State and territory governments are lining up to cut new energy deals with federal Energy Minister Angus Taylor in a bid to make the electricity grid more reliable.
The move comes as Rio Tinto chief executive Jean-Sebastian Jacques said he had complained to the “highest levels of government” about high electricity prices hurting the company’s aluminium smelters, which could be forced into early closure.
While Mr Taylor and NSW are set to announce more state deals before Christmas, other states, especially Victoria and Queensland, are clambering to make sure they do not miss out on potential funds for much-needed energy infrastructure.
Energy players are still coming to terms with the state deals – as well as NSW’s decision to create its own Energy Security Target – and what they mean for the established energy policy-making bodies, including the COAG energy council, the Australian Energy Market Operator and the Energy Security Board.
After a surprisingly positive COAG energy council meeting in Perth last Friday, Victorian Energy Minister Lily D’Ambrosio has had initial discussions with Mr Taylor about support for the KerangLink, the high-voltage transmission line between the Snowy Mountains and Melbourne.
Queensland Energy Minister Anthony Lynham has also issued a wish list to the Morrison government, including funding for new gas transmission lines and the electrification of LNG processing plants on Curtis Island, which would free up more gas for domestic consumption.
The COAG energy council has also vowed to look into a new reliability standard by March next year, despite industry’s concerns it could drive up power prices.
Troubled Rio ‘technology-agnostic’
As energy prices continue to threaten the long-term viability of energy-intensive businesses, the Rio Tinto boss said on Monday he had spoken to senior ministers in the Morrison government – but didn’t reveal who – about the company’s energy woes.
Mr Jacques warned in August that the company’s Australian smelters were “on thin ice” and in October company flagged that Rio might close its New Zealand smelter.
High electricity prices consume a third of the cost of running the energy-intensive aluminium smelters.
Rio Tinto operates aluminium smelters near Gladstone in Queensland and at Bell Bay in Tasmania, and owns a stake in the independently managed Tomago smelter in Newcastle in NSW.
“It’s a very challenging situation,” he said. “Today if I look at the energy costs that we enjoy in Australia, they are very high by any kind of global standards.
“For us to be able to build a sustainable and growing aluminium industry in Australia, one of the things we need to fix – it’s not a ‘nice to have’ it’s a ‘must have’ – is energy costs. That’s what we are working on.”
Mr Jacques wouldn’t be drawn on whether Rio wanted coal-fired power plants to supply the energy to these smelters, telling The Australian Financial Review that Rio was “technology-agnostic”.
“We want energy to be cheap and reliable,” he said.
But he did flag that Rio would embrace green energy if it could power these smelters, when questioned on the ABC Radio National breakfast program earlier in the day.
Rumours have swirled for months about the future of Alcoa’s Portland smelter in Victoria, but the American owners have yet to make a final decision.
Victoria’s Essential Services Commission on Monday announced that default prices for 2020 will go up by about $110 for households and $465 for small businesses, mostly due to rising wholesale and network prices.
But commission chair Kate Symons said that while the default price was going up, savings for households on the offer had been largely preserved.
“Average annual bills for around 120,000 households who are on the Victorian default offer will be $200 to $330 lower than they were pre-VDO, with businesses saving $1000 to $1600,” she said.