Major industries, hotels, hospitals and large schools in the central North Island should be seriously considering forest residues as an energy source, say forest owners.

In the wake of the rupture of the northern pipeline from the Maui gas field both the government and Fonterra are carrying out post-mortems on the security of energy supplies. Fonterra says it will be looking at all its options after 15 of its northern milk processing plants had to shut down because of the gas outage.

Forest Owners Association senior policy analyst Glen Mackie says vast quantities of forest residue, including branches, reject logs and stumps are available - a by-product of the normal forest harvesting cycle.

Some of this material is chipped by contractors for use as biofuel, mainly at timber and paper mills. But most of it is unused, because of limited demand.

Mr Mackie says wood chip is an environmentally sustainable, carbon-neutral fuel that will be available in increasing volumes as new forests planted in the 1990s come into production.

However, it is seldom economic to truck it more than 100 km from the source.

"For major users of natural gas inside this 100 km circle, wood chip is the answer if you are looking at energy security. While it is marginally more expensive per kilojoule than coal or natural gas, it is more than competitive with LPG and diesel," he says.

"Relying on rapidly depleting gas fields isn't strategic, and using a non-renewable resource to process the sustainable products from our farms doesn't fit with New Zealand's clean, green brand. The use of wood chips in place of fossil fuels will also reduce New Zealand's Kyoto liabilities."

At present, the burning of wood chips involves conventional boiler technology. However, wood gasification is just round the corner.

EECA (the Energy Efficiency and Conservation Authority), Waiariki Institute of Technology and Wellington company Windsor Engineering are working on a pilot plant in Rotorua, using technology developed in Norway. This involves burning wood in an atmosphere low in oxygen to generate syngas, a mixture of hydrogen and carbon monoxide.

The objective is to develop a highly automated process for generating syngas so that it can be used as a direct substitute or back-up for fossil gas from the Maui field in existing industrial heat plants and boilers. Although gasification is not a new technology, until now the fuelling process has not been automated.

Wood gasification allows biofuels with higher moisture and ash content to be burnt, with no smoke and minimal residues. It is also more efficient, burning less fuel for a given thermal output.