Power-supply talks underway for two new smelters
Century Aluminum and Emirates Global Aluminium both say their new smelters will mark a new beginning for the U.S. primary-aluminum sector. The two facilities would together nearly triple the nation’s primary-aluminum capacity when they come online, potentially around 2030.
Century Aluminum first unveiled plans for its smelter in March 2024, after the Biden-era Department of Energy launched a $6 billion initiative to modernize and decarbonize America’s industrial base. As part of the award process, Century said its Green Aluminum Smelter could run on 100% renewable or nuclear energy and would use energy-efficient designs, making it 75% less carbon-intensive than traditional smelters.
At the time, the Chicago-based manufacturer identified northeastern Kentucky as its preferred location for the smelter, though the company was also evaluating sites in the Ohio and Mississippi river basins. More than a year later, Century still hasn’t picked a final project site for the $5 billion smelter — because it hasn’t yet locked down its power supply.
Electricity isn’t available at the fixed long-term price that smelters need to ensure profitability and pay back billions of dollars in construction costs, Matt Aboud, Century’s senior vice president of strategy and business development, said in May at a global aluminum summit in London, Reuters reported.
“We remain really excited about the project,” Jesse Gary, Century’s president and CEO, said on a May 7 earnings call. “The next two key milestones are to finalize negotiations of the power arrangements, and then following from that … we’ll be making a site selection.”
The Aluminum Association estimates that manufacturers would need a 20-year power contract at or below $40 per megawatt-hour to justify investing in a new smelter at today’s aluminum prices. Restarting the nation’s fleet of idled smelters, which represent 601,500 metric tons in primary capacity, would require a similar arrangement.
Currently, power-purchase agreements for U.S. renewable energy projects are in the range of $50 to $60 per MWh — a significant difference for these power-hungry facilities. Tech giants like Microsoft have signaled their willingness to pay north of $100 per MWh for electricity from nuclear and fossil-gas plants to fuel their data centers, giving those firms an advantage over price-sensitive buyers in the race for electricity.
Meanwhile, in Oklahoma, Emirates Global Aluminium is advancing its $4 billion smelter project with the promise of significant financial support from taxpayers and utility customers.
The Abu Dhabi-based conglomerate in May signed a nonbinding agreement to build the smelter with the office of Republican Gov. J. Kevin Stitt, a deal that includes over $275 million in incentives, including discounts for power. The manufacturer and governor’s office are working to establish a “special rate offer” from the Public Service Co. of Oklahoma — a subsidiary of utility giant AEP — for the new facility.
Simon Buerk, EGA’s senior vice president for corporate affairs, said that Oklahoma’s “energy abundance” was a key factor in selecting the state for the new aluminum smelter.
More than 40% of Oklahoma’s annual electricity generation comes from wind turbines spinning on open prairies, while about half the state’s generation comes from fossil-gas power plants. Last month, the Public Service Co. acquired an existing 795-MW gas plant just south of Tulsa to meet the rising energy needs of its customers, including potentially EGA.
Buerk said EGA and the utility are in “advanced negotiations” to finalize a competitive power contract. One option the groups are considering is a tariff structure that gives the smelter dedicated long-term access to a proportion of renewable energy, equal to 40% of the smelter’s needs. The smelter’s annual power mix “will be based on EGA’s decarbonisation objectives, market dynamics, and market demand for low-carbon aluminum,” he said by email.
Affordable, clean energy remains key to powering smelters
Outside the United States, nearly all primary aluminum smelters receive some form of government backing in the countries where they operate — typically by ensuring access to affordable energy, said Sartor of Industrious Labs.
She pointed to Canada, the largest supplier of U.S. aluminum imports. Smelters in Quebec draw from the region’s abundant hydropower resources, which are operated by the government-owned entity Hydro-Quebec. The price of electricity that producers pay is often tied to the price of aluminum on commodities markets, so that smelters pay less during lean times and more when the market recovers.
“The industry functions through government support all over the world, and we should be looking at those models and finding one that fits us here,” said Sartor.
Manufacturers and utilities can also structure power-supply agreements that enable smelters to benefit, rather than strain, the grid, said Anna Johnson, a senior researcher in the industry program at the American Council for an Energy-Efficient Economy.
“When we think about how to address the challenge of procuring large amounts of clean power, one of the first tools we think about is, what can we do on the demand side to mitigate that load and make sure that the demand of these facilities is avoiding times of peak stress?” she said.
In New Zealand, for example, Rio Tinto’s Tiwai Point smelter receives financial incentives to curb its electricity use — and therefore lower its aluminum production — during dry seasons, when hydropower resources can become critically low. In Australia, the aluminum giant Alcoa is participating in a program that turns one of its smelters into an emergency resource when the grid is overly stressed. The Australian government pays Alcoa to halt production on some of its aluminum-making potlines for about an hour at a time.
In the U.S., other types of industrial plants — including a titanium-melting plant in West Virginia — are using behind-the-meter solar power and battery storage systems, so that the facilities are primarily drawing from the electrical grid only during off-peak hours.
Strategies like these that reduce electricity rates are especially crucial now that the development of cheap, renewable energy is set to slow in the United States. But manufacturers will still need access to new carbon-free electricity sources in order to produce the cleaner aluminum that customers are increasingly demanding, Sartor said.
“When [companies] build a new facility, they’re building it for 50 or 100 years,” she said. Even as the Trump administration winds back the clock on U.S. climate action, smelters “need to find clean power as a matter of international competitiveness.”
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