Removing gas a risk to big users, Tomago Aluminium warns

Tomago Aluminium, the nation’s biggest single electricity consumer, warns that removing gas from the capacity mechanism could leave heavy industrial energy users exposed.

Tomago Aluminium, the nation’s largest smelter and biggest single consumer of electricity, has warned that removing gas from the capacity mechanism could leave heavy industrial energy users exposed when renewables fail to generate enough power.

After energy ministers on Thursday unveiled a final capacity mechanism design, which shuns coal and gas in favour of dispatchable renewables and storage investment, Tomago chair David Fallu said gas needed to be part of the energy mix given the enormous back-up power required to balance renewables as coal exits the system.

“Ruling out gas categorically as a short-term solution from a firming perspective, I think will create challenges,” Mr Fallu told The Australian. “In the short term, I would be surprised if thermal firming was not part of the solution.”

Tomago – owned by Rio Tinto, CSR and Norsk Hydro – is plotting an ambitious green switch to move its coal power supply to renewables by 2029, but said the nation’s switch to clean energy needed to be done in a staged approach.

Mr Fallu said “at the moment, gas is absolutely the energy source that’s filling the breach when renewables aren’t generating”.

Tomago is likely to need more than 3000 megawatts of renewables to meet its 950MW needs, given the variability of wind and solar supplies.

“The identified thermal firming coming out of the system would require a Snowy 2.0 to be delivered each year, every year for the next eight years,” he said.

“And that’s clearly not on the cards as we sit here today.”

Energy investor Trevor St Baker, the former owner of NSW’s Vales Point coal plant, said energy ministers needed to keep AGL Energy’s Liddell coal plant open beyond its April 2023 closure date to ensure the lights stayed on. Liddell accounts for 10 per cent of NSW power supply, but will shut down in April.

“The unavailability of this 1500MW of 24/7 base-load capability next winter would be worse than the unplanned forced outage of two Bayswater power station units last winter which precipitated power supply shortages,” Mr St Baker said.

Grattan Institute energy director Tony Wood said “coal and gas are stored energy and can be accessed on demand”.

“It’s got to have contracts for firm supply of power in the full range of circumstances faced by a high-renewables grid,” Mr Wood told The Australian.

“Most capacity mechanism include fossil fuels but also have emissions constraints. That’s what the national energy guarantee was about.

“It’s not clear how (the) announcement will do that, and maybe we just have to await the detail. It’s never simple.”

Energy Minister Chris Bowen said the “keeping the lights on” capacity mechanism would unleash clean energy investment across the country.

“This is important because this will unleash at least $10bn of investment in renewable energy across Australia, at least 6 gigawatts of generation,” the federal Energy and Climate Change Minister said. “The commonwealth will run auctions for dispatchable renewable energy on jurisdiction by jurisdiction basis.

Opposition energy spokesman Ted O’Brien said Mr Bowen had “rejected the advice of the experts and ripped coal and gas out from the generator technologies available under the capacity mechanism”.