Unions were celebrating and environmentalists reeling last night with the news that aluminium giant Alcoa, Victoria’s biggest exporter, had signed electricity contracts with generator Loy Yang Power for the smelters at Portland and Point Henry, near Geelong, until 2036. The existing power contracts expire in 2016 and 2014.
The cost of the new deal to Victorian taxpayers, if any, was unclear. But after decades of subsidising Alcoa’s cheap power, the government said last night that it was not involved in the new deal and that subsidies would end in 2016.
Loy Yang’s brown-coal power station will supply the Alcoa aluminium power smelter until 2036. Photo: Rebecca Hallas
”The Victorian Government subsidy will no longer be required,” said Emma Tyner, a spokeswoman for Energy Minister Peter Batchelor.
The government also would not pick up Alcoa’s costs in the event of an emissions trading scheme being introduced, Ms Tyner said. Late last year Alcoa pressed the government to shield it from the costs of an emissions trading scheme in Victoria due to the state’s reliance on brown coal, the dirtiest of the major energy sources.
Senior figures in the energy industry and government last night told The Age they found it hard to believe that Spring Street was not involved somehow in the latest deal.
One by-product of the deal is the weakening position of International Power, owner of the Hazelwood and Loy Yang B stations. The deal in effect transfers business away from International Power, a move that may bring forward the closure of the much-maligned Hazelwood, the oldest and most polluting of Victoria’s major power stations.
The ALP is understood to be keen on an announcement about Hazelwood ahead of the November state election.
Taxpayers have been subsidising the smelters since the Cain government finalised a deal with Alcoa in the mid-1980s to build and operate the Portland plant. Last year an analysis by The Age found that the eventual cost of subsidies could be more than $4.5 billion by the time the contracts expire in 2014 and 2016.
In October Rob Maclellan, a former minister in the Hamer Liberal government, which drew up the original Portland deal, described the decision to build the smelter 500 kilometres from its power source as ”absolute madness” and a costly ”disaster” for the state.
Together, Alcoa and Loy Yang Power employ more than 2500 people in Victoria. Australian Workers Union state secretary Cesar Melhem said the deal would secure thousands of jobs that would have been jeopardised if the contracts were not renewed. ”That’s now put to bed, that’s really put people’s minds to ease that for the next 20 years they will hopefully continue to smelt there.”
Environment groups were shocked by the news about a facility that at times consumes as much as 20 per cent of the state’s electricity. Environment Victoria spokesman Mark Wakeham said: “In a time of climate change it is insane to power aluminum smelters with brown coal. Locking this behaviour in until 2036 defies belief.”
Alcoa general manager Alan Cransberg said the contracts would allow the company to expand in Victoria.