Aluminium sector gives tick to RET exemption

The aluminium industry has backed a plan by the renewables sector that would see smelters ­exempted from the ­Renewable Energy Target, a move seen as an attempt to inject some momentum into talks between the government and Labor.

In a letter to Industry Minister Ian Macfarlane and Environment Minister Greg Hunt, Australian Aluminium Council executive director Miles Prosser said the Clean Energy Council’s support for an exemption — ­combined with the benefits that would flow to other electricity users through the price-suppressing ­effect of the RET — provided a sound basis for a deal.

The Australian understands industry groups are pushing both the government and Labor for a deal on the RET.

Some are urging Labor to agree to cuts to the large-scale ­renewable energy target of 41,000GWh while at the same time urging the government to give ground and agree to a target above 31,000GWh, which would be above its preferred position of a so-called true 20 per cent by 2020 target.

However, the Clean Energy Council argues aluminium can be exempted from the RET at minimal cost to consumers.

In the letter to the government, Mr Prosser said while electricity demand continued to decline, investment in new renewable electricity generation would act to drive down the wholesale electricity price.

However, the aluminium industry does not benefit from this because, unlike other consumers, aluminium smelters purchase electricity through long-term contracts with specific generators and do not link directly to wholesale prices in the national electricity market.

“As a result, aluminium smelting is exposed to the direct costs of the RET scheme, but does not receive any potential benefit from the RET driving down wholesale prices,’’ Mr Prosser said.

Clean Energy Council acting chief executive Kane Thornton said it supported increasing the exemption for aluminium smelting from the RET, if such a proposal contributed to restoring bipartisan political support for the RET policy.

“Such a change would have a very low cost for other electricity consumers, adding between $2 and $4.50 per year to power bills for the average household,’’ Mr Thornton said.