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Whyalla’s not a ghost town, it’s the centre of a green industrial revolution

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So, it turns out that Whyalla will not become a ghost town after all. The carbon price didn’t kill it, and neither did the renewable energy target that Tony Abbott wants to finish off. And neither did the closure of the nearby coal generator that was supposed to destroy industry in the state.

What almost did kill it was an unflinching refusal to move with the times and embrace new technology. Now, however, Whyalla may come to haunt the likes of Abbott and the renewable energy nay-sayers:

It is going to be at the heart of a green energy industrial revolution. Australia’s largest integrated steelworks – under new ownership – will, in effect, be saved by a suite of wind energy, solar farms, battery storage, pumped hydro and co-generation.

That, at least, is the promise of UK billionaire Sanjeev Gupta, who followed up his purchase of the bankrupt Whyalla steelworks with the purchase this week of a majority stake in Zen Energy, the Adelaide-based solar and battery storage company chaired by economist Professor Ross Garnaut. (See our earlier story here).

In a week which saw Abbott threaten to cross the floor if the government supported another wind or solar farm, and say “you can’t run a steel plant on renewables,” while commentators foamed at the mouth over the prospect of more renewable energy (2GB’s Steve Price said Labor’s renewable energy target would “destroy” the economy), Garnaut was asked this by a disbelieving ABC.

“What’s driving this deal? Is it a belief that renewables can power steel works?”

To which Garnaut responded: “It is not a belief, it is the economic reality,” and pointed to the experience of Gupta’s operations in the UK, using renewables including tidal energy to rescue British Steel.

Garnaut told Reneweconomy on Thursday that SIMEC Zen, as the new joint venture will be called, hopes to reduce energy costs at Whyalla by at least the 30 per cent achieved by Gupta when he took over British Steel  and transformed its energy supply to majority-based renewables.

“We think we can do at least that,” Garnaut says.

How? Well, Garnaut says Zen has already put in place plans for a 80MW solar farm to be built near Whyalla, to supply the steel works and the newly named Liberty OneSteel has already said it wants to increase the size of that project.

There are also plans for a 120MW pumped hydro facility – with “many hours of storage”, to be built in one of the depleted iron ore mines in the nearby Middleback ranges that supplied the ore for the steel mill.

And the steel works will look to tap in and contract the multitude of wind farms in the area when necessary. It will also look at co-generation, using the considerable amounts of waste heat and gas to generate more power. Australia, Garnaut says, is incredibly wasteful when it comes to heat.

Across the Liberty OneSteel portfolio in Australia, which includes steel mills in Melbourne, Sydney and Newcastle, and numerous other facilities, SIMEC Zen will also look to install solar on around 150 rooftops.

“Through the clever use of new technologies – with a preponderance of renewables – we will be able to reduce the costs of power, improve the reliability of power, and unlock australia’s potential as economically rational base for energy intensive industries of the future,” Garnaut says.

“We’ll find lowest cost sources in each case, and it will be with a lot of renewables.”

He says the deal with GPG and its offshoots gives Zen the “horsepower” to continue with its plans for large-scale solar and battery storage projects, and its first big customer in its new energy retail business (it formally applied for a licence last week).

Those plans include Zen’s own “big battery” near Port Augusta. It got pipped by the Tesla big battery” in the recent South Australia tender, but intends to proceed with its project, once its clear about the market opportunities.

Garnaut hints at a size of 100MW, but that and the amount of storage will depend on what it will be used for. “Once we have locked in enough contact we will finalise that investment,” he says.

Sanjeev Gupta: Supplied by company.

Sanjeev Gupta: Supplied by company.

“It turns out that Sanjeev’s (Gupta) view of the future is pretty much the same as ours,” Garnaut says. “This deal locks in one of Australia’s largest industrial customers, it gives us access to capital for expansion and experience in technologies that we haven’t ourselves employed to date.”

These technologies include  bio-energy, the use of waste heat for power, and in tidal power. “It strengthens us all round to do the sorts of things we were going to do.”

It is just over six years ago that then Opposition leader Abbott visited Whyalla in anti-carbon price campaign mode, saying: “Whyalla will be wiped off the map by Julia Gillard’s carbon tax, Whyalla risks becoming a ghost town, an economic wasteland if this carbon tax goes ahead.”

Abbott then went on to say that the Coalition “has a strong and effective policy to reduce emissions by planting more trees, getting better soil and using smarter technology …  What we don’t want is to damage Australians’ cost of living by putting up the cost of power and fuel and to destroy our manufacturing industry by making it uncompetitive with manufacturing overseas.”

The bitter irony is that energy prices have more than doubled for manufacturers since the Coalition took power and canned the carbon price.

South Australia premier Jay Weatherill said the deal was a major vote of confidence in the state’s economy and the State Government’s leadership towards a renewable energy future.

He said it reinforced the leadership of the Upper Spencer Gulf in renewable energy, given the largest solar thermal plant that will be built near Port Augusta, and other major solar PV and wind projects.

“This really is the holy grail of energy policy – a major industrial player choosing to invest in renewables to supply their large-scale power needs,” Weatherill said in a statement.

“It’s clear – coal is the past, renewables are the future.”

That message is also a challenge to other big steel-makers and energy users in Australia, such as Gupta’s big rival BlueScope, which allowed Abbott to campaign against the carbon price quoting them as saying a carbon price would be “economic vandalism” and has been railing against renewables ever since.

The real economic vandalism is coming from those who refuse to adapt.

  

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  • Joe

    Whyalla and South Australia to become the low cost, low emission manufacturing dynamo of the Australian economy. Goodbye Holdens etc and hello Mr Sanjeev and everyone else that wants to setup in SA and be part of The New Economy.

  • wayne

    Pumped Hydro. Could the same be done at Victoria’s Hazlewood pit . There is a very large storage pond aside the old power station and a very large deep pit they are filling in with dirt and water….?

  • JIm

    Do you think Abbott will visit Whyalla? That may depend on whether it’s a community he felt deeply concerned about or treated as a political opportunity and little else.

    • Joe

      The Abbott’s map has Whyalla marked as….. “Wiped off the Map”.

      • JIm

        Got it. Abbott’s map shows ‘no where to go’.

      • David Hart

        or “Why Allah”?

  • bedlambay

    I have far more faith in Mr Gupta than Mr Adani and would much prefer government backing for the former and nil for the latter.

  • Brian Tehan

    Whyalla, with its existing foundry, access to iron ore and plentiful renewables, including possible storage, could be one of the early adopters of iron production using hydrogen instead of coking coal. It could be the beginning of Australia’s rise as a renewable superpower. All we need to do is get rid of the existing science denier federal government.

    • neroden

      You’re talking direct reduced iron, I assume? Still generates some CO2 but much less than coking coal.

  • Cooma Doug

    Great news thanks for the info.
    The coal story is getting a bit stinky. Its been like the weapons of mass destruction charade.
    It will move onto a new level of
    Murdocion fixion we have never seen.

  • BushAxe

    The divide between those with a vision for the future and those stuck in the past grows every day. It astounds me that BHP hasn’t modelled solar PV and PHES for Olympic Dam considering its solar resources and its vast underground caverns (400-600m below the surface) would be ideal.

  • Nick Thiwerspoon

    I’m interested to know how you can reduce iron ore without carbon. I tried googling the subject to see how Gupta’s steelworks in the UK are doing it but didn’t get very far. Anybody here know how he’s going to take coal out of the process?

    • Jodie Green

      Get in touch with [email protected]

      • Nick Thiwerspoon

        Thank you for the suggestion.

    • Peter Campbell

      Redox Chemistry. Iron oxide plus a reductant gives iron plus reductant-oxide. The reductant does not have to be carbon going to carbon dioxide. It could be hydrogen going to hydrogen oxide (aka water). In principle there are other things that could be oxidised as iron oxide is reduced.

      • Thanks for this Peter. Best and most succinct explanation I’ve seen. Now that stuff starts to make sense for me! Sounds like a much better use for renewable powered hydrogen than going into vehicles.

      • Nick Thiwerspoon

        Thank you for that. I didn’t think that hydrogen is also a reductant — not because I didn’t know, but because I’d never heard of it used during steel making.

        • Peter Campbell

          I do know some chemistry but I am not remotely expert about steel. I think you would still need some carbon input since I think steel needs carbon, not just to burn to produce heat and remove oxygen from the iron oxide but also as a component.

    • Mike Shackleton

      You don’t have to use coal to source carbon – wood waste turned into charcoal could be used, old car tyres can be used.

      • Nick Thiwerspoon

        True. But the article mentions cost reductions from using renewables

        • Mike Shackleton

          The heat for the furnace is generated from electricity rather than burning coal. You then just need to add carbon to complete the alloying process. If you use old car tyres you are using a waste product.

          • Nick Thiwerspoon

            Thansk for that. Do you know what the percentage needed for each part of the process is? Is it 80/20 or 50/50?

    • Andrew Scott

      The Whyalla Blast Furnace has 12 Tuyeres that are used for forcing superheated (1170 degrees Celcius) hot blast air into the burden of coke, lump iron ore and pellets.

      It is possible, by use of a lance through each Tuyere, to inject a gas such as Coke Ovens gas or Natural gas, to boost the performance of the furnace.

      In the case of Coke Ovens gas, about 55% of it is free Hydrogen.

      Hydrogen is known to be a better reductant in some respects than the carbon monoxide that forms from the hot blast on the coke inside the furnace:

      The hydrogen reduces the coke input rate required for reducing the iron ore and pellets burden.
      The lower coke input rate results in a lesser output of CO and CO2 at the furnace top.
      It also frees up some volume in the furnace for charging more lump iron and pellets .
      Increased throughput of lump iron and pellets results in more liquid iron output.
      Gases flow more freely through the burden with less pressure drop.
      The hydrogen produces water in the furnace offgas, not carbon dioxide as is emitted from consumed coke.

      …………………………………………………………………………………………………….
      There is limited availability of natural gas and coke ovens gas at the Whyalla plant for injection into the ironmaking furnace.

      It appears that the above mentioned operational benefits for iron making might be achievable by injection of hydrogen sourced from renewable powered electrolysis of water, if economies of scale can be achieved.

      The oxygen by product of such an electrolysis plant would be a useful addition for the Oxygen storage facility for the Steelmaking furnaces further up the production process.

      It would be appropriate for the SA government’s recently announced Hydrogen Roadmap to re-direct some attention to the potential for these two industrial applications.

      • Nick Thiwerspoon

        Ah, I see. Thank you for your detailed reply. I assumed that carbon of some kind was a necessary reductant, forgetting that hydrogen is also one. One question: Gupta reckons he can cut costs by using renewables, but surely the cheapness of the electrical input is offset by the energy loss during electrolysis?

        • Andrew Scott

          Correct,there will be such a tradeoff.
          I am not familiar with latest developments re electrolysis. Obviously improved efficiency of conversion is a key challenge.

          SOLAR THERMAL for Blast furnace air supply
          Changing subject to the heating of 4,000 tonnes per day of air for the blast furnace operation:

          Currently 3 stoves packed with high temperature refractory bricks are heated in cycles by gas firing. The blast air is subsequently passed through them to heat it up to about 1,170 degrees.
          A Solar thermal capture, storage and recovery system would seem to be a useful adjunct to this air heating system, either to partially reduce or to wholly replace the gas firing of the stoves.
          Some of the $110 millions of Federal loan support for Solar Thermal generation of electricity (or perhaps some ARENA funds) might be well directed to research this possibility.

  • Ian

    Don’t know whether to be overjoyed with this development or to weap. Glad to have innovative use of renewables for a fossil-free power source for this industry but not so happy about another Australian-free industry on our shores.

    • Mike Shackleton

      Honestly, who cares who owns the company? As long as they are employing locals, investing in their business rather than seeking to extract every last cent and are paying their fair share of company tax this development is a good thing.

      Australia will always require a load of international investment – small population dispersed over a large geographic area with big ticket investment items, we can’t sustain it ourselves.

      • Andrew Scott

        Mike,
        I have no quarrel with GFG Alliance ushering in fresh ideas and investment, especially with some RE intiatives.

        However,
        In answer to your rhetorical question “who cares who owns the company?”
        I care and so do thousands of other Australian shareholders.

        Many Australians became shareholders whilst they were employees of Onsteel (and BHP before the spinout of the steel-business arms in 2000).

        Many years of BHP and Onesteel company policies sought to develop employee awareness of the costs accruing in the business and incentive schemes such as small quarterly bonus payments were devised to engage employees in achieving operational improvements.

        Another important scheme was the facility for employees to forgo a small amount of their fortnightly pay to acquire shares in the business. This made some capital available to the business.
        These were effective and important initiatives for the betterment of the business and its employees.

        Since placement of Arrium in receivership under an Administrator,
        Corporate law has looked after the Biggest lenders to Arrium and some payments have been made to suppliers and current employees for outstanding leave entitlements etc

        The shareholders interests have disappeared into thin air without so much as a letter or email from Administrators to advise them of the divestment/disenfranchisement.

        So much for Industrial democracy in Australia 2017!

        • Mike Shackleton

          Shareholders are always the last in line to receive any money if a company goes bust. When an administrator is appointed, their first responsibility is to the creditors. A shareholder is not a creditor, but a company owner with a say proportionate to the size of their stockholding.

          • Andrew Scott

            Mike,
            I have long understood the situation to be as you have described regarding the ranking for distribution of funds. No argument there.

            I have also understood that shareholders have rights, proportionate to the number of shares they hold, to have some say, albeit limited, in company affairs.

            Consistent with this, I thought shareholders were entitled to be kept adequately informed of matters of most importance to the well-being of the company.

            The recent administration process has shown that the latter is incorrect. The rights of shareholders to be consulted and have a say became null and void when the company was placed under administration.

            ……………………………………………………………………………

            The steelmaking enterprise has not closed down, it has improved operations through the past 18 months and it has a future with new investment and new senior management in place. We should all be very pleased with that.

            This prompts two questions:
            Why were the shareholders so brutally dismissed?
            How could the Australian shareholders have been accommodated, or invited to participate, in the new business structure with retention of some residual interest in the business?

  • Andrew Scott

    Giles,
    a good article except for a serious error in the second paragraph where you say “What almost did kill it (Whyalla) was an unflinching refusal to move with the times and embrace new technology.”

    That is incorrect and it reflects unfairly on the attitudes and practices of the workforce and middle management in the steel enterprise, formerly known as Onesteel, latterly Arrium.

    The root cause of Whyalla’s predicament, and root cause of the ARRIUM business catastrophe, was a cultural virus that swept through SA in 2008 and several following years. It was the adoption by civic and industrial leaders, of an irrational belief that pots of gold could be found at the ends of miners’ rainbows.

    It infected the Whyalla Mayor and Councillors and Adelaide parliamentarians and public servants and they became a pro mining cheersquad.

    Eventually the mining mania influenced the Board of Onesteel and the whole identity and primary purpose of the Onesteel steelmaking business was abruptly changed.

    The new identity of ARRIUM ‘the mining business’ was championed to the world. Onesteel was relegated to the sidelines as business caution was cast aside and huge borrowings were made for the mining crusade.

    The rest is very sad history. We must not ignore the lessons offered by it.