KEY POINTS:
As the Government pushes to become the world's first carbon-neutral country, one of its own companies, coal miner and marketer Solid Energy, is pushing just as hard to be taken seriously as part of a global warming solution, not as part of the cause.
Solid Energy paid the Government a $20 million dividend last year, the proceeds of its labours of digging out and selling one of the world's most polluting fuels to steel mills and power stations. It's been one of the Government's state-owned enterprise success stories, last year notching up record sales of $570 million, up $169 million from the year before. Its record coal production year was matched by an equally ground-breaking $85.8 million after-tax profit.
Numbers like this have prompted the National Party, should it become the Government, to select Solid Energy as a prime candidate for partial privatisation, with new investors encouraged to buy a minority stake.
Over the next 20 years, Solid Energy will invest more than $100 million in research and development, hoping this will help fund the kind of technology needed to keep burning coal in a non-polluting way.
Chief executive Don Elder is a passionate advocate of the potential for "clean coal" - a phrase seen as an oxymoron by Solid Energy opponents. Clean coal has become the catch-cry of world leaders like George W. Bush and John Howard, both of whom are often condemned for continuing to push coal-burning power stations over cleaner energy sources.
Elder, naturally enough, says Solid Energy's role as a state-owned coal company is in no way at odds with government goals of carbon neutrality. He says the cost of energy has doubled in the past few years and could soon be four to five times higher than what it is now.
"If the cost of energy is going up, it's going up because energy is becoming more scarce, and the world is struggling to meet energy demands. Populations will not be satisfied with anything other than all energy companies doing what they can to meet demand," says Elder.
Statistics NZ figures released last week show that electricity prices for consumers rose 7 per cent on average last year, while the price for commercial use fell 6.5 per cent. Prices have risen every quarter for the past five years.
In this world, there is no doubt, says Elder, that there is a need for "a huge amount more coal".
"The growth of energy demand is going to cause the amount of coal we use globally to increase. There's no way around that. It's only a question of whether it's going to increase at the same time as emissions are capped, or whether it increases without emissions being capped."
At the heart of the clean coal debate are competing estimates of how far away is the idea of capturing carbon dioxide (CO2) from power station smokestacks, transporting it through pipes and injecting it deep underground into disused oil and gas wells or unmineable coal seams. Elder says it's just around the corner - opponents say it's unproven and possibly many decades away. If technology of this kind were "retrofitted" on the top of the Huntly power station, it would likely double the cost of the electricity it produced.
CO2 is already pumped into oil and gas wells to get more energy out of the ground. CO2 turns to liquid when it's injected deep into the earth.
Each stage has already been proven, says Elder, it's just the scale and the economics that have yet to be sorted out. But the cost of this technology and the economics of putting it into use are becoming more attractive every year.
Elder says the current Government is "prepared to do what's necessary to show leadership, but I don't believe any government, any person in the industry, believes that NZ is about to penalise our economy by doing something that the rest of the world is not going to".
"How is this consistent with the Government's message on CO2? I say, in fact, we are at the most critical point in the economy, because we are looking to deliver something that is not only consistent with the Government's message on carbon, but in fact can also be consistent with the Government's desire to make New Zealand more competitive, so growth rates can be faster."
Solid Energy cites predictions that carbon capture and storage will be "an operational part" of those industries that produce CO2 within the next five to eight years.
Elder says New Zealand has "vast opportunities" to store CO2 underground. It could be put into depleted gas reservoirs and in deep coal seams. The kind of work now being done by Solid Energy would allow New Zealand to support economic prosperity during a transition to renewable energy forms.
Solid Energy is helping to pay for and run a research test in Victoria, Australia, where this year up to 100,000 tonnes of CO2 is due to be injected into the ground and analysed until at least 2010.
Green Party co-leader Jeanette Fitzsimons says Elder is misleading the country when he says the kind of technology that can make coal clean on any large scale is not far off.
Storing CO2 underground has not been proven, and capturing it from coal power stations will make any electricity coming from them too expensive anyway.
"I don't believe the coal industry can help us get to carbon neutrality in any way at all," says Fitzsimons. "I think it's a company with a resource looking desperately for a way of using it to make money in a way people will tolerate - but I don't think society is going to tolerate it.
"He's doing what you would expect a bright CEO of a coal company to do. It's in the financial interests of Solid Energy, but it's not in the long-term social, environmental or even economic interests of New Zealand."
Trevor Mallard, Minister of State Owned Enterprises and Acting Minister of Energy, says the Government's stance is that it wants to make sure all future electricity generation is renewable - except where necessary to ensure security of supply.
"In the future, however, carbon capture and storage (geo-sequestration) may prove safe and affordable, with significant benefits for the world, especially those countries not as lucky as New Zealand in their renewable energy resources," he told the Herald on Sunday.
