The trusted voice of the industry
for more than 30 years

Action to cut fossil fuels

Hundreds of millions allocated in budget 2022 to reduce emissions from energy, including hydrogen roadmap.
Posted on 19 May, 2022
Action to cut fossil fuels

The government is aiming to reduce New Zealand’s dependence on fossil fuels by supporting use of more economical and cleaner alternatives.

Announced at the launch of the emissions reduction plan (ERP) on May 16, Megan Woods, Minister of Energy and Resources, says roadmaps for the energy industry, hydrogen uptakes and use of offshore renewables will be developed.

The drive to decarbonise industry and accelerate preparations for “a sustainable, more resilient future” will get a boost from the Climate Emergency Response Fund in budget 2022, which is set down for May 19.

“We must wean ourselves off expensive fossil fuels, scale up our ambitions to decarbonise industry and future-proof our energy system to ensure that a cheaper, more secure energy supply becomes the norm,” says Woods, pictured. “Emissions from our energy and industry sectors make up 27 per cent of our total emissions. 

“We’re investing around $650 million over four years to increase the size of the funding available to the Government Investment in Decarbonising Industry Fund [GIDI].

“There will also be targeted investment at a regional level for projects that optimise low-emission fuel use, funding for electricity transmission and distribution infrastructure upgrades to support fuel-switching, and the early adoption of high decarbonisation energy technologies. 

“The original $69 million GIDI fund has helped fund 53 major industrial decarbonisation projects contracted for completion by April 2024. Over their lifetime, they are estimated to save 7.46 million tonnes of CO2 – equivalent to taking 134,800 cars off the road.”

Budget 2022 also includes support for a scheme to help businesses buy and install high-efficiency electrical equipment for industrial and commercial processes. There will also be help for owners of commercial buildings to become more energy efficient.

Woods says: “The expanded programme is estimated to deliver projects that will make up around 17 per cent of our total emissions reductions required between 2022 and 2025, and around 35 per cent of our emissions reductions required between 2025 and 2030.”

Almost $18m over three years will support the transition to a low-carbon economy by developing an energy strategy, regulatory framework for offshore renewable energy, and a roadmap to develop and use hydrogen.

In the spending pot

• Just over $650m has been allocated to decarbonising industry over the four-year budget 2022 period – 2022/26 – plus a pre-commitment of $25m in 2022/23 and 2023/24 agreed prior to this year’s budget with the rest, some $330m, for 2026/27 and beyond.

• In addition, there’s almost $18m to fund an energy strategy, a regulatory framework for offshore renewable energy, and a roadmap to develop and use hydrogen.

• About $5m to develop and implement electricity market measures to support reliable and affordable electricity supply while accelerating the transition to a highly renewable electricity system. To also explore and facilitate public-sector procurement of renewable electricity via long-term power purchase agreements.

As for the phasing and allocation of funding to decarbonise industry, approximately $1 billion will be spent over seven years. This includes about $600m for an expanded process heat fund, which has the potential to include:

• Nationally available contestable funding, and streamlined process for smaller projects and partnerships with the country’s biggest emitters.

• Enabling infrastructure and supply of low-emissions fuels to support decarbonisation, such as network upgrades.

• Regionally targeted decarbonisation and technology diffusion.

On top of that, there will be $40m for commercial space and water-heating decarbonisation, and switching fossil-fuel space and water heating to renewable energy.

And $330m has been earmarked for assisting companies, including small and medium-sized businesses, to upgrade to more energy-efficient equipment.

These government’s estimates are based on current technologies and barriers.