Fonterra is moving away from coal in one of its biggest factories.

The company has burned coal at all 10 of its dehydration plants across New Zealand for decades.

"Fonterra on average uses over 500,000 tonnes of coal per year" said Fonterra's sustainable energy manager Linda Thompson.

The company is the second-largest user after NZ Steel.

But rather than shying away from it Fonterra's spending $11 million to turn its sixth-largest site - at Te Awamutu - from a coal burner to burning wood pellets.

"This will be one of the largest conversions of a coal boiler to using wood pellets in New Zealand," said Thompson.

Ending the use of coal at the Te Awamutu plant will reduce its carbon footprint by about 84,000 tonnes a year. That's the equivalent of taking about 32,000 cars off of New Zealand's roads.