Matt Johnston: Hazelwood fallout a worry for Alcoa
WITH the closure of Hazelwood and the likelihood of higher power prices, concern is rising for Alcoa’s Portland smelter and its workers, writes Matt Johnston.
Opinion
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NEWS that 750 Hazelwood power station employees had been dreading for years was delivered to them at work early today. Owners Engie and Mitsui announced the coal-fired plant will be closed by the end of March and most of the workers would be without a job.
There will be an immediate and devastating impact on some families in the Latrobe Valley, which already has significant pockets of social disadvantage.
Outside those directly affected, about $100 million in wages each year won’t be pumped into the local economy, causing a ripple effect that will hurt other businesses.
The state and federal governments were quick to announce rescue packages after French firm Engie, the majority owner, delivered the bad news.
More than $40 million each was quickly pledged by the Turnbull and Andrews governments, while Premier Daniel Andrews will announce a further $266 million package today.
Included in the premier’s plan is $174 million to be spent on infrastructure to try to offset some job losses in the short term.
HAZELWOOD CLOSURE ‘ANOTHER KICK IN THE GUTS FOR THE VALLEY’
A $50 million “economic growth zone” will also be created, giving tax breaks and other benefits to companies that set up shop in the Latrobe Valley.
This direct intervention to boost one region of the state shows the level of social, economic and political concern.
Some of the projects likely to be fast-tracked using state and federal money include new roads and health centres.
The new economic growth zone will be overseen by a Latrobe Valley Authority and will cover three local government areas: Latrobe City Council, Wellington Shire and Baw Baw Shire. As Andrews says, the state government is literally trying to “open doors to businesses” in the hope that they will set up shop and employ locals.
The wider fallout from the closure of one of Victoria’s biggest energy producers is harder to gauge.
Power prices, Victorian Energy Minister Lily D’Ambrosio concedes, are likely to rise.
Estimates vary wildly and will depend on how much other coal-powered stations increase capacity and how much the wholesale price of power is distorted.
The Victorian Coalition has been quick to accuse state Labor of failing to secure a staged closure.
Opposition leader Matthew Guy sensationally remarked today that the sudden closure and inevitable higher power prices “may very well signal the end of manufacturing in Victoria”.
Others have pointed out that the government’s plan to massively increase renewable energy sources in Victoria by 2025 would have helped secure Hazelwood’s demise.
Meanwhile another major Victorian employer nervously considering Hazelwood’s shutdown and higher power prices is Alcoa, which operates Portland’s aluminium smelter in Victoria’s west.
The smelter is already feeling the pinch of high energy costs combined with low international aluminium prices.
The smelter uses a massive amount of electricity, meaning if it was to close, Victoria’s power use would dive.
HAZELWOOD CLOSURE ‘ANOTHER KICK IN THE GUTS FOR THE VALLEY’
ONE energy expert said that the supply lost from Hazelwood’s shutdown would be mostly negated by the end of the smelter, combined with the car industry shutdown, and it could actually dampen price rises.
But the combined devastation of the car industry shutdown and the Hazelwood horror show means a third wave of job losses would be hard for a government to stomach.
The Portland smelter employs about 600 people directly in the state’s west but then there are about 2000 indirect jobs.
As one source put it bluntly, the region would be “fed” if the smelter closed tomorrow.
Despite Alcoa’s reported woes, the Andrews government announced this year it would no longer continue to guarantee electricity prices for the smelter in the way it had done for the past 20 years. Treasurer Tim Pallas said the guarantee had cost $100 million a year “on some occasions”.
Since then, the company has tried to renegotiate power contracts with AGL, which was waiting for the shutdown of Hazelwood to maximise potential profits related to future energy contracts.
Opposition energy spokesman David Southwick said if electricity prices now rise sharply, it’s hard to see how Alcoa can survive.
“The Hazelwood closure also threatens the future of Alcoa in Portland, putting more jobs at risk including the thousands of remaining manufacturing jobs in Victoria,” he said.
Government sources seem quietly confident Alcoa won’t go the way of Hazelwood for now, however, suggesting that intervention may be on the way.
Some industry watchers have speculated about new smelter subsidies, or raised the possibility that the government could effectively help pay for Alcoa to use renewable energy.
But the cost of such a move would certainly be high.
There’s also the possibility of Alcoa being given tax breaks or other benefits.
The decision to create a special economic zone on the other side of the state shows the government’s willingness to intervene at broader taxpayer expense.
Of course, some industry analysts have claimed that giving Alcoa a big helping hand at this stage may be simply delaying the inevitable.
But Labor is indicating it will not sit and watch another major employer go the way of car manufacturers and the Hazelwood power station.
The big question for taxpayers and for households eyeing higher electricity bills will be but at what cost and to what end?
Matt Johnston is state politics editor
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