Giant aluminium smelter puts its hand up for new coal-fired power

The giant Tomago aluminium smelter has put itself forward as a foundation customer for any low emissions coal-fired electricity generator to be built in the Hunter Valley as it warns continued power supply instability and rising prices threatens its future.

With the plant accounting for 12 per cent of NSW’s electricity consumption, a commitment from Tomago would help underwrite any new power plant.

Federal Energy Minister Josh Frydenberg and Resources Minister Matt Canavan have both floated ultra-supercritical coal-fired power stations as potential sol­utions to stabilise the energy grid and drive down emissions.

A question about the role for low-emissions coal technologies was also included in the national energy market security review being conducted by Chief Scientist Alan Finkel.

Market analysts question whether private interests would back a low-emissions coal plant that would need to operate for two or three decades and compete with rising levels of renewable energy and pressure to substantially reduce carbon emissions.

In his submission to the inquiry, Tomago Aluminium Company chief executive Matt Howell warns that rising electricity prices and increasing concerns about reliability of supply and uncertainty about carbon pricing policies risk the future of the plant.

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“It is important to note that the joint venture partners who own TAC have a wide range of other investment opportunities internationally and that if TAC begins to lose its international competitiveness, they will no longer invest in continuing improvement of TAC.

“This will result in the long-term decline and closure of the smelter with the consequent loss of jobs and economic benefit to Australia.’’

Electricity comprises about one-third of the input costs of the Tomago plant, but the Victorian blackout that cut supply to the Alcoa smelter at Portland and the resulting damage to the potlines has increased concerns at Tomago. As the state’s biggest electricity consumer, Tomago participates in “managed blackouts’’ for up to an hour at a time on each of its potlines to ease pressure on the rest of the state at times when electricity supplies are stretched.

It says its potlines can be offline for only a maximum of three hours at a time before the smelting load “freezes’’.A complete potline can take 12 months to repair and cost up to $100 million. The submission expresses concerns that rising rates of renew­ables increase the likelihood of blackouts. Tomago says there are very few bona fide large, time-sensitive loads in the NEM.

While hospitals could be considered time-sensitive loads, most modern facilities have backup generators on site to provide ­essential power.

“A backup supply to an aluminium smelter is a power station and on that basis, it is reasonable to expect that conventional thermal generation is maintained and available until such stage renew­ables and energy storage are commercially viable,’’ the submission says.

Tomago argues that the level of variable renewable energy should be curtailed in each region until new measures to ensure grid stability are implemented, particularly in regions where there are already high levels of renewable generation.

On the question of the role for low-emissions coal technologies, Mr Howell says: “This could be a significant and low cost contributor to achieving abatement in the electricity sector. However, these are high cost and long life investments and, consequently, require policy certainty.

“TAC would form an ideal foundation load for such a facility due to its reliable offtake and system security benefits.’’