Finance Work Portland smelter energy debate ‘risks crucifying thousands of workers’

Portland smelter energy debate ‘risks crucifying thousands of workers’

portland smelter
The Portland aluminium smelter in south west Victoria. Photo: Alcoa
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Australia must refocus on cheap and reliable energy after an electricity debacle at a Victorian aluminium smelter put thousands of jobs at risk, according to economists, unionists and politicians.

Prime Minister Malcolm Turnbull said on Tuesday it was “crucial” that electricity supply be “affordable” and “reliable”, while also cutting emissions “over time”.

“Treating this as an ideological thing where people say, ‘Renewables are bad’ or ‘All fossil fuel is bad’ is wrong. You’ve got to make sure you get the right mix,” he told reporters in Queensland.

“Above all, and this is the crucial point, energy has to be affordable. We’ve got to be able to afford to pay the bills, and it’s got to be reliable.”

Ever since South Australia lost power during a storm in September, which some blamed on renewables, a debate has raged over the future of Australia’s power supply. The Victorian debacle has only deepened the controversy.

On November 30, electricity supply from the Hazelwood power plant in Latrobe Valley to the aluminium smelter in the Victorian seaside town of Portland was interrupted for about six hours. Molten aluminium solidified in more than 200 smelting pots as a result, causing millions of dollars worth of damage and cutting capacity by as much as 75 per cent.

At the time of the outage, one of the plant’s two transmission lines was down for maintenance. The other failed for an unknown reason. This triggered power loss in South Australia as well, as that state also draws from Hazelwood on the same transmission line.

portland smelter
The Portland smelter has relied on electricity subsidies ever since it was opened in the 1980s. Photo: Getty

The crippled smelter – Portland’s biggest employer – was already in danger of closing because a very generous deal for subsidised power dating from the 1980s expired in October 2016.

The state and federal governments, smelter owner Alcoa and energy company AGL issued a joint statement this week announcing that “significant progress” had been made towards a new electricity deal.

The Victorian and Turnbull governments already agreed in December to provide $230 million to keep the smelter open.

The Alcoa smelter employs about 600 workers and pays more than $60 million in wages into the town. A further 2000 people are thought to be indirectly employed.

The big question is where the smelter’s power will come from. Because the smelter draws power from Hazelwood, one of the nation’s dirtiest coal-fired plants (which is expected to close imminently), it has become a symbol of the tension between curbing carbon emissions and protecting jobs.

portland smelter
A total of 2600 of Portland’s 10,000 residents are thought to be reliant on the smelter for direct or indirect employment. Photo: Getty

The Australian Workers Union blamed the Portland outage on an infrastructure flaw. But its spokesman also criticised the premature “rush” in some states to nascent renewable technologies, saying it risked “crucifying” manufacturing jobs.

“You cannot run heavy industry without reliable, plentiful and cheap electricity. And I don’t just mean aluminium, I mean steel, paper, petro-chem,” AWU Victorian secretary Ben Davis told The New Daily.

“The transition to renewables is inevitable and welcome, but it will take time. It’s just a shame that renewables aren’t quite there yet. They will be able to provide a reliable base load supply in the next five or 10 years. But in the real world today, they can’t.

“So the rush away from coal and gas-fired electricity power stations to renewables is a little unseemly in its haste because we are potentially crucifying hundreds of thousands of manufacturing workers.”

Some low-carbon alternatives to renewables include nuclear energy (currently being debated in South Australia and recently championed by former prime minister Bob Hawke) and natural gas.

portland smelter
Alumina from Western Australia is piped from the local port, while electricity is transmitted 500km from Gippsland. Photo: Getty

Dr Stephen Anthony, chief economist at Industry Super Australia, said the current generation of policy makers had “really done everything they can to make life impossible for manufacturers and to drive up the cost of energy”.

“We’ve really regulated energy costs so that we are no longer a low-cost producer – even where we have the potential to be – and that’s particularly concerning when it comes to producing elaborately transformed manufactures,” Dr Anthony told The New Daily.

“We seem to be a nation that has forgotten about international competitiveness. Now, the recent events in South Australia were just bizarre in terms of ensuring baseload supply, just bizarre, especially given the presence of significant manufacturing activity in South Australia, including steel making in Whyalla, and the fact that the security of all future investment in these types of activities are being placed in jeopardy, let alone the smelting activities in Portland.

“So you just wonder what decision makers are doing to ensure this episode is not repeated.”

Dylan McConnell, energy expert at Melbourne University, acknowledged the need for a transition period. “If we lose these industries, they’re not likely to come back,” he told The New Daily.

But he stressed that the recent incidents in South Australia and Victoria were the result of ageing infrastructure, not ‘unreliable’ renewables. He urged investment in alternatives to brown coal – including ‘clean’ coal, hydro, solar and wind.

“The majority of our fleet is old, so doing nothing is not an option.”

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