Aluminum smelters typically sign long-term contracts with utilities that lock in the price of electricity the companies pay over years or decades. In Australia, those contracts are coming to an end, and as manufacturers look to sign new deals, they’re finding themselves in a dramatically different energy market, Johnson said.
Today, three of Australia’s smelters get most of their electricity from coal-fired power plants: Rio Tinto’s Boyne Island facility in Queensland, Alcoa’s Portland plant in Victoria, and Tomago Aluminium’s smelter in New South Wales. Only Rio Tinto’s Bell Bay smelter in Tasmania runs predominantly on hydropower.
Coal power is steadily declining in Australia as renewables surge, owing primarily to market forces. About 90% of the aging coal fleet will likely be gone by 2035, and the rest could shutter later that decade, the head of the Australian Energy Market Operator, which oversees the nation’s power markets, recently told Canary Media’s Julian Spector. (Australia banned nuclear energy decades ago, so it’s not an option.)
For now, coal still accounts for 46% of Australia’s annual electricity production, according to the International Energy Agency. Renewables contribute about 35%, though existing projects aren’t necessarily located near smelters that need them.
Rio Tinto, which owns a majority share of Tomago Aluminium, warned in late October that the smelter is bracing for a potential shutdown by the end of 2028 owing to the soaring costs of both “coal-fired and renewable energy options from January 2029” that would make the facility’s operations commercially unviable. Tomago is the country’s largest smelter, accounting for about 40% of Australia’s annual aluminum production.
“There is significant uncertainty about when renewable projects will be available at the scale we need,” Jérôme Dozol, CEO of Tomago Aluminium, said in an Oct. 28 statement.
Johnson said Tomago’s troubles point to the broader limitations of initiatives like the GAPC. While the production credit can reduce power costs for smelters, other measures are needed to support the buildout of not just wind, solar, and battery storage but also transmission lines and grid infrastructure that connect the resources to the energy-gobbling smelters.
The Australian Aluminium Council is also advocating for energy policies that reward smelters for the benefits they are able to provide to the grid. For example, smelters can rapidly reduce their power consumption for about an hour at a time to help stabilize the system during emergencies. Alcoa is participating in such a demand-response program in Australia, as is Rio Tinto’s Tiwai Point smelter in New Zealand. Aluminum plants can also be an important source of demand for solar power plants in particular, since factories use plenty of power during the day when households generally consume less.
“We’re doing a lot of work here in Australia, in terms of the energy transition and how all these pieces of the puzzle need to fit together,” Johnson said.
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Great Job Maria Gallucci & the Team @ Canary Media Source link for sharing this story.
