Australia lagging behind New Zealand on cutting industrial energy costs - Amandine Denis-Ryan | CEO, IEEFA Australia takes up the case
Last year, research from IEEFA revealed that electrification could slash energy use in industrial processes, using heat pump technology that is commercially available today. However, adoption remains slow in Australia, with only a few industrial heat pumps (IHPs) deployed here. In contrast, New Zealand is already well ahead of its larger neighbour.
New Zealand’s Energy Efficiency & Conservation Authority (EECA) estimates that about a quarter of their country’s potential for IHPs has now been captured. The shift appears to have contributed to a material decrease in coal and gas use in the country’s food and beverage sector. Between 2019 and 2022 (the latest year of available data), coal use in the food and beverage sector decreased by 12% and gas use by 21%, while electricity use increased by 7%.
The successes achieved in New Zealand offer Australia a range of valuable learnings if decisive action is taken now.
A comprehensive approach was key to success
The New Zealand government started supporting the deployment of IHPs in 2013 through the Technology Demonstration Fund, which demonstrated IHPs at lower temperatures (60°C) in commercial and industrial applications. The program has progressively moved to higher temperatures as the technology has advanced. In 2018, the government supported the demonstration of a small number of applications with temperatures of 80-90°C. The program provides 50% co-funding, with up to roughly A$450,000 of support for IHP projects.
Support then moved to deployment through the Government Investment in Decarbonising Industry (GIDI) fund. The fund supported 83 projects with 35% co-funding, mostly decarbonising industrial heat through energy efficiency, electrification and shifting to biomass. About 26-30 projects involved IHPs, receiving NZ$40-45 million in government funding. This allowed the projects’ paybacks to decrease enough to unlock internal capital.
Significantly, government support wasn’t limited to funding projects, but also included information and capacity-building elements. The government worked with international experts to share their learnings; it partnered with universities where required to look at how to best integrate IHPs into existing processes and industrial sites; and it organised training and site visits. It also invested in a team to engage with industry, including dedicated account managers for the top 200 energy users, which was helpful in developing a pipeline of projects for government programs.
The Energy Transition Accelerator provides up to 40% and NZ$35,000 in co-funding to help businesses assess their opportunities to reduce emissions. The assessment relies on a full review of the business’ energy balance and provides a cost-optimised decarbonisation pathway, which businesses can then choose to implement in full or progressively. This provides businesses with a good understanding of where IHPs do or do not make sense for them.
IHPS have many financially attractive applications, and they’re not all complex
IHPs are particularly attractive for processes that use both cooling and heating, as the waste heat from the cooling process can be used as an input to the heating process.
In many cases, there were more benefits than just the reduction in energy costs. IHPs are much easier to operate than fossil fuel boilers and, according to EECA, “don’t require ash disposal, fuel handling, and other operational costs, and may need less supervision and operator intervention.” Projects have also provided some resilience benefits, such as the ability to turn off an unstable fossil fuel boiler, or by maintaining both the IHP and the original boiler, thereby allowing for a shift between fuels.
How government support kick-started a new industry
One of the key impacts of the various government programs was catalysing the development of an IHP industry in New Zealand. Refrigeration companies are now the primary suppliers of IHPs, supported by specialised consultants. IHPs utilise the same technology as refrigeration systems, which makes refrigeration companies a natural fit. They hired or partnered with heating engineers and learnt how to assemble and integrate the technology.
It wasn’t very easy to start with, given that the first units were fully bespoke. However, there are now quite a few projects up and running, which have provided both suppliers and consumers with confidence in the technology. Suppliers have a range of case studies they can showcase to interested businesses.
The technology is also still progressing. For example, some IHPs are now available in containerised models, which come at a lower cost and with lower complexity (but may lead to small efficiency drops in some cases). Now that the GIDI program has closed, IHP projects are still moving forward in New Zealand without any government support.
Australia can learn a lot from New Zealand and benefit from its capacity development. Given the imminent excess gas demand on Australia’s east coast, it’s time to start seriously considering those opportunities.
Note: Publicly available information was complemented by interviews with DETA, New Zealand’s Energy Efficiency & Conservation Authority (EECA) and Essential Energy in preparing this article.
https://ieefa.org/resources/queensland-lng-exports-decade-high-domestic-prices-falling-local-demand