Industrial Energy
Process heat, major energy users, and the pathway to industrial decarbonisation.
Industrial Energy Overview
How NZ's industries use energy β and the challenge of decarbonising
~35%
Of NZ electricity
Used by industry
~8%
Of NZ emissions
From process heat
60%
Process heat fossil-fuelled
Coal & gas
2037
Coal boiler phase-out
Policy target
Industrial Energy by Sector
π§ Food Processing
Largest
Dairy (milk drying), meat processing, beverages. Biggest user of industrial coal for process heat.
Electricity use β as processors electrify
βοΈ Basic Metals
~12%
Tiwai Point aluminium (~12% of NZ electricity), NZ Steel at Glenbrook.
Tiwai demand response saved 330 GWh in 2024
π Wood, Pulp & Paper
Declining
Uses geothermal at Kawerau, wood waste (black liquor). Multiple closures since 2021.
-27% electricity use since 2022
π§ͺ Chemicals
Methanex
Methanol production at Motunui (Taranaki). Largest gas user β idled in 2024 due to gas shortage.
Production halved in 2024
Industrial energy demand fell in 2024: Total industrial electricity use dropped to 12.5 TWh β the lowest since 1992. Key factors: Tiwai Point demand response (330 GWh saved), Methanex idled due to gas shortage, multiple pulp mill closures. Good for the grid during dry year; concerning for economic output.
Sources: MBIE Energy in New Zealand 2024/2025, Electricity Authority, EECA
Process Heat
The energy used to make things hot β and why it matters
~1/3
Of NZ energy use
Is process heat
60%
Fossil-fuelled
Coal & natural gas
~8%
Of NZ emissions
From process heat
$650M
GIDI Fund
For decarbonisation
What is Process Heat?
Process heat is thermal energy used in industrial processes β steam, hot water, or hot gases used to manufacture products. Examples include:
- Dairy: Turning milk into powder (spray drying)
- Meat processing: Cooking, sterilisation, cleaning
- Wood processing: Drying timber, making pulp
- Food & beverage: Brewing, baking, canning
- Textiles: Dyeing, drying, finishing
- Steel: Melting, refining (very high temps)
Temperature Categories
| Category | Temperature | Main Fuels |
|---|---|---|
| Low | <100Β°C | Heat pumps, electricity |
| Medium | 100-300Β°C | Biomass, electricity, gas |
| High | >300Β°C | Coal, gas, some biomass |
| Very High | >1000Β°C | Coal (steel), hydrogen future |
Low/medium temp heat is easier to electrify. High-temperature processes are harder β the "last mile" of industrial decarbonisation.
Why process heat is a big deal: Around 60% of NZ's process heat currently comes from fossil fuels (coal and gas). Switching to electricity, biomass, or other renewables is one of the biggest opportunities to cut industrial emissions β but requires significant capital investment and, in some cases, new technology.
Process Heat by Fuel (Current)
Natural Gas~35%
Coal~25%
Electricity~15%
Biomass (wood, black liquor)~20%
Geothermal (direct heat)~5%
Sources: MBIE, EECA, Climate Change Commission
Major Industrial Users
NZ's largest energy consumers β and their decarbonisation journeys
π©
Tiwai Point Aluminium
Rio Tinto (NZAS)
~12%
Of NZ electricity (~572 MW)
π§
Fonterra
Dairy cooperative
#1
Industrial coal user
π§
NZ Steel (Glenbrook)
BlueScope
~1%
Of NZ emissions
Tiwai Point Aluminium Smelter
- NZ's single largest electricity user (~12% of national demand)
- Draws up to 572 MW continuously
- Powered mainly by ManapΕuri hydro (dedicated supply)
- Produces ~330,000 tonnes aluminium per year
- Employs ~1,000 people in Southland
- 20-year contracts signed May 2024 (secured to 2044)
Demand response hero (2024): During the winter energy crisis, Tiwai reduced demand by up to 205 MW (36% of capacity) under its contract with Meridian. This saved an estimated 330 GWh β equivalent to 7% of NZ's total hydro storage. The smelter effectively became a "virtual battery" for the grid.
Fonterra β NZ's Largest Industrial Emitter
- World's largest dairy exporter
- 21 coal boilers and 76 gas boilers (as of 2021)
- ~1,300 MW total installed boiler capacity
- Process heat to turn milk into powder
- Committed to exit coal by 2037
- North Island now coal-free (as of late 2024)
- $790M allocated to decarbonisation
Fonterra Decarbonisation Progress
2020
Te Awamutu converted to wood pellets
2023
Stirling 100% renewable (biomass)
2024
Edendale electrode boiler, Waitoa biomass, North Island coal-free
2025-27
Whareroa & Edgecumbe electrification (38% gas cut)
Early 2030s
Majority of coal conversions complete
2037
Target: Zero coal
NZ Steel β Glenbrook
- NZ's only integrated steel producer
- Produces ~670,000 tonnes steel per year
- Uses local ironsand as raw material
- Coal used as reducing agent (not just heat)
- Currently ~1% of NZ emissions
- Employs ~1,400 directly, 4,000 total jobs
Electric Arc Furnace (2025-26): NZ Steel is installing a $300M electric arc furnace (EAF) β co-funded $140M by government. Will recycle scrap steel using electricity instead of coal. Expected to cut emissions by 1 million tonnes/year β a 1% reduction in NZ's total emissions from a single project. Commissioning by end of 2025.
Other Major Users
| Company | Sector | Energy Use | Status |
|---|---|---|---|
| Methanex | Methanol (chemicals) | Largest gas user in NZ | Production halved 2024 (gas shortage) |
| Pan Pac | Pulp & paper | Electricity, biomass | Reopened 2024 post-cyclone |
| Oji Fibre Solutions | Paper recycling | Electricity | Penrose closed Dec 2024 |
| Alliance Group | Meat processing | Coal, gas β electricity | GIDI-funded conversions |
| Open Country Dairy | Dairy processing | Coal β biomass | Waharoa converted 2023 |
| Mataura Valley Milk | Dairy processing | Electricity | β First all-electric dairy factory (2024) |
Sources: MBIE, EECA, company reports, Electricity Authority
Coal Phase-Out
Ending coal use in industrial process heat
~2.5Mt
Coal produced/year
Declining
15.3 PJ
Industrial coal use (2024)
Down from 16.4 PJ (2023)
2037
Phase-out target
Low/medium temp boilers
β7%
Industrial coal use
Year-on-year decline
Where NZ Coal Goes
Exports (premium bituminous)~50%
Industrial process heat~30%
Steel production (Glenbrook)~10%
Electricity (Huntly backup)Variable
Note: Coal use for electricity spiked 225% in 2024 due to dry year β not a typical year.
Policy Framework
- Ban on new coal boilers (low/medium temperature) β in development
- Phase-out by 2037 for existing low/medium temp coal boilers
- Sites must prepare GHG Emission Plans
- Adopt best practicable option to reduce emissions
- National Policy Statement & Environmental Standard being finalised
Coal use by sector: Dairy processing accounts for about two-thirds of industrial coal use β mainly Fonterra's South Island sites. Meat processing is a smaller but significant user. Most industrial coal is lignite from Southland (lower quality, local use) or sub-bituminous from Waikato. Premium bituminous coal from the West Coast is mostly exported.
Coal Production Regions
| Region | Coal Type | Main Use |
|---|---|---|
| West Coast (SI) | Bituminous (high quality) | Export, steel-making |
| Waikato (NI) | Sub-bituminous | Huntly power station, industrial |
| Southland/Otago (SI) | Lignite (low quality) | Local industrial, dairy, meat |
Sources: MBIE Energy in NZ 2024/2025, Coal statistics, NZ Petroleum & Minerals
Industrial Decarbonisation
Technologies, funding, and progress
$650M
GIDI Fund total
Budget 2022 allocation
53+
GIDI projects funded
Early rounds
7.5 Mt
Lifetime COβ avoided
From funded projects
50%
Max co-funding
Of eligible costs
Key Technologies
β‘ Electrode Boilers
Direct electrification
Convert electricity directly to steam. Best for sites with good grid connection. Fonterra, NZ Steel using.
High efficiency, zero on-site emissions
π‘οΈ High-Temp Heat Pumps
3-4x efficiency
Use electricity to "pump" heat from waste streams. NZ leading globally. Meat sector especially suited.
~25% of NZ potential now captured
π² Biomass Boilers
Wood pellets, chips
Replace coal with sustainably sourced wood. Fonterra converting multiple sites. Works for high temps.
Carbon neutral if sustainably sourced
β»οΈ Electric Arc Furnace
For steel
Melts scrap steel using electricity. NZ Steel's $300M project. Reduces coal use for steelmaking.
~50% emissions cut for steel production
NZ leading on industrial heat pumps: Between 2019-2022, coal use in food & beverage fell 12% and gas use fell 21%, while electricity use rose 7%. About a quarter of NZ's industrial heat pump potential has now been captured β one of the highest rates globally. The meat sector alone received over half of GIDI heat pump funding.
GIDI Fund (Government Investment in Decarbonising Industry)
- Established 2020 (COVID recovery + climate)
- $650M allocated in Budget 2022
- Up to 50% co-funding for eligible projects
- Minimum project size: $300,000
- Projects must complete by Dec 2027
- Funded via ETS revenue
GIDI Programmes
- GIDI: Industrial β process heat fuel switching
- GIDI: Partnership β large emitters (Fonterra, NZ Steel)
- GIDI: Commercial Buildings β building heat
- GIDI: Clean Tech β smaller business upgrades
- Network Upgrades β grid capacity for electrification
Decarbonisation Progress
β Food processing (dairy, meat)Making progress
β Basic metals (steel)Major project underway
β Chemicals (methanol)Uncertain β gas supply issues
β Very high-temp processesTechnology challenges
The pathway to 2050: Modelling suggests direct electrification will be the main driver of industrial decarbonisation, with coal phased out by 2040 and gas by 2050. Hydrogen may play a role in very high-temperature applications, but only becomes cost-competitive under rapid technology progress. Grid constraints and electricity prices are key factors.
Sources: EECA GIDI Fund, Climate Change Commission, MBIE, IEEFA