Electrification can slash heavy industry bills and emissions – but new report says it will take a team effort

Australia’s traditionally “hard to abate” heavy industrial sectors could halve their electricity costs and slash their emissions if they worked together on their electrification needs, a new study has found. 

The new report from Monash University’s Climateworks Centre suggests that if companies coordinated when locking in renewable energy supplies, for example, their electricity would be cheaper than had they negotiated individually. 

“Coordination delivers the lowest-cost outcome, with potential electricity savings of up to 50 per cent, outcompeting business-as-usual Queensland grid prices from the early 2030s,” said Climateworks Centre CEO Anna Skarbek. 

Using Gladstone’s industrial hub as an example, the study mapped out just how much entire industries could save on energy if they took a coordinated approach compared to going it alone on an energy transition journey. 

That region is currently home to alumina, aluminium, clinker, cement, lime and chemicals production, mainly owned by Rio Tinto, Orica and Cement Australia.

Rio Tinto has already recognised the need to shift to renewable energy, hinting that it will likely close its 1.68 gigawatt (GW) Gladstone coal power station in 2029 as it lines up 2.88 GW of deals with solar, wind and battery energy suppliers. 

The Climateworks argument is that sharing individual assets and orchestrating energy use, so different companies can turn their electricity consumption up or down as needed, would be even cheaper than negotiating individual power purchase agreements (PPAs) or installing individual thermal energy storage units. 

It estimates the difference to be a system levelised cost of electricity by 2040 of $103 per megawatt-hour (MWh), compared to $124/MWh if companies transition without coordinating. 

The Australian Energy Market Commission’s (AEMC) estimate for Queensland, using the Liberal government’s expensive coal and gas-heavy strategy, is that power prices will shoot up to $203/MWh as soon as 2035.

The benefits, Climateworks says, is that less new utility solar and wind would be needed – 9 GW compared to 10.6 GW – and therefore a lower cost overall of $41 billion instead of an estimated $52 billion. 

But as Western Australia has found, competitive businesses don’t naturally coordinate themselves. 

Western Australia has been working towards a coordinated transmission network for its northern mining region since 2022, when it started the Pilbara Energy Transition (PET) Plan.

Currently, much of the Pilbara is powered by single-user infrastructure, built by miners to support their own operations. 

The goal is to shift to common use, shared infrastructure that can allow other industries, such as renewable energy projects, to connect in; studies suggest this could save $30 billion over 25 years.

The Climateworks report lead author Calvin Lee says Industrial Precinct Energy Plans, led by state governments, will need to be the backbone of any industrial energy coordination. 

“Industry and renewable energy developers need to understand how much electricity will be required, when it will be needed and what infrastructure should be built,” he said in a statement.

“IPEPs can provide that visibility, helping investment move forward while ensuring infrastructure is built and used as efficiently as possible.”

A cooperative approach to industrial energy could also save governments money.

This year alone the federal and New South Wales (NSW) governments have agreed to pay $2.5 billion to help the Rio Tinto-AGL-owned Tomago smelter quit coal, and the federal and Queensland governments will sink $2 billion over a decade to support Rio Tinto converting its Boyne aluminium smelter in Gladstone to renewables.

And yet another Rio Tinto-owned smelter, this time Bell Bay, won a support deal from the federal and Tasmanian governments to bridge a gap in the price of electricity it wanted to pay and what Hydro Tasmania could afford to sell it at.

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