Power firms saving billions by swapping copper for aluminium

Manufacturers in the electricals segment are abandoning copper for its lighter and cheaper rival aluminium after a decade of technological innovation that is saving some companies hundreds of millions of dollars. Sapa, a supplier of aluminium components, said it has seen a pickup in demand.

Developments in aluminium wiring that compensate for lower conductivity and less flexibility, new ways to stop corrosion and more efficient conductors, mean there is more scope to replace copper in power grid cables, auto wiring, air conditioning and refrigeration systems.

Saudi Electricity Co. said it has already saved 2.4 billion riyals ($640.09 million) by shifting from copper to aluminium in its medium voltage distribution network.

“We started more than a year ago and we plan to continue,” said SEC’s Chief Executive Ziyad Alshiha.

A push for innovation to overcome the obstacles to substituting the two metals gathered speed in 2011 when copper prices spiked to $10,000 a tonne while aluminium, suffering from a supply glut, was $2,525. The price gap has more than halved, but aluminium is still around $3,400 cheaper than its rival.

"Ten years of high (copper) prices incentivized many players involved throughout the supply chain to invest in the R&D and make more substitution possible," said analyst Patrick Jones at Nomura in London. “Now we're starting to see some results on this front."

Power grids, Car wires

The biggest potential for switching from copper is in the power sector, where aluminium is already widely used in overhead high-voltage cables from power stations but is now attractive for wiring branching off from substations.

Japan's Kansai Electric Power last year began replacing 50-year-old copper distribution cabling in Osaka prefecture with aluminium. A spokesman said its plans to replace some 140,000 km of copper cabling over 30 years would save tens of billions of yen. Their new aluminium wires compensated for the downside of being thicker with a dimpled design that reduces wind pressure and helps repel snow meaning they can use existing electric poles and lower the risk of cables snapping, the spokesman said.

Air conditioning and refrigeration is another area of competition for the two metals. Sapa supplies aluminium components to air conditioner makers and said in a presentation it expects sales growth after improvements in aluminium tubing made them more competitive as a replacement for copper tubes.