Tomago’s pivot to renewables could spell end for biggest coal generator

One of Australia’s largest electricity users could make the shift to 100 per cent renewable electricity and spell the early demise of one of Australia’s largest coal-fired generators.

The chief executive of one of Australia’s last remaining aluminium smelters, Tomago Aluminium’s Matt Howell, has indicated that the company is aiming to transition the smelter to 100 per cent renewable electricity before 2030.

“Our goal would be, by 2029, that the largest load in Australia is, for all intents and purposes, 100 per cent renewable,” Howell told the Australian Financial Review in an interview, in reference to the Tomago smelter which is located near Newcastle.

It is a remarkable turnaround for Howell, who has previously criticised wind and solar for not being able to provide “baseload” supplies. He said in 2018, in a media appearance with federal energy minister Angus Taylor, that “the largest battery in Australia would run this smelter for less than eight minutes.”

Switching the smelter to renewable electricity could have significant ramifications for one of Australia’s largest coal fired power stations – the 2,640 MW Bayswater power station – which supplies power to the aluminium smelter under a contract that is due to expire at the end of 2028.

Tomago is understood to have already commenced negotiations with a range of renewable energy projects for future supplies of power, and the renewable industry is pushing the state government to create a renewable energy zone in the region.

However, Howell said the smelter would need to secure “firming” or backup supply contracts with gas generators, raising the prospect of a deal with the new taxpayer-funded gas generator to be built by Snowy Hydro at Kurri Kurri.

The Kurri Kurri generator, which Snowy Hydro is developing at the instruction of the Morrison government, is expected to operate just a few times a year and its financial viability is likely to be dependent on its ability to secure such firming contracts.

The production of aluminium is an electricity intensive process and aluminium smelters generally rank amongst the single largest users of electricity in the Australian grid.

The Tomago smelter draws a continuous 850MW of demand from the grid when it is operational – representing around 10 to 15 per cent of the total electricity demand in New South Wales.

An offtake deal with the smelter could support the construction of thousands of megawatts of new wind and solar projects, and lead to a significant reduction to the state’s greenhouse gas emissions, should it result in the early closure of the Bayswater power station.

Howell added that he remained sceptical about the ability of battery storage technologies to deliver the same energy firming services in the future and cited the recent Tesla Megapack fire at the Victoria Big Battery that he thought raised a “risk management” issue.

Howell, however, did not mention a recent explosion at a Queensland coal fired generator, that rendered a unit at the Callide C power station unusable.

The Bayswater power station is owned and operated by AGL Energy, which has flagged its intention to run the power station until 2035.

However, if the power station was to lose its largest customer before that date – being the Tomago smelter – AGL may be forced to reassess the viability of operating the power station from 2029 onwards and could see it decommissioned as many as six years earlier than planned.

AGL Energy said it had not yet revised the intended closure date for the Bayswater power station.

“Our commitment to continuing to play a leadership role in Australia’s energy transition directly aligns with Tomago’s ambition to decarbonise their operations and we look forward to our ongoing engagement with them on how we can work together to achieve this,” AGL Energy’s Chief Operating Officer, Markus Brokhof said.

“We are committed to the Hunter region and continue to progress our plans to transform our thermal generation sites into low-carbon integrated industrial energy hubs that will support the decarbonisation of Australian industry, with work already underway on the Liddell Energy Hub.”

The news comes a day before AGL is set to reveal its financial results for the 2020-21 year, a tricky period for the company undergoing its own transformation in response to the rapid transformation underway in Australia’s energy market.

In response to the comments from Tomago, Greenpeace Australia said the announcement would put significant pressure on AGL Energy to reassess the future of the Bayswater power station, while also raising concern about the potential deal with a gas generator.

“This announcement is a game-changer for Australian energy, and underscores the need for AGL, Australia’s biggest coal power operator, to rapidly switch to renewable energy production to keep up with the demands of the market,” Greenpeace Australia senior campaign Glenn Walker said.

“AGL has planned to push the life of its Bayswater coal-burning power station well into the 2030s, but with its biggest customer, Tomago Aluminium, showing energy leadership and switching to renewable energy by 2029, it’s almost impossible to see how AGL can avoid bringing forward Bayswater’s closure.”

“We’ll be watching claims of a gas back up for Tomago closely. Gas is a dangerous, expensive fossil fuel that’s a primary driver of climate change, and has no place in Australia’s energy transition,” Walker added.

The Australasian Centre for Corporate Responsibility (ACCR), which has called on AGL Energy to set corporate emissions targets that are aligned with the Paris Agreement, echoed the call for AGL to revise the closure date for the Bayswater power station.

“AGL now has the perfect opportunity to set Paris-aligned targets before its proposed demerger goes to a vote,” ACCR’s Dan Gocher said. “Setting a clear closure date will allow workers and the community time to adjust and transition. AGL must ensure workers are repositioned or retrained throughout the closure.”

“The NSW government has proven that with the right policy settings in place, the energy transition can be accelerated. Businesses should get on board and commit to ambitious emissions reduction targets as Tomago has done.”

The Portland Aluminium smelter in Victoria was saved from the brink of closure in March, when the Victorian and Federal governments agreed to subsidise the plant’s electricity contracts.

In return, the Portland Smelter will act as a sort of big battery and provide demand response services to the energy market in a move that highlight the role that the major industrial electricity users can play in actively contributing to ongoing reliability of electricity supplies.

See also: Wind and solar could play key role in future of Australia’s aluminium industry