Victoria’s aluminium smelter has received a $76.8m lifeline after the federal government stepped in to protect thousands of jobs while also shoring up the power grid.

The Herald Sun can reveal Alcoa will receive four years of guaranteed payments for its Portland smelter — which uses 10 per cent of the state’s electricity — to power down at times of peak demand.

The smelter can slow its operations over summer, freeing up extra electricity in the power grid to keep the lights on across Victoria.

Its reliance on baseload power is also crucial to maintaining the power demand needed to ensure the viability of Victoria’s coal-fired power stations.


Alcoa will receive four years of guaranteed payments for the Portland smelter. Picture: Jake Nowakowski

Alcoa welcomed the support, but with $200m in state subsidies and its electricity contracts running out next year, it remains in talks with the Victorian government and industry players for more help.

Federal Energy Minister Angus Taylor told the Herald Sun the new underwriting deal was “not a silver bullet” but would provide crucial emergency power reserves, with the smelter able to reduce its ­demand for up to three hours.

“It is three times larger than the largest battery in Australia and has been vital to avoiding blackouts in previous summers,” he said.

“The government will ­ensure Portland continues to play that important role and is appropriately compensated for the grid services it provides.”

The smelter produces a fifth of Australia’s aluminium and employs about 450 people in Portland and contributes an extra $100m to the local economy in supply contracts.

https://www.heraldsun.com.au/news/victoria/the-federal-government-has-protected-thousands-of-jobs-with-a-768m-lifeline-for-alcoa/news-story/f3a1aa95a7b61073c231f156917a99f5

So they're paying them to not make aluminum now because the fragile green-energy ruined grid can't handle it... hilarious. Alcoa will be laughing all the way to the bank.

Then again I guess $76,000,000 is nothing at all when you're borrowing five billion a week just to keep the country running.

So they're paying them to not make aluminum now because the fragile green-energy ruined grid can't handle it... hilarious. Alcoa will be laughing all the way to the bank.

Then again I guess $76,000,000 is nothing at all when you're borrowing five billion a week just to keep the country running.

It is hilarious that Alcoa has been paid to load shed since operations began. This is nothing new.

Where does the output from the plant go?

Is it domestic?

So they're paying them to not make aluminum now because the fragile green-energy ruined grid can't handle it... hilarious. Alcoa will be laughing all the way to the bank.

Then again I guess $76,000,000 is nothing at all when you're borrowing five billion a week just to keep the country running.

It is hilarious that Alcoa has been paid to load shed since operations began. This is nothing new.

This is quite standard in countries other than Australia. The concept is called Demand Response and is used extensively in the USA and a fair bit in Europe. When peak loads come in, consumers are paid to not consume electricity. Mostly you don't hear about it because it only applies to large consumers like smelters and office buildings. However, the consumer version has been running around a bit in Vic for about 5 years. SE Qld considered it for a while back around 2014-5, and NSW has played with the concept. Any time you hear of proposals (via smart meters) of turning off your home AC or fridge on hot days dynamically, that's the DR system kicking in.

Roughly speaking (based on US data, but very similar here in Oz), 48hrs of peak generation over the entire year is about 33% of the costs incurred by power generators. It's cheaper for them to pay consumers to not use power than to build/maintain/bring online peaking plants. This payment has absolutely nothing to do with keeping coal-based power plants running and everything to do with cost management.

Tomago smelter (NSW) has the same arrangement, it down loads during periods of peak load for financial compensation.

Bell Bay Smelter (Tas) has a financial arrangement with Bass Link that when ever Bass Link has a trip while importing power into Tasmania, a potline will trip immediately to ensure grid stability.

FYI - Aluminium potlines do not have any mechanical inertia, its purely electro-chemical process. Other parts of the smelter however do but are excluded and draw much lower levels of power.

When I was at Boyne Smelter (Qld), 2009, we were started to look at the option of deloading and increasing output to take advantage of the new at the time regulation for major customers to sell their contracted power into the grid.

The former Anglesey Smelter in Wales used to have a 0 load contract that at no notice for 1h the grid operate could deload for up to 1h one of the two potlines either separately or together, max so many hours a day and it was almost a daily event.

Trimet operates a number of smelters in the EU it bought off ALCOA and Rio Tinto that would have closed or had closed and they survive in their high cost markets including in Germany by increasing amperage during low power prices and dumping load during high power prices.

There are numerous other industries that do the same including in Australia, for example

Qmag (Rockhampton), used to buy power to run their 3 x 20MW furnaces based on the spot price and it up to the panel operator to make the call when to power on as they needed 8h to complete a run. They guys made a sport out of predicting the spot price. In the control room they had the power spot prices, power movements between the states and the BOM website all up on screems.

Additionally for decades most water pumping by Local Govt was done at night due to off-peak prices.

I know Don thinks this is madness but it makes economic sense and nothing to do with RE. The elternative is to build high cost power generation for short term peaks than can cost $100's or even $1000's / MW. For example a Gas Turbine sitting idle for weeks at a time or an old coal generator that is brought back on line for a hot weekend (was how it used to be managed). Or the likes of pumped hydro and the exact reason Tumut 3 and Wivenhoe Pump back stations were built.

Where does the output from the plant go?

Is it domestic?

Australia exports most of our Aluminium metal production

There are currently four aluminium smelters operating in Australia producing Australian primary aluminium metal. Production was 1.58 million tonnes in 2018, of which 1.45 Mt was exported. Australia is the world’s sixth largest producer.

That 1.45 Mtpa export is worth around US$ 3.5 B.

We used to export 2 Mtpa until Geelong and Kurri Kurri closed in the last 10 years.

Realistically Australia should be making over 10 Mtpa of aluminium metal (from 100% of the alumina we currently make) as most of the ingredients come from Australia including the coal and at times gas and are exported to be smelted off-shore.

Tomago smelter (NSW) has the same arrangement, it down loads during periods of peak load for financial compensation.

Bell Bay Smelter (Tas) has a financial arrangement with Bass Link that when ever Bass Link has a trip while importing power into Tasmania, a potline will trip immediately to ensure grid stability.

FYI - Aluminium potlines do not have any mechanical inertia, its purely electro-chemical process. Other parts of the smelter however do but are excluded and draw much lower levels of power.

When I was at Boyne Smelter (Qld), 2009, we were started to look at the option of deloading and increasing output to take advantage of the new at the time regulation for major customers to sell their contracted power into the grid.

The former Anglesey Smelter in Wales used to have a 0 load contract that at no notice for 1h the grid operate could deload for up to 1h one of the two potlines either separately or together, max so many hours a day and it was almost a daily event.

Trimet operates a number of smelters in the EU it bought off ALCOA and Rio Tinto that would have closed or had closed and they survive in their high cost markets including in Germany by increasing amperage during low power prices and dumping load during high power prices.

There are numerous other industries that do the same including in Australia, for example

Qmag (Rockhampton), used to buy power to run their 3 x 20MW furnaces based on the spot price and it up to the panel operator to make the call when to power on as they needed 8h to complete a run. They guys made a sport out of predicting the spot price. In the control room they had the power spot prices, power movements between the states and the BOM website all up on screems.

Additionally for decades most water pumping by Local Govt was done at night due to off-peak prices.

I know Don thinks this is madness but it makes economic sense and nothing to do with RE. The elternative is to build high cost power generation for short term peaks than can cost $100's or even $1000's / MW. For example a Gas Turbine sitting idle for weeks at a time or an old coal generator that is brought back on line for a hot weekend (was how it used to be managed). Or the likes of pumped hydro and the exact reason Tumut 3 and Wivenhoe Pump back stations were built.

Thankyou Shane for this post. It is good to see a post from someone that works in the industry and has knowledge on the practices.
Cheers
Big J

Where does the output from the plant go?

Is it domestic?

Australia exports most of our Aluminium metal production

There are currently four aluminium smelters operating in Australia producing Australian primary aluminium metal. Production was 1.58 million tonnes in 2018, of which 1.45 Mt was exported. Australia is the world’s sixth largest producer.

That 1.45 Mtpa export is worth around US$ 3.5 B.

We used to export 2 Mtpa until Geelong and Kurri Kurri closed in the last 10 years.

Realistically Australia should be making over 10 Mtpa of aluminium metal (from 100% of the alumina we currently make) as most of the ingredients come from Australia including the coal and at times gas and are exported to be smelted off-shore.

I agree.

Also, it is a shame that we do not attempt to do this with some of the other resources (Eg rare earths, magnesium) or try to retain what we already do without threat of closure (eg Copper, Nickel)

Where does the output from the plant go?

Is it domestic?

Australia exports most of our Aluminium metal production

There are currently four aluminium smelters operating in Australia producing Australian primary aluminium metal. Production was 1.58 million tonnes in 2018, of which 1.45 Mt was exported. Australia is the world’s sixth largest producer.

That 1.45 Mtpa export is worth around US$ 3.5 B.

We used to export 2 Mtpa until Geelong and Kurri Kurri closed in the last 10 years.

Realistically Australia should be making over 10 Mtpa of aluminium metal (from 100% of the alumina we currently make) as most of the ingredients come from Australia including the coal and at times gas and are exported to be smelted off-shore.

I agree.

Also, it is a shame that we do not attempt to do this with some of the other resources (Eg rare earths, magnesium) or try to retain what we already do without threat of closure (eg Copper, Nickel)

This would be a win-win. Create jobs. Sell refined materials at a higher price. Shipping becomes more efficient as you're not carrying useless tailings along with the valuable stuff.

Where does the output from the plant go?

Is it domestic?

Australia exports most of our Aluminium metal production

There are currently four aluminium smelters operating in Australia producing Australian primary aluminium metal. Production was 1.58 million tonnes in 2018, of which 1.45 Mt was exported. Australia is the world’s sixth largest producer.

That 1.45 Mtpa export is worth around US$ 3.5 B.

We used to export 2 Mtpa until Geelong and Kurri Kurri closed in the last 10 years.

Realistically Australia should be making over 10 Mtpa of aluminium metal (from 100% of the alumina we currently make) as most of the ingredients come from Australia including the coal and at times gas and are exported to be smelted off-shore.

I agree.

Also, it is a shame that we do not attempt to do this with some of the other resources (Eg rare earths, magnesium) or try to retain what we already do without threat of closure (eg Copper, Nickel)

This would be a win-win. Create jobs. Sell refined materials at a higher price. Shipping becomes more efficient as you're not carrying useless tailings along with the valuable stuff.

So why don't we do it anymore? I recall we shipped steel to the USA back in the seventies.

I know Don thinks this is madness but it makes economic sense and nothing to do with RE.

Yeah, the issue is that the power has to be reliable in order to produce aluminum though isn't it - you know that as well as I do. Tomago have been saying repeatedly that without Liddell's reliable coal generation that they'll have to leave - you just can't make aluminum with batteries and windmills - it just can't be done.

Portland has had one foot in the grave for years now, it's getting to a point where they should have either built some kind of complimentary power station at or near the site or just let it go.

Where does the output from the plant go?

Is it domestic?

Australia exports most of our Aluminium metal production

There are currently four aluminium smelters operating in Australia producing Australian primary aluminium metal. Production was 1.58 million tonnes in 2018, of which 1.45 Mt was exported. Australia is the world’s sixth largest producer.

That 1.45 Mtpa export is worth around US$ 3.5 B.

We used to export 2 Mtpa until Geelong and Kurri Kurri closed in the last 10 years.

Realistically Australia should be making over 10 Mtpa of aluminium metal (from 100% of the alumina we currently make) as most of the ingredients come from Australia including the coal and at times gas and are exported to be smelted off-shore.

I agree.

Also, it is a shame that we do not attempt to do this with some of the other resources (Eg rare earths, magnesium) or try to retain what we already do without threat of closure (eg Copper, Nickel)

This would be a win-win. Create jobs. Sell refined materials at a higher price. Shipping becomes more efficient as you're not carrying useless tailings along with the valuable stuff.

So why don't we do it anymore? I recall we shipped steel to the USA back in the seventies.

I believe we still export steel to the US as does NZ (going by an interview from one of the US late night shows with NZ PM JA 2 years back).

I'll speak of aluminium as this is one I know best.

In 2000, China made around 10-20% of the world's aluminium and a major importer, the middle east was a significant producer but around 5% globally. Currently today there is 70mtpa made with nearly 40mtpa coming from China and 25% of the non-Chinese market comes from the Middle East (guess why I live here).

China is generally not competitive globally on price. They still import some alloys and generally only make enough to feed themselves and their govt has been proactive to stop dumping on global markets as it doesn't make sense to import energy and alumina and petroleum coke to then sell aluminium metal globally. China's demand is driven on the back of growing industry in China replacing manufacturing OS.

Aluminium is electrical energy intensive, each tonne requires 14,000 kW of electrons. Your house uses ~20kW a day. An aluminium smelter can also not be turned on and off, once live it normally remains so for its life until shut down. It may suffer from power outages and more than 3h will often see the potline frozen and it takes months and millions to bring it back. It also cannot ramp up significantly but can reduce load for short periods.

China makes nearly 100% of its aluminium burning coal, the middle east gas, however the KSA smelter often uses crude oil when gas demand in the country is high as most middle east countries are gas poor, apart from Qatar. Why the Abu Dhabi (UAE) is currently commissioning a nuclear power station (4000 MW) and Dubai Emirate will shortly start commissioning a 2400 MW coal power station. Guess where the fuel for both comes from....


Back to aluminium.
You need roughly 5-6t of bauxite to make 2t of alumina to make 1t of aluminium and you need 420kg of coke in the smelter to make the anodes.

Australia currently exports around 35 MTpa of bauxite, with about 60 MTpa consumed domestically.

The 60 MTpa is used to make alumina at refineries in Gladstone and SW of Perth making about 20 MTpa of alumina. Gove in NT has a bauxite mine and used to convert to alumina (5 MTpa) but was shut down by RTA following take over from ALCAN and despite billions in investment during the 2000's to be one of the biggest in the world found it uneconomic (was fueled by oil). Very high labour costs would not have helped and really a stupid place to build a complex refinery compared to Gladstone which gets its bauxite from Weipa.

Of the 20 Mtpa of alumina, we consume just 3 Mtpa to aluminium metal.  


Indonesia issued a directive to China a few years back it will no longer solely export Bauxite and guess what, they now have an alumina refinery.

For me Australia should be capping the exports of minerals to force down stream processing or simply keep it for a raining day. YEs mining created jobs, but Wepia employs around 400 people to make around 20mtpa of bauxite. Boyne Smelter has 1000 direct employees and 1000's more in support industries, all well paid and uses just 2mtpa of Weipa's bauxite plus the 1000 jobs at QAL next door making the alumina for the smelter.

To help drive on shore demand, mined ore used domestically should not pay royalties. Likewise if the alumina from the refinery is used domestically, then there should be a further incentive. Most of the these plants are already tolling plants (refinery's and smelters) and as such pay no or very little corporate tax. Currently I believe only Weipa and Gove export Bauxite so simple, force another alumina refinery to be built domestically or give these operators 10 years notice to cease production.

Likewise the steel industry I think the iron ore export should be capped at 500mtpa, you want to mine more, then process it here to some degree for which there will be no mining royalty applied.

I wonder why the aluminium industry means more to the Federal Government than the automotive industry did.

I wonder why the aluminium industry means more to the Federal Government than the automotive industry did.

I guess they've decided to draw a line in the sand on these 'strategic' things. They also gave $200,000,000 to the (remaining) refineries to try and keep them here - announced here- but it's unlikely to make much of a difference to the one at Geelong which has been run down to the point of un-viability. Most of that money is just going to things like diesel storage anyway.

The owners of Corio Refinery have said they're staying. We are horribly isolated here for items like petroleum; if no refinery wanted to stay it could be time for a return to the days of Commonwealth Oil Refineries. The government keeps army, navy and air force in case they're needed; add a refinery to the list.

The owners of Corio Refinery have said they're staying. We are horribly isolated here for items like petroleum; if no refinery wanted to stay it could be time for a return to the days of Commonwealth Oil Refineries. The government keeps army, navy and air force in case they're needed; add a refinery to the list.

Word is that Viva Energy have been looking to the Commonwealth and VIC government to pay for expensive upgrades but they won't come to the party. There have been repeated safety incidents and OH&S breaches since they've taken over including more than a dozen fire brigade call-outs and (recently) a very large 'flare off'. It doesn't bide well for the future of the refinery.

The owners of Corio Refinery have said they're staying. We are horribly isolated here for items like petroleum; if no refinery wanted to stay it could be time for a return to the days of Commonwealth Oil Refineries. The government keeps army, navy and air force in case they're needed; add a refinery to the list.

For a 'Nanny' state/country on so many petty issues we take some terrible risks on our fundamental security.

I wonder why the aluminium industry means more to the Federal Government than the automotive industry did.

I guess they've decided to draw a line in the sand on these 'strategic' things. They also gave $200,000,000 to the (remaining) refineries to try and keep them here - announced here- but it's unlikely to make much of a difference to the one at Geelong which has been run down to the point of un-viability. Most of that money is just going to things like diesel storage anyway.

The failure of the car industry was mostly consumer driven. Look at the vehicles sales for the models being made and you will see only the  Camry had any reasonable volume that was holding steady. The Cruz, Falcon/Territory were below economic sales and  the Cruz has since been axed globally. The Commodore while previously doing well was in rapid decline due to the growth of the dual cab sector.

Export wise, only the Camry/Aurion were still being exported in the final years. Some Commodores were turning up in the middle east, but by an large had mostly ceased. I don't think either taxpayers nor govt would have objected to any further subsidy had the sales of these vehicles been doing well and exporting.

Globally, the worlds car manufacturing industry is moving to developing and emerging economies unless its higher end or specialized vehicles with high domestic demand in their country of manufacture, i.e. European higher end cars, F150 and Tesla's.


Meanwhile Australia exports the bulk of its aluminium for which there are plenty of buyers, basically the global market for which very few of the buyers are patriotic, Japan and SE Asia are the main buyers. Prior to the mining boom Australia was extremely competitive place to make aluminium and only the high $A and later the loss of control of the wholesale power price has caused significant pain in the aluminum industry and loss of the two smaller and older plants Kurri Kurri and Geelong.

Aluminium production unlike the car industry isn't gravitating towards developing nations as aluminium production is always built in locations with large amounts of cheap and reliable power and requirement #1.  Labour cost isn't as big a factory in the cost of production. Thailand will not be building a aluminum smelter any time soon as they simply do not have large amounts of cheap power. Using imported energy to make aluminium is rarely cost competitive. And while Sth Africa is building more cars, its aluminium industry is under threat with one of the two smelters eventually closing a few years back.


Another factor is long-term payback. A car assembly line can be built within 12mth from shovel to first car (Tesla being case in point). 100% of parts can be imported until local manufacture is established.  A car assembly line needs about 10-15 yr to achieve payback and if required the robots can be packed up and relocated quickly. In comparison an aluminium smelter typically takes 12-18mths just to get approvals, 2.5 y to build, 9-12mths to ramp up and 25 years to achieve payback with another 10-15 years beyond that. Once its shutdown, it is not relocatable and simply scrapped. It also requires an extremely reliable power supply and very sensitive to sovereign risk.


The oil refineries will eventually go as domestic demand for petrol is expected to enter decline in the coming years with EV and hybrid's taking over. Diesel demand will remain for sometime.