Energy experts are criticising plans made by state-owned miner Solid Energy, saying efforts to build a large export factory in Southland’s Mataura valley are uneconomic.
The state-owned miner’s lignite briquettes are expected to go on sale this year, but an ambitious plan to export the pellets overseas is now looking unlikely.
Energy expert Professor Basil Sharp, of the University of Auckland, is dubious of the economics behind the company’s plans.
“The price of gas internationally has gone through the floor, and this obviously has an impact on the demand of coal,” he says. “I suspect that feeds back into Solid’s proposal.”
The whole scheme may be uneconomic, as new drilling technologies and fracking have triggered a dramatic downturn in coal prices, Prof Sharp says.
Solid Energy had planned to process the fuel into hotter burning briquettes and is bankrolling a $29 million pilot factory in Mataura.
The miner owns billions of tonnes of lignite in the area, but with coal prices plummeting, the future of the factory is now looking uncertain.
Solid Energy was unavailable to comment today, but on a corporate video, CEO Don Elder talks about his high hopes for the lignite reserves.
“We have one of the largest lignite resources in the world. On a per capita scale we are one of the largest in the world,” he says.
“We can turn those lignites to urea with powers our agriculture economy, we can turn them to diesel which powers our export economy.”
But with those economics now in doubt, Solid Energy is also facing pressure from environmentalists.
One group, the Coal Action Network, held a small protest outside the plant last week the weekend.
Parliamentary Commissioner for the Environment Jan Wright says that an abandoning of the pilot plant would be “good news for the environment”.
If big export plans are abandoned, it could tremendously help the work put towards green house gas emissions, she told 3 News.
Solid Energy says it hopes to make its lignite projects carbon neutral, by either offsetting or capturing and storing the emissions.
But it will take a big rise in global coal prices for solid energy to seriously exploit Southland's lignite reserves.