Tomago Aluminium, Australia’s biggest aluminium smelter and energy user, is to transition from coal fired power to a new supply of firmed renewables after federal and state governments agreed on a $2.5 billion package to help it secure long term wind and solar contracts.
The smelter, which employs more than 1,000 people around Newcastle, and supports a further 5,000 indirect jobs, was facing possible closure because of the impending expiry of its long term and subsidised coal fired power supply deal with AGL’s coal generators.
As the country’s biggest electricity user, Tomago has a near constant load of around 950 megawatts, and it will require some 3,000 MW of new solar and wind capacity, firmed by storage and possibly peaking generators to continue operations and meet international demand for low carbon products
But the smelter’s joint owner, Rio Tinto, had said the increase from its historically low electricity cost – regardless if it was a new coal contract or a switch to renewables – was too much for it to bear, and the facility would need to close without government support.
The $2.5 billion “bailout” – as it is being described by most media – will be provided in equal portions by the federal and state governments and will reduce the cost of the power supply by around $35/MWh, meeting the difference between the asking price of new renewables and what Rio Tinto is prepared to pay to keep Tomago open.
