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The Guardian - AU
The Guardian - AU
Environment
Adam Morton

Australia’s biggest industrial players are focusing on climate solutions – why isn’t the political debate?

Alcoa plant in Point Henry
A reliable electricity supply is vital for an aluminium smelter given its equipment can quickly freeze in a blackout – and cost vast sums to fix or replace. Photograph: Joe Castro/AAP

One of the most striking statements on climate change during the election campaign has come from an unlikely source – the owner of the country’s most power-hungry industrial plant.

Tomago Aluminium, near Newcastle, consumes about 11% of all power generation in New South Wales. For years, its management has warned about the economic impact of policies to cut Australia’s greenhouse gas emissions.

In the past, Tomago’s chief executive, Matt Howell, argued that a shift away from coal would push up prices and could lead to blackouts and the closure of the smelter. His argument that Australia would stop “making things” if it did not have baseload fossil fuel power was published on the front of the Daily Telegraph and praised by right-wing commentators including Peta Credlin and Ray Hadley.

But times, and opinions, change. This week, Howell issued what was effectively a challenge to Australia’s biggest emitter, AGL Energy, to embrace renewable energy much more rapidly, and declared that Tomago was prepared to give up coal-fired power by the end of the decade.

Given that wasn’t a scare campaign, it appeared on page 15 of the Australian, not the front of the News Corp Australia tabloids.

Howell’s new position aligns with that of tech billionaire Mike Cannon-Brookes, who this week bought an 11.3% share of AGL as part of his campaign to stop the energy company from demerging and spinning off a new entity to run its aging and failing coal power plants. Cannon-Brookes wants AGL to head in the other direction: to stay as one, commit to closing coal generation by 2030 and go all-in on a renewable future.

Tomago has a contract to run on AGL’s coal generation until 2028, but Howell said it was optimistic about the signing of a future deal under which it ran on renewable energy backed by “firming” capacity that can be called on whenever needed. He said that could be with AGL if it could deliver backed-up renewables at the right price.

If that happens, it would have a significant impact on emissions in Australia’s biggest state and may lead to a coal plant – possibly Bayswater in NSW – shutting earlier than currently planned.

Howell has flagged this shift before, last year telling the Australian Financial Review the company was in talks with renewable energy suppliers. But saying it during an election campaign – especially as the Morrison government is attempting to extend the “climate wars” by attacking Labor over the cost of a proposed accelerated roll-out of renewable energy – makes for a sharp contrast. If the country’s biggest industrial players are focusing on how quickly climate solutions can be put in place, why isn’t the political and media debate?

A reliable electricity supply is vital for an aluminium smelter given its equipment can quickly freeze in a blackout – and cost vast sums to fix or replace.

The key question facing Howell is whether it is possible to run a smelter the size of Tomago on renewable energy plus firming by the end of the decade. Experts say it is, though coming up with a contract to do it wouldn’t be straightforward.

Tony Wood, the energy program manager at the Grattan Institute, says Tomago will be trying to answer two questions: will it have a constant physical electricity supply and who will carry the financial risk under any future contract?

“You could see how it could run on a combination of wind and solar, with maybe some role for battery storage, but more likely backed up by something like Snowy Hydro or gas,” Wood says.

Tristan Edis, from Green Energy Markets, suspects Tomago’s electricity needs could be managed through a portfolio of energy projects delivered by a big player in the energy market, such as Neoen, AGL or Iberdrola. He says the electricity provider would have to be able to “deliver and cleverly manage the weather and commercial risk”.

“Alternatively it might be a state government or Snowy Hydro using a blend of owned and contracted projects,” he says. “During daytime, we’ll have plenty of solar, even in winter. Then you pull together a blend of wind farms located across New England, the central west and ideally south-west to get some diversity.”

He says a big battery could be used to cover the “four-hour high price period” between 4pm and 8pm. “Lastly, buy a hedge contract from Snowy Hydro. Job done.”

Rising the flag for coal power, still

Nationals renegade Matt Canavan is no stranger to extravagant claims about climate change and coal power, and has been busy keeping his opponents within the Coalition focused on it during the election campaign.

As well as saying the net zero emissions by 2050 target was “dead”, he has taken to social media to point out that electricity prices are increasing. This is not consistent with the government’s narrative, which remains that they are down 8% on its watch.

In a Facebook post last week, the Queensland senator said average power prices in NSW in the first three weeks of April were more than triple what they were a year ago. He blamed the increase on the closure of the first unit to go at the Liddell coal plant, which is scheduled to shut across the next year. His conclusion? “We need to build new coal power stations to replace the old ones.”

The reality is, of course, more complicated, and headed in the opposite direction.

As the Australian Energy Market Operator (Aemo) reported last week, wholesale electricity prices are up sharply due to operational failures across a number of coal plants in NSW and Queensland, and because black coal and gas prices jumped following Russia’s invasion of Ukraine and Australian consumers are exposed to global markets.

Studies have found the cheapest form of new generation is solar and wind backed by “firming” from a range of sources. In some cases, new renewable energy is even cheaper than existing fossil fuels.

Energy companies, banks and regulators alike agree high-polluting coal-fired power is increasingly economically and environmentally unviable – and not necessary. Aemo, in a blueprint for an optimal power grid, has suggested coal plants could exit the system much faster than current announcements suggest.

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