Why are we still burning coal?

Coal warms our hospitals and schools, ripens our tomatoes, makes roses bloom, turns ironsand into steel, dries milk powder for export, and generates electricity when hydro lakes are low and gas production sputters. Coal also releases close to double its weight in carbon dioxide emissions—and, in 2021, New Zealand imported record volumes of it. If we’re to meet our net zero emissions target in time, we’re going to need a game changer.

Written by       Photographed by Neil Silverwood

In 2010, some 25,000 New Zealanders marched down Queen Street to stop mining on our own conservation lands. Today, few would know that one unit of electricity in every ten they used early this year came from the destruction of someone else’s. According to Global Forest Watch, the Indonesian province of East Kalimantan, on the island of Borneo, has lost nearly 3.5 million hectares of forest cover to timber and mining operations since 2001—that’s three and a half Fiordland National Parks.

The Kalimantan rainforests are among the most biologically rich in the world. Surveys show that, floristically, there’s nowhere else like them. Borneo has, by one count, 14,423 plant species. There are 8500 in all of Aotearoa.

But the two biomes do have something in common: coal. More than half a million hectares of East Kalimantan is pockmarked with pits. In 2020, according to the International Energy Agency, Indonesia produced around 529 million tonnes of coal, including more than one million tonnes sold to New Zealand. We also imported 95,000 tonnes from Australia, and virtually all of it was low-grade (so-called sub-bituminous)—coal that’s low in energy value and high in carbon emissions. But our 2021 imports dwarfed even those volumes: a record 1.8 million tonnes. The biggest customers were Genesis Energy, New Zealand Steel and Golden Bay Cement.

Every tonne of coal burned releases two tonnes of climate-wrecking emissions, yet New Zealanders continue to burn it apace—more than three million tonnes in 2021. A record 1.8 million tonnes of that was low-grade “dirty” coal imported mostly from Indonesia.

Along with that coal, New Zealand bought some of Indonesia’s liability for climate change. Our greenhouse-gas emissions, like everyone else’s, are determined by the United Nations Framework Convention on Climate Change, which distinguishes between emissions produced inside a country’s own borders and those produced by commodities exported beyond those borders. The climate costs of digging up that coal stay in Indonesia, but the bill for burning it rests here
with us.

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Ironically, one reason we’re burning more climate-destroying coal is the climate itself.

In normal years, hydroelectric dams supply the greater proportion of our electricity—an average of 57 per cent per year over the past two decades. But normal years are becoming less normal. In the first half of 2021, the hydro-generation figure fell to 50 per cent, thanks to some of the lowest inflows on record into hydro lakes, most of which are clustered in the lower South Island. Rainfall at Aoraki Mount Cook was just 68 per cent of normal from January through April. Further south, Manapōuri received 77 per cent of normal rainfall. Overall, hydro storage was down by a third against 2020 levels—its lowest in 25 years.

We’ve had dry years before, and electricity generators have historically topped up the difference by burning more natural gas. But in recent years, they haven’t had that option. Most of our gas comes from four undersea fields off the Taranaki coast: Kapuni, Māui, Pohokura and Kupe. Kapuni, once New Zealand’s biggest field, is now in its autumn years—it furnished less than five per cent of supply in 2021. Now, the largest field is Māui. In 2018, Pohokura began to sputter, and nobody knows why. Energy analysts are now wondering whether Pohokura has gone into terminal decline years sooner than anybody predicted. New Zealand’s gas industry body forecast in May 2021 that, under its worst-case scenario, gas would no longer be a back-up plan for electricity generation from 2026 onwards.

Power suppliers will always draw on electricity from renewable sources first, because it’s cheaper, but if the wind drops and gas supplies are at a trickle, they must resort to coal. Nowadays, we burn more imported coal than at any time in the past 15 years, and in 2019, Aotearoa’s gross greenhouse-gas emissions hit a record 82.3 million tonnes of carbon dioxide equivalent (CO2-e, the number of tonnes of carbon dioxide emissions it takes to drive the same warming effect as a tonne of a different greenhouse gas)—more than 25 per cent higher than in 1990. The region where those emissions really spiked was Waikato, where emissions jumped 7.5 per cent, or just over a million extra tonnes of CO2-e. They came almost entirely from one source: Genesis Energy’s Huntly Power Station.

Genesis routinely promises to quit coal, but Nature—and the realities of New Zealand’s energy market—has made that difficult.

In 2015, Genesis announced it would stop burning coal at Huntly by late 2018. Over the next few years, it deferred that target to 2022, then 2030. But strangled gas supply has stymied those plans. In 2021’s first quarter, fully 44 per cent of Genesis’s total electricity generation came from burning coal. In February 2021, facing a forecast short of both rain and gas, the company brought one of Huntly’s retired turbines back online.

Genesis Energy’s Huntly Power Station is the country’s biggest thermal electricity plant, with five coal- and gas-fired turbines. Genesis has routinely pledged to stop burning coal here, but unpredictable natural gas flows and lake levels have thwarted this. Lately, Huntly has consumed vast quantities of coal: an estimated 250,000 tonnes a month for the first quarter of 2021—more than all of 2016-17 combined.

Now, Genesis will try burning biomass in one of its Rankine turbines instead: in March 2022, it secured 4000 tonnes of black wood pellets, an untested product in such big boilers, but thanks to intensive drying and other treatments, are said to deliver 30 per cent more energy than ordinary white pellets. But in an ironic twist, the company is importing the pellets from the United States, past the front gate of perplexed white pellet producers in Taupō.

Genesis says biomass could extend the life of Huntly out to 2040—a decade longer than planned—by which time it means to supply both base load and peak electricity demand from renewables. Late in 2020, Genesis pledged to cut pledged to cut its annual emissions by 1.2 megatonnes of CO2-e—almost half its current liability—by 2025. That’s roughly 1/80th of the country’s total emissions, or taking 272,000 petrol cars off the road for a year.

To that end, in March 2021, it opened its Waipipi windfarm in South Taranaki, and in August announced the construction of another near Dargaville. It’s also looking for joint-venture partners to build a solar array.

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Around 200 New Zealand schools still use coal boilers to heat their rooms, as do many hospitals, prisons, libraries and swimming pools all over the country.

Combined with manufacturing use, such process heat—steam, hot water or hot gases—consumes about around a third of Aotearoa’s energy, and it will be one of the most difficult markets to decarbonise, because around 60 per cent of it comes from burning gas and, increasingly, coal. In 2021, the government took aim at fossil fuels in process heat, agreeing to develop a National Environment Standard and a National Policy Statement that will give regional councils consistent policies and rules to help them retire all coal boilers by 2037.

Westland Milk Products in Hokitika still burns coal to dry raw milk into powder, releasing an estimated 116,000 tonnes CO2-e a year. In 2021, the company received a $1.7 million grant from the Government Investment in Decarbonising Industry Fund to reduce its greenhouse emissions by seven per cent.

If this happens, we have to find something else. Some are pointing to wood waste, which already supplies more than 10 per cent of New Zealand’s process heat. According to the Bioenergy Association of New Zealand, between two and four million tonnes of forestry waste can be economically turned into fuel for process heat each year. But how is burning wood any different to burning coal? Both release carbon dioxide into the environment. (Coal also releases sulphur dioxide.)

At its milk powder plant at Balclutha, French food giant Danone—which has committed to carbon neutrality by 2050—retired an old gas boiler and spent $30 million on a new four-storey one that burns hog fuel, or thinnings, slash and other wood waste from the district’s plantation forests. But biomass proponents argue that the carbon dioxide released from Danone’s smokestack is cancelled out by forests that supply it. As they grow, trees sequester carbon, which is released back to the atmosphere when they die. Burning biomass, then, pre-empts that natural death by felling the tree and using its stored carbon to produce energy instead. That carbon is duly taken up again by more trees. It all equals out, making biomass a carbon-neutral fuel.

The largest opencast mine in New Zealand, Stockton, high on the Buller Plateau north of Westport, yields an average 900,000 tonnes of coal a year. Around 70 per cent of it is high-grade coking coal, which fires steelmakers’ furnaces here and overseas, while the rest—lower-grade thermal coal, is burned to keep New Zealand lights on. Despite a history of acid drainage problems here, owners Bathurst Resources and Talley’s Group will go to the appeal court this year to argue for another mine on the plateau.

Which is fine, but while no extra carbon is being emitted, the process does not cut carbon dioxide emissions either. In fact, some researchers say, it’s worse than that. Estimating biomass emissions relies heavily on carbon payback time: nebulous maths that delivers very different answers depending on which questions you ask. The devil lurks in details such as the species of fuel tree, its rate of growth and the extent of new plantings.

Those variables all determine the lag between emissions and re-uptake, and the US environmental lobby group, the Natural Resources Defense Council, charges that, without some means of trapping its carbon emissions at the source—so-called carbon capture—a wood-burning power plant would have slightly higher net carbon emissions than a comparable gas-fired plant for the first 40 years of its life. A 2013 paper in the Journal of Sustainable Forestry calculated that deficit to last longer still—up to half a century. Critics say we don’t have time for biomass; by the time all that carbon has been re-absorbed, it may have melted the ice caps.

In 2021, New Zealand imported 1,800,000 tonnes of coal to keep the lights on. But how much is that—really? It’s about 51 bulk carrier ships, each loaded with some 35,000 tonnes of coal, offloading at the Port of Auckland at the rate of about six per month.

Since raw forest and mill waste is usually low in bulk and density and high in moisture, it can’t compete against even low-grade coal for energy content. It must be collected, transported to a processing site, dried, then either shredded into chips or compressed into pellets—and that all takes energy. Then it must be transported to the recipient boiler. Danone says its Balclutha boiler will burn 35,000 tonnes of biomass each year. That’s four or five 30-tonne truck-and-trailer units every day.

Nevertheless, the government is going gangbusters on biomass as an alternative to coal, along with electricity. The Energy Efficiency and Conservation Authority has a $219.5 million war chest—in the form of the State Sector Decarbonisation Fund—to swap fossil-fuelled boilers in hospitals, schools and tertiary institutions for biomass boilers and heat pumps.

Each and every bulk carrier requires 875 trucks to offload it, each truck carting 40 tonnes of coal down the line to Huntly—about 100,000 return trips a year, and a lot of carbon in order to burn more carbon.

The Government Investment in Decarbonising Industry Fund offers similar incentives to the private sector. So far, it’s paid out $56 million to 39 businesses—overwhelmingly freezing works and other food producers—to partially fund initiatives that will cut their reliance on fossil fuels. The fund is meant to remove the biggest, dirtiest boilers before 2026. But while some companies are using the money to mothball coal boilers, still more are getting out of natural gas and into electricity, in plain expectation of more gas shortages and price spikes.

For all this, our own Climate Change Commission reported last year that Aotearoa looks set to miss its Paris Agreement goals and, by extension, its net zero carbon by 2050 target. We need a game changer.

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Imagine lives, economies—civilisation—powered by the most abundant molecule in the universe; one that, measure for measure, holds three times as much energy as petroleum and, once burned, combines with oxygen to become water. It’s hydrogen, and advocates say it could fuel our furnaces, our cars and trucks, maybe even our planes. Collectively, those sectors are the toughest decarbonisation nuts to crack, which is why the European Union, Japan, South Korea, China, Singapore, the United States and Australia have all signalled plans to switch to hydrogen economies by various years between 2035 and 2060.

Hydrogen is harvested by splitting water into oxygen and hydrogen molecules, a process called electrolysis. Those hydrogen molecules are then fed into a fuel cell, through a positively charged electrode called an anode, where a catalyst splits them into electrons and protons. The hydrogen electrons get forced through a circuit, generating an electric current and excess heat. Once they’ve done their job, the electrons are reunited with their protons at the fuel cell’s negatively charged cathode, where the hydrogen atoms recombine with oxygen to create a fuel cell’s only emission: water.

Fuel cells don’t rely on combustion—call it, rather, an electro-chemical reaction—so they’re silent, and there are no moving parts to break.

They don’t need recharging; just a constant supply of H2 molecules. You could fit a fuel cell, say developers, into a hatchback or a house, an apartment or an aeroplane. Airbus says it will have a hydrogen-powered prototype ready by 2035.

Global producers already make about 70 million tonnes of hydrogen a year, mainly for synthetic fertiliser and methanol production. But hydrogen is overwhelmingly made by burning gas—called grey hydrogen when emissions go unchecked, or blue hydrogen if the emissions are captured and stored. Aotearoa’s energy future—and maybe its economy—rests instead, says Hiringa Energy’s chief executive, Andrew Clennett, on green hydrogen, made with uniquely abundant renewable resources that might just give us a competitive edge on global markets.

Late last year, Hiringa and Ballance Agri-Nutrients secured a resource consent to erect four wind turbines in South Taranaki. These will send electricity to Ballance’s ammonia plant at Kapuni, which currently produces a third of the country’s urea fertiliser by burning natural gas. Hiringa means to use that electricity to extract hydrogen, some of which Ballance will use to make zero-emissions fertiliser.

The rest might just kick-start our hydrogen economy. Clennett says the Kapuni plant could generate two tonnes of green hydrogen a day; that’s enough to power 6000 cars or 50 heavy vehicles. “Hydrogen needs scale, and quickly, in order for it to have the impact that we need by 2050,” he says.

To achieve that scale, Clennett looks for hydrogen ecosystems. “A dairy factory, for instance, might produce hydrogen for its truck fleet, but it could also put some of that hydrogen into process heat. The hydrogen price of those applications will be different, depending on the fossil fuel it’s replacing, so you end up with a blended price, and that can stack up.

“You could take it further and put a wind farm next to that dairy factory, which can feed the electrical demand of that plant or charge your EVs, and produce hydrogen, which can augment your process-heat demand. That’s how you create decentralised industrial ecosystems.”

At Lyttelton Port, the Derby awaits a consignment of West Coast coal, bound for Japan. New Zealand exports around 1.2 million tonnes of coal a year, mostly to steelmakers who pay a premium for its relative purity. Burning coal only accounts for some of its emissions: fossil fuels dug this shipload from the ground, transported it to a railhead, and powered the locomotives that hauled it across the Main Divide. The Derby will burn heavy fuel to carry it across the Pacific.

Hiringa is also a partner in Venture Taranaki’s H2 Roadmap, a proposed hydrogen industry built on the region’s existing energy infrastructure and offering 150 jobs to energy workers displaced by the government’s decision to stop issuing permits for  oil and gas exploration. The plan is for offshore wind farms and tide turbines to generate electricity, which will in turn power hydrogen production plants on old gas-drilling platforms or facilities ashore. Hydrogen gas is then piped to myriad applications: Venture suggests, for instance, hydrogen-powered wastewater and sewage treatment plants, hospitals with backup hydrogen power cells, civic buildings with hydrogen power and heating. Taranaki Regional Council says it’ll trial hydrogen fuel-cell buses next year.

New Plymouth-based Firstgas Group is the country’s biggest gas supplier, and already operates around 2500 kilometres of pipes. It says that network could be converted to carry hydrogen—perhaps at a mix of 80 per cent gas and 20 per cent hydrogen at first, so that consumers could use existing boilers and appliances without having to modify them. Trials are set for later in 2022, and Firstgas says it has a plan to get to 100 per cent hydrogen by 2050, a shift that could cut non-transport energy emissions by a quarter. (By that time, the company expects the North Island will need at least 15 hydrogen plants.)

But the government is looking to send green hydrogen still further afield. Right now, 98 per cent of global hydrogen is made with fossil fuels, releasing some 830 million tonnes of carbon dioxide a year. But as gas supplies are further squeezed, the production costs of grey and blue hydrogen are set to skyrocket. Add the spectre of meaningful carbon charges on those emissions (see sidebar) and it becomes clear that the only affordable option is to go green.

But many countries don’t have the renewable generation resources—hydro, wind, sun, tides, geothermal—that Aotearoa enjoys in spades, and that, says the government, is our ace in the hole: it may yet prove cheaper for those countries to simply buy their green hydrogen from us.

A government green paper, ‘A Vision for Hydrogen in New Zealand’, points out that Japan, which is forced to import nearly 90 per cent of its energy, expects to buy 300,000 tonnes of green hydrogen a year by 2030, “ramping up to five to ten million tonnes as the country transitions towards a decarbonised… energy system”.

The H2 Taranaki Roadmap coincidentally allocates exactly 300,000 tonnes of hydrogen for export—nearly 40 per cent of annual production. In 2018, Aotearoa and Japan signed a hydrogen co-operation agreement, and since then Japanese corporations have been lining up to co-invest with companies here, like Hiringa (Mitsui) and the Tuaropaki Trust’s Halcyon Power at Taupō (Obayashi Corporation).

The International Energy Agency estimates New Zealand could be producing 700,000 tonnes of green hydrogen by 2030, and exporting some 40 per cent of it. The rest could help decarbonise our single-biggest burner of coal.

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“We spend a lot of time worrying about Huntly,” says Chris Bumby, “but we’re missing the elephant in the room. Glenbrook Steel Mill is by far and away our biggest industrial emitter.”

Bumby, principal scientist at Wellington’s Robinson Research Institute, points out that humanity has relied on the same chemical equation to make iron and steel for 2000 years: superheating iron oxide by burning carbon-rich fuel like coal. Oxygen in the ore reacts with the coal to produce a molten alloy called pig iron and an awful lot of carbon dioxide—1.8 tonnes per tonne of steel. In 2018, Glenbrook pumped out around 1.7 million tonnes of carbon dioxide—more than half of all industrial emissions, and nearly five per cent of New Zealand’s total emissions.

Bumby says we could be making high-quality steel with hydrogen instead. And to prove it, he built a 1000ºC hydrogen reactor at the Gracefield campus to simulate a carbon-free steel-making process. “It all works fine,” he says. “There’s only a handful of people around the world who’ve done this.”

Chris Bumby, principal scientist at Wellington’s Robinson Research Institute, is finding a way to make steel using hydrogen, rather than coal, to power the chemical reaction it needs. Coal-fired steelmaking is responsible for a quarter of the world’s carbon dioxide emissions—hydrogen emits only water vapour, and produces better steel to boot.

That’s partly because Aotearoa is one of very few countries to make steel out of titanium-rich ironsand, which is a very different chemical proposition from the norm. “The titanium content makes the slag impossible to handle in a normal blast furnace, which is why the story of New Zealand steel-making began with a century of failure.”

But in the 1960s, metallurgists cracked the problem with a world-leading process called direct reduced iron (DRI). It uses carbon monoxide to remove the oxygen from iron ore, rendering metallic iron without having to melt it. No slag; no titanium problem.

Bumby points out that hydrogen could also do that job. Other countries have been working on hydrogen DRI technology for a while—a Swedish joint venture delivered its first fossil-free steel to carmaker Volvo for trials in 2021, and means to achieve industrial scale by 2026. Bumby’s process is uniquely Kiwi: a “fluidised bed” in which ironsand “is basically bounced up and down, while we pump hydrogen gas through it”.

The resulting pig iron is a quality product, says Bumby. “If you burn a lump of coal, however hard you try, there’s always going to be a bit of sulphur and random bits of rock that will come out in the steel. Even the best coal-derived iron has at least four per cent carbon left in it, which has to be cleaned up in a secondary process.” But when hydrogen’s been made by electrolysis, he says, “it doesn’t have a lot else in it”. That gives him iron of very high purity—99.98 per cent—in a single step

And because hydrogen is a gas, “it gets to all of the surfaces available on every grain of sand”, which delivers another bonus: “It’s so fast.” Bumby’s process takes 20 minutes. A conventional coal-fired process takes more than 10 hours.

It sounds like a rock-solid business case, but making a kilo of carbon-free iron in a lab is one thing; matching New Zealand Steel’s 1700 tonnes a day is quite another.

“We have an external furnace heating our reaction, which works fine for small quantities, but as we scale up, the amount of heat we’ll need would melt the walls of the reactor,” says Bumby.

And hydrogen’s biggest plus is, perversely, another hurdle. Its only by-product is water, which in a reactor “generates a heck of a lot of steam”, and that affects the reaction. “So we’re using hydrogen to perform a chemical reaction with iron oxide instead,” says Bumby, “but that reaction only begins once you get the temperature up towards 1000°C, so you need to heat the reactor.” Traditional steel-making burns coal to do that, and it reduces the iron ore as it does so. “But in an H2-DRI reactor you need a separate electrical source of heat.”

Kerry Silverwood helps himself to an exposed coal measure near Waimangaroa, north of Westport. “He’s been doing this for about 35 years,” says his son, Neil, who photographed this feature. “One trailer load lasts him about six months. It’s his only source of heat and it also heats his hot water. I think it’s about self-reliance.”

And right about here, the business case for hydrogen starts to shake. It takes a lot of electricity to make green hydrogen, and if you buy electricity from the grid rather than generating your own, you simply can’t turn a buck.

“We already have to spend a lot of money to compete with fossil fuels,” says Hiringa’s Clennett. “So we can’t just buy power from the grid—that makes it too expensive.” The government’s hydrogen paper points out that cradle-to-grave costs of hydrogen infrastructure compare favourably with fossil fuels, but that’s cold comfort to investors who can’t afford the cradle.

You have a lot of choices, but let’s compare thermal coal and residual biomass. You won’t need much coal—half a wheelbarrow will do—and it won’t cost much, less than $8 delivered, but it will emit some 100 kilograms of CO2-equivalent gases when burned. Burning residual biomass is a bit like collecting firewood—you’ll need seven times the volume of fuel to make a gigajoule of energy, but because it’s already rotting on the ground, the only emissions is in the freight and processing, less than one per cent of the emissions of coal. The drawback is the cost. Forestry slash costs about $12 per gigajoule because there isn’t a market for it, yet—forestry workers are paid for tonnes of timber on the truck, not for the slash left on the ground.

The International Energy Agency predicts that hydrogen costs may fall by as much as a third before 2030, thanks to renewables’ ever-improving bottom line, but that assumes renewables are getting built in the first place, and in New Zealand, the sector continues to wallow. Every two years since 2013, accounting firm EY (formerly Ernst & Young) has published its Renewable Energy Country Attractiveness Index ranking 40 nations in order of their policy and incentive support for renewables. New Zealand has mostly languished near the bottom, in the company of Kenya and Kazakhstan—until in 2021, when it was knocked off the chart by Indonesia.

“Anything that relies on power from the current New Zealand electricity market is going to be substantially more expensive than coal,” says Bumby.

A hydrogen-powered Glenbrook, he adds, would need around 25,000 tonnes of the gas yearly, and that would demand a bank of electrolysers with some 140 megawatts of capacity—the same as Mercury Energy’s Rotokawa II/Ngā Awa Pūrua station near Taupō, the country’s third-largest geothermal plant. And, according to Fonterra, which burns coal at nine of its 29 dairy plants, the fossil fuel is 3.25 times cheaper than electricity as a source of process heat. The dairy giant says converting to electricity at scale would cripple its bottom line.


If the government is serious about decarbonising the energy sector, it would intervene, says Bumby. He’d like to see it stop charging for use of the transmission network, which is state-owned; if innovators had to meet only the cost of generation, and not transmission, hydrogen steel-making “looks entirely doable”, he says.

He also wants to see the government do the heavy lifting of early adoption: “Nobody wants to buy the first hydrogen furnace—there’s a humongous amount of technology risk, because no one’s done this before—so there’s a really important role for government here, and we’re starting to see that around the world. The HYBRIT [green hydrogen project] in Sweden received well over $100 million from the Swedish government because it’s an important industry for them—they make the world’s ball bearings. That’s the sort of money you have to spend to build a full-sized plant to demonstrate that it’s going to work. Once you build one, the next one has less risk, and the next has less risk again.”

Hydrogen steel-making, for instance, would likely have to go through “at least two, if not three” levels of pilot-scale projects, says Bumby. “There is absolutely no way our industry can support that. Steel-makers are not technology-development companies.”

To that end, the government has dipped a toe in the water. It put $6.5 million into Bumby’s hydrogen DRI research, and has what Clennett calls a “nominal shareholding” in Hiringa’s Kapuni project. It has also extended a loan towards the company’s hydrogen refuelling network for heavy transport.

In the end, though, it could be Vladimir Putin who pushes global energy markets into the deep end of the pool. In retribution for his invasion of Ukraine, the West is turning off the tap that kept its economies running on Russian oil and gas.

“We have been too dependent on Russia for our energy needs,” Frans Timmermans, European Commission Vice-President, recently told media. “Renewables give us the freedom to choose an energy source that is clean, cheap, reliable and ours.”

Timmermans leads the European Union’s Green Deal, a programme to make the EU the first climate-neutral continent by 2050. “Let’s dash into renewable energy at lightning speed. Putin’s war in Ukraine demonstrates the urgency of accelerating our clean energy transition.”

Here in Aotearoa, with gas, petrol and electricity prices convulsing, the Labour Government must surely be drawing the same conclusion.

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