Rio Tinto makes power supply deal with federal and NSW government to cut emissions and decarbonise, preventing potential closure
Follow our Australia news live blog for latest updates
Get our breaking news email, free app or daily news podcast
Resources giant Rio Tinto says Australia’s largest aluminium smelter will run entirely on renewable energy by 2033 after it struck a $2.5bn subsidy deal with the federal and New South Wales governments to prevent a potential closure.
The deal – announced by Anthony Albanese and the NSW premier, Chris Minns, at the Tomago smelter near Newcastle on Thursday – is for a 10-year below-market power supply guarantee that begins after the facility’s existing coal-focused electricity contract with AGL ends in December 2028.
The governments said the deal would underpin nearly 3,000 megawatts of new renewable and “firming” capacity in the state, more than a giant coal station.
Rio Tinto, a joint owner of the smelter, said it meant by 2033 the smelter would run on clean energy only and cut its annual greenhouse gas emissions by 7.1m tonnes a year, equivalent to 1.5% of Australia’s annual climate pollution.
In a statement, Rio Tinto Aluminium and Lithium’s chief executive, Jérôme Pécresse, said the smelter had a pathway to “long-term, cost-competitive, low-carbon power”.
The deal is the latest in a series of Albanese government bailout packages meant to ensure major industries keep operating. Other commitments include $2bn for Rio Tinto’s Boyne aluminium smelter in Queensland and $2.4bn for steelworks in the South Australian town of Whyalla.
Aluminium production is particularly vulnerable to rising power prices due to its huge electricity use, and the Australian industry has for decades relied on cheap long-term supply deals. Tomago is the country’s largest single electricity user, taking more than 10% of total generation in NSW. It directly employs about 1,000 people, and is claimed to indirectly support about 5,000 more.
The smelter’s owners committed to invest $1.1bn in Tomago over the next 12 years, including $100m for “decarbonisation activities”, as part of the deal.
The federal climate change and energy minister, Chris Bowen, said Tomago Aluminium had told the governments that the smelter could no longer rely on coal-fired power and did not have confidence that enough renewable energy was being built to keep it operating.
“We agreed … and so we worked on a very innovative arrangement together with New South Wales, working with our government agencies, Clean Energy Finance Corporation and Snowy Hydro, to bring on that renewable energy,” he said.
Bowen said the renewable energy developments would not all be in the Hunter Valley, and would be “spread predominantly out through New South Wales”.
“It will take projects which have been worked on in the pipeline that maybe have already received environmental approval, but haven’t reached final investment decision,” he said. “Some will be windfarms, others will be solar backed by batteries.”
