Australia\u2019s second-largest aluminium smelter has been extended a $2 billion lifeline from federal and state governments, in a deal that will keep it running until at least 2040 and underpin $7.5 billion of new renewable energy generation and storage investment.<\/p>\n
The federal Labor and Queensland LNP governments on Wednesday announced they will invest $1 billion each\u00a0over 10 years \u2013 from 2030 to 2040 \u2013 to support the long-term future of Rio Tinto\u2019s Boyne aluminium smelter in Gladstone.<\/p>\n
For its part in the deal, Rio Tinto has committed to underwriting $7.5 billion of new wind, solar and battery storage development in the once coal dominated Gladstone region, which it will contract to supply the smelter\u2019s energy needs through power purchase agreements (PPAs).<\/p>\n
In its own media release, Rio said that in addition to previously announced PPAs, it has agreed to buy 40 per cent of the output from Lightsource bp\u2019s Lower Wonga solar and battery project near Gympie, equivalent to 112 megawatts (MW) of solar, and three hours duration of storage.<\/p>\n
\u201cThis is a story, here, from the federal government, about driving investment into our energy system,\u201d federal minister for industry and innovation Tim Ayers told reporters on Wednesday.<\/p>\n
\u201cThis facility \u2026 is at the centre of an industrial ecosystem that supports thousands of jobs, hundreds of businesses and builds our industrial capability overall as Australia makes Australia stronger and more resilient.<\/p>\n
\u201cIt is a slam dunk, the economic case for this investment: It\u2019s good for productivity, it\u2019s good for economic resilience, it invests in electricity generation, it drives costs down, lifts productivity up, and makes Australia stronger.\u201d<\/p>\n
The future of the Gladstone smelter, which directly employs around 1,000 people in the region and is Queensland\u2019s biggest single energy users, has been on \u201cthin ice\u201d for years, according to Rio Tinto<\/a>, as it struggled to remain economically competitive in a decarbonising global market.<\/p>\n The 1,680 megawatt (MW) coal-fired power station that currently supplies the smelter \u2013 and which began operations in 1976 \u2013 is slated to close in 2029, at the same time as the current lot of power contracts for Rio\u2019s Boyne smelter and Yarwun and Queensland alumina refineries expire.<\/p>\n Federal Coalition MPs, including the new leader of the National Party, Matt Canavan, have argued loudly and often that only coal can keep smelters like Boyne alive, and that it is the shift to renewables that is causing their demise. <\/p>\n But the smelter\u2019s owner clearly has a different view, and it now appears that the state LNP \u2013 which has ripped up renewable targets and threaten to \u201ccall in\u201d some of the Rio contracted projects \u2013 is now agreeing to support it, knowing it cannot afford to lose the state\u2019s biggest electricity user and one of its biggest employers.<\/p>\n \u201cThis announcement backs in the thousands of Queensland workers that rely on smelter and gives industry the certainty it needs to invest in the region,\u201d said the state\u2019s minister for natural resources and mines, Dale Last.<\/p>\n \u201cAt a time when supply chain disruptions are being felt across the globe, this investment is needed now more than ever to safeguard Queensland\u2019s sovereign manufacturing capabilities, and to build national resilience and international competitiveness.\u201d<\/p>\n Rio Tinto \u2013 despite the streamlining of its decarbonisation division, announced earlier this week \u2013 has been very clear<\/a> about no longer needing or wanting the expense of powering its generators with ageing and increasingly unreliable coal-fired power.<\/p>\n According a 2019 University of Queensland report, the Boyne smelter has a load of around 1000 MW and uses around 8 terawatt-hours (TWh) of electricity a year, the vast majority of which (810 MW) is supplied under a long-standing PPA with the Gladstone power station that is subsidised by the state government.<\/p>\n It suggests that the subsidy for renewables \u2013 $ 200 million a year \u2013 will be less than the discount it has received for using fossil fuels.<\/p>\n It was estimated by the report\u2019s authors that the aggregate price paid by the smelter was heavily subsidised by the state, at less than $50\/MWh \u2013 \u201csignificantly lower\u201d than the then average spot price of $103\/MWh, as reported by the Australian Energy Market Operator (AEMO). <\/p>\n \u201cAs fossil fuels become increasingly expensive, this investment, combined with the power purchase agreements we have already signed, positions Boyne to be among the world\u2019s first aluminium smelters underpinned by solar and wind power,\u201d Rio Tinto aluminium and lithium chief J\u00e9r\u00f4me P\u00e9cresse said in a company statement<\/a> on Wednesday.<\/p>\n \u201cIt also ensures heavy manufacturing like aluminium smelting can continue in Gladstone for the long term and preserves one of the few fully integrated aluminium value chains in the world \u2013 from bauxite mining to alumina refining to aluminium smelting all in Queensland \u2013 as demand for aluminium continues to grow with the energy transition.\u201d\u00a0<\/p>\n