Low-cost renewable energy could save the aluminium sector

Australia’s aluminium sector could become the model for sustainable heavy industry by moving to low-cost, zero emission electricity and investing in plant modernisation.

Pro-renewables think tank the Institute for Energy Economics and Financial Analysis (IEEFA) believes that not only is the cost of electricity a major obstacle to the industry’s global competitiveness, it is also one of the most emissions-intensive globally.

Focusing on the aluminium smelters in Gladstone, Queensland, the IEEFA noted in a new report “An Aluminium-Led Energy & Industry Renewal for Central Queensland” that with operators losing money and considering closure, some 4,500 jobs in the region could be under threat.

“This failure is linked to their enormous electricity demand which has historically been tied to Australia’s largely fossil fuel-based electricity generation,” report author Clark Butler said.

“But instead of closing the smelters, the aluminium sector could move to low-cost, zero-emissions electricity and invest in plant upgrades to support demand response management, and profit from the long-term growth by value-adding in metals and industrial processing markets.”

In the study, Butler found that if electricity could be generated and delivered to Gladstone at between $40 and $50 per megawatt hour (MWh), it would support not just the aluminium sector but the whole of the city’s heavy industry.

Hydrogen push is key

“Gladstone has four major hydrogen projects in the planning stages and has a number of competitive advantages when it comes to developing a green hydrogen industry – world-class solar energy, available land, a major export port and an established energy exports industry,” Butler added.

“It is also well located geographically to supply green hydrogen to potential hydrogen importing countries such as China, Japan, South Korea and Singapore.”

‘Green’ hydrogen is produced from water using 100 per cent renewable energy.

While this results in relatively high cost of production, Wood Mackenzie recently suggested that economies of scale could reduce the cost of green hydrogen by up to 64 per cent by 2040.

The COVID-19 pandemic has also contributed more support to this proposal given that it has focused attention on supply chain security, while the Queensland government’s decision to establish three renewable energy zones creates an opportunity to re-power the region’s key heavy industries at sustainably lower cost.

The three renewable energy zones are part of a $145m investment in new transmission infrastructure to unlock new wind and solar investment in the state.

Premier Annastacia Palaszczuk said the zones would attract industrial energy users to create more jobs in regional Queensland.

“Finally, aluminium is one of several foundational industries that could fail or prosper depending on electricity costs,” Butler said.

“Manufacturing has already taken a heavy blow from high electricity costs in Australia.”