Secret plan to save Portland aluminium smelter
Power baron Trevor St Baker is putting together an ambitious plan to keep Victoria’s Portland aluminium smelter operating.
Power baron Trevor St Baker is putting together an ambitious plan to keep Victoria’s Portland aluminium smelter operating, aiming to build a coalition between Victoria's legacy and renewable power generators to chip in to deliver cheap power to keep the under-threat smelter running for at least another decade.
Industry sources say the plan puts Portland’s role as a stabilising factor in the Victorian grid at the centre of the proposal. Portland uses 10 per cent of the energy generated in the state and is playing an increasingly important role as a “demand management” option, dialling down its own operations when power demand peaks elsewhere in the state.
If successful it would make unlikely allies of Mr St Baker, historically a big donor to the Liberal Party, left wing unions that represent the plant’s workers and are desperate to keep it open, the Labor government of Premier Daniel Andrews and big power companies that fear they will cop the blame if Portland is closed.
The proposal, still at an early stage, is believed to involve stitching together an agreement between Victoria’s Latrobe Valley power generators, and the renewable energy companies that already supply the facility, to provide power at well-below market rates to get the smelter out of the “subsidy cycle” and on to a long-term deal that would ensure its viability for the next 10 years.
Portland has been under renewed threat of closure since October, when alumina giant Alcoa announced a review of its global portfolio targeting high-cost and high-carbon-emission plants for closure.
The review, due to report in 2020, puts Portland’s 600-strong workforce under renewed threat and could also worsen grid stability problems in Victoria.
Sources in the energy sector say the closure of Portland would almost certainly force the early closure of EnergyAustralia’s Yallourn power plant, currently slated to reach the end of its life in 2026, exacerbating the risk of system failures during peak demand periods in summer.
Portland has been kept alive over the last decade by a succession of rolling subsidy deals from the Victorian government, worth $200m over four years when last signed in 2017.
But Alumina Corporation boss Mike Ferraro — a part-owner of the Alcoa-operated facility — said last week that “subsidy cycle” could not continue and a long-term power deal at favourable rates was needed to secure its future.
It is understood Mr St Baker’s rescue plan involves putting together a 10-year power offer, involving multiple generators, offering to supply Portland at an average rate of about $45 a megawatt hour — 20 to 30 per cent below the rate it currently pays under a contract with AGL, which expires in 2021.
Rather than asking the Victorian government to give another round of direct subsidies to the plant, worth $200m over four years when last granted in 2017, the proposal asks the state-owned transmission company Ausnet to waive an easement tax levied on power lines that carry energy to the plant — ironically, a levy originally raised to cover the costs of the original Portland operating subsidies.
It is understood the scheme also seeks to help manage an influx of renewable power into the grid, flagging a shift away from the brown coal that makes up about 85 per cent of Portland’s current supply, to renewable energy ratios approaching 50 to 60 per cent over the next five years, if technically viable.
That would not only help meet the Victorian government’s renewable power ambitions, but would help allay Alcoa’s concerns about the plant’s carbon footprint. But despite the likely benefits of the scheme, both to the Victorian economy and the grid, it still faces significant hurdles.
Any agreement between power companies to co-operate on a deal would require the approval of the Australian Competition & Consumer Commission, believed to have been approached by the plan’s proponents.
It would also rely on the Australian Energy Market Operator, which controls the east coast grid, to agree to new rules around the sale of Portland’s capacity into the grid at times of peak demand.
And the Victorian and federal governments would also need to back the plan.
Mr St Baker would not confirm or deny his involvement on Thursday, saying through a spokesman he had no comment to make. But, while the exact nature of his involvement is unclear, sources say the businessman has so far been the driving force in bringing the various parties together, albeit at an early stage.
Such is the secrecy around the discussions, none of the key stakeholders believed to be involved would comment.
The Australian Worker’s Union Victorian state secretary Ben Davis would not comment on details of any discussions aimed at saving the plant, but said that a long-term solution was possible with the goodwill of all stakeholders.
“If all parties — Alcoa, state and federal governments and the power companies — come together, it can have a future. As they did in 2016 to 2017,” he said.
AGL chief executive Brett Redman said his company was committed to supporting “every effort” to keeping the smelter going, but would not comment on details of any proposals for a new Portland power plan.
“I care deeply about maintaining jobs and industries in Australia. The Portland aluminium smelter is one of AGL’s largest customers and we’ve been working hard with them on their energy supply ahead of our contract with them expiring in late 2021.”
A spokeswoman for Alcoa said Portland was a “very well run” facility and the global giant was focused on securing a long-term future for the smelter.
A spokesman for the Victorian government said arrangements between Alcoa and power companies were a matter for those private companies.