The Government is promising to introduce more certainty into the Southland wood energy market.
In an announcement last week , Energy and Resources Minister Simon Bridges said a ''renewable heat hub'' would be established in the province - a $1.5 million, three-year initiative designed to encourage the uptake of renewable energy, particularly by businesses.
Mr Bridges said business heat accounted for about 30% of New Zealand's energy use. About two-thirds was generated from fossil fuels.
''By encouraging businesses to switch to renewable energy sources, such as wood, to generate their heat, we can significantly reduce New Zealand's carbon emissions.''
Mr Bridges said Southland's forestry and wood processing industries generated 300,000 tonnes of wood waste each year.
''This wood waste could be cost-effectively used for industrial and commercial heat processes, but it is currently overlooked because of uncertainty in the market.
''Potential users are concerned about certainty of supply, and potential suppliers are unsure whether the demand justifies investment.''
The renewable heat hub would have the Energy Efficiency and Conservation Authority work with suppliers and users in Southland to overcome these barriers.
Mr Bridges' announcement was welcomed by Bioenergy Association of New Zealand chairman Rob Mallinson.
''There really is no better time to be considering the use of forest harvest and wood processing residues as a fuel for hospitals, institutional and industrial heat applications.
''The Government should be congratulated for their recognition that we can get additional value from wood.''
Mr Mallinson said 10-15% of wood was wasted.
His association wanted to see 25% of the country's energy supply coming from biomass and municipal organic waste by 2040, and it was considered such a strategy ''could contribute'' an additional $6 billion to the New Zealand economy.
Venture Southland enterprise and strategic projects group manager Stephen Canny said two good examples of businesses already using wood energy in Southland were McCallum Drycleaners and the Southland Aquatic Centre ''Splash Palace''.
''There are increasing numbers of interested parties - schools, hospitals, you name it. There's an increasing interest in switching to bioenergy.''
Mr Canny said how the money would be spent had not yet been finalised but it was likely to be used to investigate the feasibility of businesses switching to wood energy.
He said it was too early to comment on whether the money would be available as a subsidy.