A feasibility study has been completed on the viability, risk, expected costs and other outcomes and the project now has the full green light from New Zealand Steel.
“It’s an exciting step – this project will eliminate one per cent of the country’s total annual emissions and deliver huge benefits for our environment, our industry and to New Zealanders,” said Minister of Energy and Resources Megan Woods.
“There has been rigorous due diligence on the project, which has been a critical process before New Zealand Steel fully embarks on its journey to decarbonise its activities while maintaining onshore steel production.”
Production using the new furnace is expected to start as early as mid-2026, in line with agreed commissioning milestones.
The Climate Change Minister James Shaw says the installation of an electric arc furnace at Glenbrook means New Zealand Steel will cut its emissions by more than 45 per cent.
The emissions reductions will be equivalent to keeping approximately 300,000 cars off the road.
“Once commissioned, the completed project will reduce Glenbrook’s carbon footprint by 800,000 tonnes per annum. That means 100% of its annual steel production will be lower carbon from day one,” said James Shaw.
“This project will mean the production of very low carbon steel by world standards – that’s a win for New Zealand,” James Shaw said.
The deal is being part funded with up to $140 million from the $650 million Government Investment in Decarbonising Industry (GIDI) Fund, which enables businesses of all sizes to reduce their emissions. The balance of the $300 million project will be funded directly by New Zealand Steel.
“The project getting off the ground adds real momentum in pushing fossil fuels out of the energy system and lowering emissions through renewables and energy efficiency,” Megan Woods said.
“We’ve come a long way in the last three years GIDI has been operating with 30 of the 81 process heat focused projects complete or in commissioning.
“This deal was the first in a number of bespoke opportunities that the government has been exploring, to deliberately target appropriate support for New Zealand’s largest emitters where the greatest emissions reductions can occur quickly,” Megan Woods said.
A second large partnership deal was announced in July with Fonterra to cut coal use at its dairy factories and support a 50% reduction in the company’s manufacturing emissions by 2030 – increasing the existing target of 30%.
Notes for editors:
The feasibility study assessed various critical factors that may impact the success of the project, including access to enough scrap steel, consenting processes, and getting the necessary equipment within current cost estimates.
This deal was the first in a number of bespoke opportunities that the Government is exploring, through the expanded GIDI Fund, to deliberately target appropriate support for New Zealand’s largest emitters.
Background on GIDI:
- GIDI (Government Investment in Decarbonising Industry) was first introduced in 2020 – to ramp up decarbonisation of our industrial process heat while stimulating our economic recovery post the pandemic, to create and protect jobs.
- The $650m expansion of GIDI in Budget 2022, funded from the Climate Emergency Response Fund is a key initiative to help deliver on the Government’s Emissions Reduction Plan (ERP).
- The Fund enables partnerships between Government and businesses to accelerate emission reductions by supporting energy efficiency and fuel switching projects.
- GIDI helps get decarbonisation projects across the line and happening faster than they otherwise would, delivering larger and earlier emissions reductions for New Zealand.
- The key measure of a GIDI project’s impact is the carbon dioxide emissions abatement it achieves. This is the amount of carbon the project prevents from being emitted – compared to the most likely scenario without EECA co-funding.
- It helps ensure that decarbonisation happens in New Zealand by investing in New Zealand businesses instead of buying offsets overseas – and that we support our businesses with a just transition.
- The project is forecast to have an abatement cost of $16.20 per tonne. The abatement cost per tonne is the cost of removing one tonne of carbon dioxide equivalent pollution.
- This partnership agreement is with EECA (Energy Efficiency & Conservation Authority), with support from the Ministry for the Environment, and the Ministry of Business, Innovation and Employment.
- EECA – which delivers projects under GIDI – has a specific programme dedicated to ‘Partnerships with Very Large Emitters’ as part of the funding allocated.