Federal Government under internal pressure to scrap Renewable Energy Target costs for aluminium industry

More than a quarter of the Federal Government's lower house MPs have signed a petition calling for aluminium production to be exempt from the Renewable Energy Target.

Twenty-five Coalition backbenchers have signed the letter, which has been sent to Industry Minister Ian Macfarlane and Environment Minister Greg Hunt.

The target is designed to ensure Australia gets 20 per cent of its electricity from renewable sources by 2020.

Aluminium smelting already gets a partial exemption from RET costs but the petition calls for a full exemption from January 1 next year.

Victorian Liberal backbencher Dan Tehan is leading the charge and says the industry forecasts it will be paying up to $80 million a year in RET costs by 2017.

"They are concerned that there has been a smelter that has closed in the last two years, one which is scheduled to close this year," he said.

Norsk Hydro mothballed its Kurri Kurri smelter in New South Wales in 2012, and Alcoa is closing its Point Henry smelter in August.

Mr Tehan says aluminium smelting should be treated as a special case because it uses so much energy.

"The amount of electricity they use in production means that they stand alone when it comes to the cost that the RET imposes on them," he said.

He says the industry is also important for the stability of the electricity grid.

"For instance the smelter in Tasmania uses 25 per cent of the electricity in Tasmania, in Victoria it's roughly 10 per cent," he said.

Australia on track to reach RET: Origin Energy

Falling energy demand has some predicting Australia will well exceed the 2020 target.

Origin Energy quotes figures indicating Australia is on track for 27 per cent of its energy to come from renewable sources by then.

Mr Tehan says the aluminium industry has done modelling showing Australia could still meet the 2020 target, even if it was granted a 100 per cent exemption from RET costs.

A Government-commissioned review of the RET is due soon but crucial cross-bencher Clive Palmer has dealt a blow to anyone hoping it will lead to a lower target, saying he will not support changes until after the next election.

Mr Tehan says he is particularly concerned about the RET costs the industry faces because the Portland Aluminium smelter is in his electorate.

He says the smelter employs 725 people and accounts for about 10 per cent of the electricity used in Victoria.

Portland Aluminium is a joint venture managed by Alcoa.

The company has not indicated plans to close it or cut jobs but Mr Tehan says the industry as a whole is under pressure.

"With the dollar where it is, with the aluminium price where it is, there are pressures on the sector and if we're putting additional costs on the sector as well there is the potential for the industry to be hurt ... that's why I'm speaking out now," he said.

Other backbenchers who have signed the petition include Tasmanian Liberal MP Andrew Nikolic and Queensland Nationals MP Ken O'Dowd.