Last year, research from IEEFA highlighted that electrification could significantly reduce energy use in industrial processes using commercially available heat pump technology. However, adoption in Australia remains slow, with very few industrial heat pumps (IHPs) deployed. In contrast, New Zealand is leading the way, with around 25% of its IHP potential already captured.
New Zealand’s Energy Efficiency & Conservation Authority (EECA) has reported notable reductions in fossil fuel use in the food & beverage sector. Between 2019 and 2022, coal use decreased by 12%, gas use by 21%, and electricity consumption increased by 7%.
Comprehensive Approach to Success
New Zealand’s success stems from a well-structured approach. The government began supporting IHPs in 2013 via the Technology Demonstration Fund, initially targeting lower temperature applications (60°C) before expanding to higher temperatures (80-90°C) by 2018. The program provides 50% co-funding, with up to NZ$500,000 (~AU$450,000) available per project.
The Government Investment in Decarbonising Industry (GIDI) fund followed, providing 35% co-funding across 83 projects, with 26-30 involving IHPs and receiving NZ$40-45 million in support. This funding improved project paybacks, making them more viable for businesses.
Beyond financial support, the government engaged international experts, partnered with universities, and provided training and site visits. Dedicated account managers worked with top energy users to develop a robust pipeline of projects.
The Energy Transition Accelerator further supports businesses with up to 40% and NZ$35,000 in co-funding for emissions reduction assessments. Additionally, the government created a detailed Energy End Use Database and a Regional Heat Demand Database to map industrial energy consumption, providing crucial data for planning.
Financially Attractive and Practical Applications
IHPs are particularly valuable for processes that require both heating and cooling, such as in the meat industry, which accounted for over half of the supported projects. Other sectors benefiting include dairy manufacturing, food processing, and textiles.
Beyond energy cost savings, IHPs offer operational advantages. They are easier to manage than fossil fuel boilers, eliminating costs related to ash disposal and fuel handling while requiring less supervision. Some projects improved resilience by allowing businesses to switch between IHPs and traditional boilers as needed.
Integration need not be complex; IHPs can preheat water for existing boilers, reducing fossil fuel consumption without major system redesigns.
Electricity Network Capacity Considerations
A key challenge is electricity network capacity. In Australia, Essential Energy is piloting dynamic connection agreements, enabling businesses to use available capacity flexibly. This approach could provide greater access to electricity while mitigating peak demand constraints.
Catalysing a New Industry
New Zealand’s government programs fostered a thriving IHP industry. Refrigeration companies, leveraging their existing expertise, became primary IHP suppliers. Initial projects were bespoke, but as adoption increased, standardised solutions emerged, including containerised IHPs for easier deployment. Even after the GIDI program ended, IHP adoption continued without government support.
Lessons for Australia
Australia can learn from New Zealand’s success and leverage its expertise to accelerate IHP adoption. Given looming gas shortages on Australia’s east coast, now is the time to invest in industrial electrification solutions.