Rio Tinto turns to big batteries to underpin green smelters, as firmed renewables eclipse gas and coal

Rio Tinto’s global aluminium chief says the resources giant is looking to add battery storage to the clean energy mix powering its Queensland Boyne Island smelter, as part of a plan to replace coal with firmed renewables and shift its Australian assets to “the good half of the global cost curve.”

In a detailed, two-part post on LinkedIn, Rio Tinto’s chief executive Jérôme Pécresse says there is no reason why Australian aluminium smelters can’t be powered by a mix of intermittent renewables, provided that mix is “firmed” via batteries.

Rio is already working hard to gather together the renewables part of the equation. Of the 5 gigawatts of new capacity required for its Gladstone smelters and refineries, it has locked in more than 2.2 GW of wind and solar generation through power purchase agreements, or PPAs.

The message this week from Pécresse, at the end of a tour of Rio Tinto’s Pacific aluminium operations, is that Rio will now turn its attention to the other part of the equation – adding battery storage to firm the contracted renewables.

“Such a solution is what we are working to put in place at our Boyne smelter,” Pécresse says. And he says this, not because he is an inner-city greenie, nor to spite Peter Dutton, who remains adamant smelters can run only on baseload coal or nuclear, but because – to borrow a recent Dutton-ism – it’s the economics of it.

As Pécresse explains it, the company’s two east coast Australia aluminium smelters are currently both on the “wrong half” of the global cost curve, “given high, coal-driven, electricity costs … on a continuously increasing trend.

“Being on the wrong side of the cost curve means, among others things, that you do not generally generate enough cash flow to cover the level of investments which is necessary to maintain your assets and that you will have difficulties to weather cyclical market downturns,” he says.

And he says that given Australia’s “high-quality, very competitive, wind and solar resources” and the “continuous downward trend” of battery costs, a power supply from firmed renewables is the goal for Rio’s Australian smelters – including in Queensland.

Not coal, not gas, but solar, wind and battery storage.

“There is no reason why, in some places, it cannot be achieved via a mix of intermittent renewables, provided that this mix is ‘firmed’ via batteries and other sources,” he writes. And he adds that the smelter can also be “flexible”, acting as kind of a battery itself, and helping demand meet supply, and vice versa.

This is a powerful and well-timed message, coming at the end of a week of Queensland state politics in which the LNP Crisafulli government has sent strong messages that it is closed for business on renewables.

This has included the rushed introduction of new wind farm planning laws that experts have warned will have significant impacts on the economic viability and risk profile of current and future renewable energy investment in the state.

This is a worrying sign for renewable energy developers and for major industrial giants like Rio Tinto, which are working hard to build enough renewable energy capacity to keep their operations viable in the Sunshine State.

For Rio, there has been a more immediate impact, with the state planning minister pausing the development approval process for Windlab’s 1.4 GW Bungapan wind farm, 80 per cent of which is contracted to help power its Gladstone smelting and refining operations.

It is also seeking a similar solution for the Tomago smelter in NSW.

Happily for Rio Tinto, it has the support of Australia’s federal Labor government, via the recently unveiled green aluminium production credit scheme – derided by Dutton as a “$2 billion con-job” – that will provide financial support to smelters for every tonne of green aluminium they make over a decade.

But it’s clear that global industrial executives like Pécresse feel the need to make their intentions on energy clear to anyone who cares to take notice.

It is not the first time that Rio Tinto has felt the need to intervene in the public debate. Late last month, CEO Jakob Stausholm posted on LinkedIn underlying the important of wind and solar to the future of its energy-hungry assets.

See: Rio Tinto says wind and solar make economic sense, LNP stands in way of its plans to save smelters

“When we, at Rio Tinto, dedicate a lot of efforts and time, and take substantial balance sheet commitments to repower these smelters with a mix of renewable solutions, it is first and foremost because we need and want to bring these smelters to the good half of the global cost curve,” Pecresse writes on LinkedIn.

“It is not easy, it requires some support from state and federal governments and a bit of risk-taking, but we know there are situations where it can be done, thanks in particular to the high-quality, very competitive, wind and solar resources parts of Australia are lucky to have.

“We have made very good progress in that direction for our Boyne smelter in Gladstone (Queensland) and have very good reasons to believe that, in addition the support of the recently-announced Federal green aluminium scheme, we can get this smelter into a much more competitive and long-term viable position, for the sustainable benefit of all its stakeholders.

“In other words, for us, decarbonisation is about building, stronger, more performing, more resilient, businesses and, yes, on top, many of our end customers require lower and lower carbon aluminium, so we can hit two birds with one stone!

“What we discover in addition… is that we can also impact positively these energy markets by prompting faster renewable energy development and that energy management becomes a more important part of our business and of the skills we need to develop,” he adds.

“Smelters have always been located in grids that have sufficient generation to make sure they are competitive and stable. This isn’t changing in the new era, and we are contributing to ensure there is enough investment in our operating grids to maintain these conditions in the future.”