Rio Tinto is moving to transfer its other mainland aluminium smelter – the Boyne plant near Gladstone in Queensland – to renewable energy sources. It has struck four agreements contracting enough wind, solar, and battery storage projects to meet 80 per cent of the smelter’s average electricity demand. The company has also been weighing longer-term renewable energy options for the Tomago smelter, but it has been unable to find enough renewable energy supplies in NSW that could supply sufficient power around the clock.
On Tuesday, Dozol said energy costs were 40 per cent of the smelter’s expenses, and it needed an internationally competitive price to remain commercially viable.
However, he said there was significant uncertainty about when enough renewable projects would be available “at the scale we need”.
“We are facing a huge bridge between the end of this contract and when available new renewable energy will come online,” he said.
Speaking in Canberra, Ayres said the government was working on an assistance package aimed at subsidising the smelter’s power bills, and viewed a 50:50 funding split with the NSW government as “about right”.
“I’m very focused … on exhausting every opportunity to secure new power purchasing agreements for that facility,” he said.
The government promised at the 2022 election that its pledge to boost renewable energy to 82 per cent of the grid by 2030 would result in a cut of $275 from residential power bills by the end of its first term, in 2025.
Power bills have instead risen across the eastern seaboard, and by up to $700 in regional NSW.
If a taxpayer-funded support deal for Tomago is reached, it will mark the fourth time the Albanese government has intervened to prop up a struggling metals processor this year, after it contributed to bailouts of Glencore’s Queensland copper smelter and refinery earlier this month, Nyrstar’s smelters in Port Pirie and Hobart in August, and the collapsed Whyalla steelworks in February.
The opposition targeted the government’s energy policy in parliament on Tuesday, blaming its goal to boost renewables for rising energy prices and claiming it had broken its promise to revive local manufacturing.
Opposition energy spokesman Dan Tehan said: “This reckless pursuit of 82 per cent renewables by 2030 is not working. It’s driving energy prices up.”
Processing alumina into aluminium is extremely energy-intensive, and Tomago is the single biggest electricity consumer on Australia’s eastern seaboard, meaning its closure would have far-reaching consequences for the electrical grid.
The energy market operator relies on its ability to call on Tomago and other large electricity users to power down during periods of elevated demand, such as heatwaves, to free up greater supplies for households and prevent blackouts and price spikes.
However, University of NSW senior researcher Dylan McConnell said Tomago’s closure would also create an oversupply in the electricity market that could lead to lower power bills.
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“It’s a huge contributor to the demand in the state, so you would expect that would put downwards pressure on electricity prices,” McConnell said.
Tomago Aluminium produces up to 590,000 tonnes a year of the metal, which is used to manufacture construction materials, cars, drink cans, foil packaging and electrical products. Aluminium is also increasingly in demand in the construction of solar panels and wind turbines.
The Tomago smelter contributes about $2.2 billion a year to the Australian economy, of which $800 million is spent locally. The site supports about 3000 direct and indirect jobs in the Hunter region.
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