Tomago Aluminium will be hit by the new carbon tax

It's hardly a household name but Tomago Aluminium is New South Wales' biggest power user. It needs the same amount of electricity as one million homes.

The Federal Government's new carbon tax will affect the company on two fronts: directly, as one of Australia's 500 biggest polluters, and indirectly because its thirst for electricity means it'll be hit hard by power price increases.

AM's Adam Harvey visited the company's site near Newcastle.

ADAM HARVEY: In a vast storage yard a few kilometres outside Newcastle, Tomago Aluminium's finished products sit like pieces of an oversized Lego kit - shiny ingots, hefty rectangular blocks bigger than fridges, and silver cylinders the size of tree trunks.

JOHN LEMBERG: These extrusion pellets get extruded out into shapes that might form yacht masts or window frames, ladders.

ADAM HARVEY: It's taken a lot of effort to get it to this point. Bauxite is mined in the Northern Territory and Queensland, it's refined in Gladstone and then Tomago takes over.

JOHN LEMBERG: Aluminium oxide is added, electricity is passed through that electrolyte, the reduction process occurs, separation of aluminium from the oxygen and the aluminium drops to the bottom of the cell.

ADAM HARVEY: All the action happens about 500 metres away. But as company CEO John Lemberg explains, if we go any closer there could be an unfortunate side effect.

JOHN LEMBERG: The critical thing about our pot lines, because of the high electrical concurrence in the area they generate high magnetic fields and your recording equipment might not be robust enough to survive a journey into the pot rooms Adam.

ADAM HARVEY: The process uses a vast amount of energy.

JOHN LEMBERG: Here we have a demand of 917 megawatts.

ADAM HARVEY: That's an annual demand, is it?

JOHN LEMBERG: That's an instantaneous (loud banging), instantaneous to, okay sorry about that, 917 megawatts.

ADAM HARVEY: So Tomago uses about the same power as one million homes.

JOHN LEMBERG: It's 10 per cent of New South Wales' demand.

ADAM HARVEY: So you use 10 per cent of the state's electricity.

JOHN LEMBERG: That's correct.

ADAM HARVEY: So you do have a big power bill.

JOHN LEMBERG: That's right (laughs).

ADAM HARVEY: Bet you can't tell me how much the power bill is?

JOHN LEMBERG: No, (laughs) it's, no, that's right.

ADAM HARVEY: That's a trade secret, unlike the problems of the aluminium industry.

JOHN LEMBERG: Aluminium is struggling at the moment, facing some very strong headwinds. In fact in Australian dollar terms we are experiencing aluminium prices that are lower at the moment than they were at the depths of the GFC (global financial crisis).

ADAM HARVEY: A rival aluminium company Norsk Hydro has already said it will close its Hunter Valley plant.

John Lemberg worries that the carbon tax will make things worse.

JOHN LEMBERG: Look, as I said we are happy to pay our part in terms of the challenges that face the globe in terms of climate change and control of emissions. But it's imperative that it's done fairly and recognising that we need to compete with others and other countries that are doing things quite differently.

The critical issue is not so much the design of the scheme per se - although that's obviously very important for its efficiency. But the critical issue is the international diplomacy that has to happen to ensure that sufficient members of our global community that emit carbon are aligned on the solution.

ADAM HARVEY: It has to start somewhere though and…

JOHN LEMBERG: Correct, it has to start somewhere. But it's a risky line to walk if that somewhere damages the competitiveness of industries like ours in Australia.

TONY EASTLEY: Tomago aluminium chief executive John Lemberg ending that report from Adam Harvey.