Bell Bay Aluminium conundrum: Can Tasmania close the $60m power gap?

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The future of Bell Bay Aluminium smelter in Tasmania remains dependent on the outcome of negotiations over its electricity supply agreement. Federal Industry Minister of Australia Tim Ayres has stopped short of committing federal funding similar to the support extended to the Tomago aluminium smelter in New South Wales.

While Canberra has acknowledged the strategic importance of Bell Bay and its employment base, Ayres has stressed that the immediate priority is securing a commercially sustainable power agreement between Hydro Tasmania and Rio Tinto.

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Bell Bay faces a different challenge from Tomago

The federal government’s position on Bell Bay comes after the Australian and NSW governments agreed to share USD 2.5 billion over 10 years to secure the future of Rio Tinto’s Tomago aluminium smelter.

However, Ayres regarded the circumstances surrounding Bell Bay as different and that the key issue is the smelter’s power purchasing agreement with Hydro Tasmania.

“It is of course welcome news for Australia that the Tomago facility deal has been finalised,” Ayres stated, adding that the agreement would move Tomago away from unaffordable coal-fired electricity while backing investment in the electricity system.

For Bell Bay, he said, the focus should instead remain on determining a “sustainable pathway forward” for the facility.

Hydro Tasmania-Rio Tinto negotiations take centre stage

Unlike Tomago, Bell Bay sources its electricity from Hydro Tasmania, a publicly owned hydroelectricity provider. Ayres highlighted Tasmania’s renewable power advantage, noting that its electricity is generated from water stored in dams and has supported the state’s industrial base for decades.

He noted that the current negotiations are effectively between Hydro Tasmania and Rio Tinto, with the Tasmanian Government also central to the process.

“I’m encouraging and have been encouraging all the way through those negotiations to reach a conclusion in the interest of Tasmanian workers and Tasmanians generally,” Ayres said.

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The Tasmanian Government has publicly indicated an existential gap of around USD 60 million a year over 10 years between the electricity price Rio Tinto is prepared to accept and what Hydro Tasmania wants to receive.

When asked whether the Federal Government would contribute towards closing that gap, Ayres repeatedly directed attention back to the ongoing negotiations between Hydro Tasmania and Rio Tinto.

“Well, it’s a negotiation between Hydro Tas and Rio Tinto,” he said.

At the same time, he did not rule out possibilities of federal assistance.

Canberra keeps the door open, but no funding commitment yet

Ayres noted that the Federal Government would continue working with Tasmanian Premier Jeremy Rockliff and the state government, but stressed that “working together in the interests of Tasmania and Tasmanians” would be a solution, founded on cooperation between the two ends.

For now, therefore, no specific federal financial commitment to Bell Bay Aluminium has been confirmed in the interview. The immediate focus remains on whether Hydro Tasmania and Rio Tinto can reach an electricity agreement that provides a commercially viable future for the smelter.

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Bell Bay’s future remains tied to power metrics

Bell Bay Aluminium remains dependent on the outcome of the power negotiations. With the Tasmanian Government seeking to secure the smelter’s long-term presence and Canberra continuing to engage without announcing a funding package, the electricity contract remains the central issue.

Ayres summed up the Federal Government’s position by saying, “We will keep engaging with the Tasmanian Government and with the owners.”

For the Bell Bay Aluminium smelter workers and the wider Northern Tasmanian supply chain, the next key development will therefore be whether the parties can close the gap and establish a sustainable electricity arrangement for the smelter.

Source credit: https://www.abc.net.au/