What a crazy situation in Australia where we have power costs of $70,000 per minute and costs $200,000 in power costs to produce one tonne of aluminium.
"Producing for that 60 minutes would have put the cost of every tonne of aluminium at about $200,000, more than 100 times the market price of under $2000 a tonne, Mr Howell said."
I'm sure all the climate change socialists will be pleased when Australia no longer has any industries.
Tomago leads energy users buckling under power crisis Angela Macdonald-SmithSenior Resources Writer
Jan 24, 2020 — 6.33pm
Tomago Aluminium chief Matt Howell is leading a push by energy users for a more cautious transition towards renewable energy after he was forced to shut down part of his smelter near Newcastle on Thursday to avoid paying $70,000 a minute for electricity.
The call by industrial energy consumers comes after NSW only narrowly avoided forced rolling blackouts for the third time since December, even as industrial electricity demand is yet to reach its summer peak.
Tomago Aluminium chief executive Matt Howell says smelters help stabilise the power grid. Max Mason-Hubers
It provides a counterpoint to the bushfire-driven escalation of pressure on the federal government from the public, green groups and some investors for an acceleration of the switch to cleaner energy to help achieve more ambitious emissions reductions to combat climate change.
When spot power prices spiked up to their maximum in NSW twice on Thursday, Mr Howell didn't hesitate to switch off a potline at the smelter, the state's biggest electricity consumer.
Staying online would have cost it almost $4.5 million for an hour of power given its supply contract with AGL Energy is essentially set aside when prices surge to the market cap of $14,700 a megawatt-hour.
Producing for that 60 minutes would have put the cost of every tonne of aluminium at about $200,000, more than 100 times the market price of under $2000 a tonne, Mr Howell said.
"Clearly it’s just not an option for us, we have to take the line off," he said.
"And we’re not in the peak demand period so what’s it going to look like in February when we have a heatwave? Where will the energy come from?" Weather-related attacks
The Australian Energy Market Operator is grappling with multiple weather-related attacks on the power grid, from bushfires that have brought down transmission lines, to dust and smoke that is cutting solar power generation.
Unexpected outages also hit units at AGL Energy's Bayswater coal power plant in the Hunter Valley and EnergyAustralia's Mt Piper plant just as sweltering temperatures drove up demand.
The confluence of factors forced AEMO to call on emergency back-up reserves on Thursday for the third time this summer to prevent potential blackouts in NSW. NSW Energy Minsiter Matt Kean had to call on households to switch off pool pumps, avoid using washing machines and to up the temperature on air conditioning.
"It's a tight situation that needs to be carefully managed and we're probably not through the worst of it yet," said Andrew Richards, head of the Energy Users Association of Australia, which represents BlueScope Steel, Orica and other heavy electricity users.
He said that while the federal government was taking action to support the growth of intermittent wind and solar power through the Snowy 2.0 project and its underwriting scheme for power plants, "we've probably got a few wobbly moments to get through first, which makes everyone pretty nervous".
Both the EUAA and Mr Howell support the growing use of cheap renewable power but want more attention on how to keep electricity affordable and reliable at the same time.
Mr Howell noted that when Tomago took a second potline offline on Thursday evening, wind and solar were meeting just 6 per cent of NSW's electricity demand.
Closing one potline at the smelter provides an extra 300 megawatts into the system – enough to power more than 100,000 homes.
"That is a stark illustration that if we want to sustain energy-intensive manufacturing in Australia we must have both affordable and reliable generation sources that are independent of the weather," Mr Howell said.
AEMO chief executive Audrey Zibelman said additional transmission links to enable power to be shifted more flexibly around the national power market would be part of the solution.
"Yesterday’s supply and demand market dynamics strongly demonstrate the need to continue strengthening the interconnector networks in the National Electricity Market," said a spokesman for soft drink bottler Coca-Cola Amatil, for which the price and reliability of power are crucial.
One priority transmission project identified by AEMO, a proposed $1.53 billion interconnector between South Australia and NSW, took a leap forward on Friday as it received approval from the Australian Energy Regulator to qualify as a regulated asset.
Still, Mr Richards voiced concern about added costs of new transmission investments, the development of which which could be overtaken by new generation and storage technologies and which have been shown to be vulnerable to bushfires. Urging caution on renewables
Mr Richards said he had written on several occasions to various government ministers "cautioning against too much, too fast on renewable energy deployment".
He said that renewables growth was "going to happen anyway", but the transition needed to be managed far better than it has been so far.
"It does require a higher level of co-ordination between state and federal governments than we have seen," Mr Richards said.
Federal Energy Minister Angus Taylor said the government has "consistently prioritised action to encourage the new reliable supply needed to balance continued growth in intermittent renewables" and put downward pressure on power prices.
Mr Taylor pointed to the Snowy 2.0 pumped hydro storage project, the $1 billion Grid Reliability Fund and actions to underwrite new gas power plants and transmission upgrades, as well as setting up the Liddell Taskforce to plan for the closure of AGL's Liddell coal power generator.
"These actions are a key part of ensuring that energy-intensive trade-exposed industries, like Tomago Aluminium, continue to be viable in Australia," he said.
Gas should be part of the solution to "firm" renewable energy until Snowy 2.0 is commissioned, more advanced storage technology is developed and battery costs come down, industry says. But gas prices – despite a recent softening – are still too high.
"If we had gas available at $7 or $8 [a gigajoule], we would be using gas-powered generation to support renewables and fill the void while battery costs come down," Mr Richards said. Smelters' sacrifice
Meanwhile, Mr Howell said the benefit that smelters provide to the public through emergency reduction of electricity load should be recognised and compensated for, helping plants like Tomago stay viable. Snowy Hydro in 2018 set a new lower benchmark for firmed supply of renewable energy at less than $70/MWh, but Mr Howell said that was still "right off the cost curve" for an aluminium smelter.
And while renewables developers are offering supply in the $40/MWh range, that is not firm, uninterrupted supply.
"Nobody wants to buy intermittent energy. The question is what is the price to firm, and presently the cost to firm is too high."
He said gas is too expensive, and batteries currently work only for frequency control but are not viable for bulk energy supply to energy-intensive manufacturing.
