Solid comment on lignite

By Rebecca Macfie | Published on February 12, 2011 | Issue 3692

Are Solid Energy's lignite plans a significant step down the wrong energy path?

Lignite is just a geological notch up from peat. It’s brown coal, low in energy and about 45% water. It’s such an inefficient form of energy that the minute it’s transported any distance, it becomes uneconomic.
Southland has masses of the stuff. Ever since the days of the Liquid Fuels Trust Board, set up to look for alternative fuel sources in the wake of the 1970s oil shocks, the southern lignite fields have been recognised as a world-class energy resource. When the price of oil dropped, lignite dropped off the radar. But over recent years the state coal-mining company, Solid Energy, has been developing plans to exploit it, as has mining company L&M.
Solid Energy is already mining lignite at its New Vale open-cast mine near Gore, most of which is consumed by Fonterra’s nearby Edendale milk factory. But it has ambitions to use lignite as the feedstock for three new industries: industrial fuel pellets called briquettes, urea fertiliser and diesel.
Last week it made the first substantive step towards large-scale lignite exploitation, announcing it would spend $23-25 million on a briquetting plant at Mataura, using new technology developed by North Dakota company GTL Energy. GTLE’s method involves crushing the lignite, squeezing the embedded water to the surface, drying it at a low heat and then reconstituting it into pellets. Solid Energy’s Brett Gamble says the process upgrades low-grade lignite to a sub-bituminous coal.
The briquettes will be sold to New Zealand industrial users and trialled in export markets. If successful, Solid Energy is likely to push ahead with an export-scale plant.
Of the three possible uses for lignite, the domestic briquetting project is the least controversial, given the users of the product are already burning coal and the carbon emissions produced in the process are minor. Gamble even talks of trialling “green coal” – briquettes made from wood and lignite, producing lower emissions than if made purely from coal.

But the briquetting plant will be seen by many as a significant step down the wrong energy path for New Zealand: the thin end of a dirty carbon-intensive wedge that will lock New Zealand into a deeper dependence on fossil fuels instead of focusing on developing new forms of clean energy.
Solid Energy expects to take another step forward on its lignite-to-urea project later this year. Working with fertiliser company Ravensdown, it is looking at a plant that could produce up to 1.2 million tonnes of urea – enough to supply all New Zealand’s needs and allow for exports.
The lignite-to-diesel option is a more distant prospect, but Gamble likens it to an insurance policy for New Zealand. When Kiwis are paying $3.50 or $4 a litre for petrol, New Zealand needs to have “the ability to press the button”, he says.
Solid Energy has long talked of capturing the carbon produced in lignite projects and storing it in geological formations underground (carbon capture and storage, or CCS). But big questions still hang over the feasibility and efficiency of this process, and although Solid Energy is involved in international CCS research, it tends to talk more these days about conventional carbon-offsetting techniques like planting trees.
Prime Minister John Key’s announcement of plans to partially privatise Solid Energy arguably makes all three of Solid Energy’s lignite work-streams more achievable. Chairman John Palmer – who last year called for a partial sell-down to enable the company to meet future capital requirements – has already raised the possibility that the lignite reserves, which will require enormous investment to develop, could be spun off and listed separately on the stock exchange.
But the company’s plans have come under the critical scrutiny of Parliamentary Commissioner for the Environment Jan Wright. She has worked out the emissions from lignite-conversion projects, and concluded coal-to-diesel production creates twice as much CO2 as conventional diesel production, and coal-to-urea generates about two-thirds more CO2 than that produced from natural gas.
Moreover, under the Emissions Trading Scheme, industrial processes to turn lignite into fuel and fertiliser could be up for free emissions credits – in other words, taxpayer handouts from the very scheme supposed to be steering the New Zealand economy in a low-carbon direction.
Solid Energy objects to Wright’s analysis, saying it has never banked on getting free credits and will “take responsibility” for its emissions. But Wright has raised a question that demands an answer before the SOE commits millions – and possibly billions – of dollars to its lignite strategy: does it make sense for “clean green” New Zealand, which has promised to reduce its greenhouse gas emissions by 10-20% below 1990 levels by 2020, and which on current performance will miss that target by a massive margin, to launch a new carbon-intensive industry that will make our emissions profile substantially worse?