Published 22-03-2021
| Article appears in April 2021 Issue

Victorian smelter given five-year reprieve, saving 500 jobs and stabilising power grid

22-03-2021
smelter worker

The Federal Government has thrown a lifeline to Alcoa’s aluminium smelter in Portland, Victoria, announcing that it will stay open until 2026, saving 500 jobs, following an agreement with energy retailers. The smelter accounts for 14 percent of jobs in the area.

The Government will provide up to $76.8 million over four years to secure Portland’s participation in the Reliability and Emergency Reserve Trader (RERT) scheme and help Victoria keep the lights on at times of peak demand. The Portland smelter, the state’s largest energy consumer, will reduce its energy demand at peak times, making more electricity available to the grid. Alcoa will be compensated.

The agreement will help strengthen the Victorian electricity grid, which has been subjected to increased fragility following the exit of the Hazelwood coal-fired plant in 2017 and the rapid uptake of intermittent renewables.

National employer organisation Ai Group welcomed the news but said longer-term reform was needed. 

 “The deals with the Federal Government, the Victorian Government, and several energy businesses to extend the life of the Portland smelter by five years will ease the fears of businesses and workers not just in Portland, but in supply chains that extend across the state and beyond,” said chief executive Innes Willox. 

“There is never a good time for a major industrial closure. But with Australia’s recovery from the pandemic recession still taking root this would be the worst of times. The pandemic has also brought greater consciousness of the need for economic resilience, including both trusted international supply chains and the capacity to make core products within Australia. A functional industrial base has a value well beyond its share of GDP. Losing more of our aluminium output would not only have consequences for exports, but also for the security of supply chains for many other products.

“Aluminium is important to our economy and way of life. But so are steel, glass, bricks and many other energy-intensive materials and products. The challenges facing Portland are not unique: ageing facilities, fading of the old coal and gas advantage and relatively high emissions make it hard to attract investment in a market awash with competitors.

“The five years’ breathing space this deal buys can’t be wasted.

“Power prices are down for now as cheap renewables boom, but prices could easily sawtooth from slump to surge if the accelerating closures of old coal generators aren’t managed well. Gas prices are rebounding from last year’s lows, and alternatives like hydrogen will need much more deployment to become affordable. Upgrading and expanding industry to become low, zero, or negative-emissions needs ambitious and investment-grade policy.

“If we don’t solve these problems, government rescues will not be able to hold back the tide of closures.

“Governments, regulators and industry need to redouble our efforts to build a new energy advantage for a net zero emissions world. Reforming our energy markets and getting our climate policies right can secure not just the survival of our energy intensive industries, but strong, secure and sustainable growth,” Mr Willox said.

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