Huge NZ bio-fuels opportunity from forestry

New Zealand's plantation forestry estate represents a major opportunity for New Zealand to become more self-sufficient in transport fuels.

That is the conclusion of the latest report from the Pure Advantage business lobby group seeking support for a "green growth" push in New Zealand.

However, a "crisis of faith" in the industry could stymie the newly emerging potential of forestry – a sector that has long confounded attempts to add value beyond the export of raw logs, mainly to Asian markets.

Pure Advantage trust chairman Rob Morrison told BusinessDesk the fragile state of the forestry industry is a major issue for realising the largest economic opportunity identified by a study conducted by London economic consultancy Vivid Economics and the Business School at the University of Auckland.

"One of the concerns is faith in the forestry industry," he says. "There are question marks about the forestry industry's capacity to deliver" as a result of stop-start government policies towards forest planting in the last decade.

The report identifies seven areas for action, some of which are partially under way, including mass home insulation and an upgrade to electricity networks to enable energy efficient "smart grids".

The initiative is intended as a catalyst for investment in science and new businesses capable of producing economic growth that also combats climate change.

Its sponsorship by industry figures associated with the Labour Party, including its brainchild Philip Mills of the Les Mills gym franchise, saw the initiative spurned by ministers as special pleading and subsidy-seeking.

The report from the London-based economic consultancy Vivid Economics and the University of Auckland Business School identifies the opportunity to "create a smart, productive, sustainable forestry industry" among seven big opportunities.

They are:

  • Retrofitting homes for energy efficiency and warmth to create a healthy environment: under way after existing initiatives by both Labour and National-led governments. Some 750,000 homes to go, the report says.
  • Turning geothermal expertise owned by MightyRiverPower and NZX-listed Contact Energy into a globally valuable resource, as heat from the Earth becomes understood as an electricity generation source. New Zealand is a world leader in geothermal energy.
  • Investing in sustainable agriculture and efficient agricultural technologies, simultaneously reducing greenhouse gas emissions and making farming more profitable.
  • Using waste heat and burning waste products to produce low-carbon energy.
  • Installing a national "smart grid" allowing real-time energy pricing and digital technology to connect. Under way.
  • Establishing a bio-fuels industry based on woody biomass.
  • Investing in New Zealand's ecological diversity to create high value eco-tourism and conservation education programmes.

Mr Morrison says "green growth ... is the only growth that allows humanity to develop and flourish, reduce poverty and achieve development goals, while at the same time protecting natural capital, such as climate stability, without which growth and development will be retarded or reversed".

Pure Advantage sponsors include Air New Zealand chief executive Rob Fyfe and Chris Liddell, an expatriate key adviser to failed US presidential candidate Mitt Romney and a former Carter Holt, Microsoft and General Motors senior manager.

Warehouse founder Sir Stephen Tindall, merino-wear impresario Jeremy Moon of Icebreaker, and Joan Withers, chairman of the boards at Auckland International Airport and MightyRiverPower, the state-owned electricity company, are also involved.

Led by Mr Morrison, the investment banker brother of the late Infratil founder Lloyd Morrison, Pure Advantage will now seek senior corporate sponsors to build business cases for action, independent of government involvement, in the seven identified areas.

Among those tipped for involvement in the bio-fuels initiative are understood to be science and bio-tech darlings, Auckland-based Lanzatech, the New Zealand-owned transport fuels company Z Energy and Scion, the government-owned forestry science research body.

Labour and National-led governments have sponsored efforts for more than a decade to secure a special place for New Zealand's plantation forestry as a legitimate way of storing carbon under global carbon market rules.

One of the few wins noted in last December's talks in Durban, South Africa, was New Zealand's successful campaign creating more value for owners of plantation forestry, if and when global carbon prices rise from current low points.

"None of it's greenfields," Mr Morrison says of the report. "It's not about new technologies or silver bullets. It's about what we are currently doing and trying to improve it. Much of it's common sense."

(BusinessDesk)

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6 Comments & Questions

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So do any of these utopian dreams and schemes for "green growth" not require govt. compulsion?

If the market says they are bad, loss-making ideas who are we to argue?

Pssst, wanna buy some carbon credits?

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Growing trees is a long-term investment strategy that has become derailed by the short-term thinkers. The ETScam is a perfect example of the nonsense that the parasites and dreamers can interfere with good planning. Successive governments are equally to blame. The moment I read that the carbon fraud is expected to be a part of this proposed strategy I know its ultimately doomed.

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Show us the numbers, don't buy into this mythical wonderful cheap energy.
This sort of technology will need HUGE subsidies. Even in the US, where gas prices are so cheap, you don't see a massive rush to build tens of gas to liquids plants.
Please show us a single example of this technology having been comercialised without massive subsidies.

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There is nothing new in this idea. Somewhere back in the 1950/60's, I recall, a Forestry Research group (I think they were) in rotorua or similiar, explaining how all the herbage from milled trees could be used for Fuel.
This idea never got of the ground due to lack of entrepenurial Capital; opposition from the major fuel companies, who probably bought the research findings; or the plain shortsideness; ' we only milk cows and mill timber' mentality of the country.
Not a lot seems to have changed!

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We have huge forests, so it is obvious that there is huge potential for forestry to be a potential source of biofuel. But before we get too excited, two fundamental questions must be asked, and answered. Could biofuels ever be the best use for the forest biomass (compared, for example to timber and wood pellets), and, would forests the best source of biomass for biofuels(compared to other crops)?

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And the third question, JRS, should be answered by the Pure ADvantage process: i.e., what is the business case for doing this? If it requires subsidies, it shouldn't happen. But the likes of Lanzatech have long identified NZ's huge upcoming forest resource as a potential feedstock for biofuels in the future. The Luddites on the NBR site will say of course that a carbon price is a "subsidy", but if you want action on climate change, it's just another version of a sin tax, with economic stabilisers built in by being based on tradable units.

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