Alcoa's Portland aluminium smelter subsidy secures jobs, fails green energy test

　　The smelter at Portland, in the state's south-west, is one of Victoria's largest electricity users and there have been calls from the local community and the Australian Workers Union for both the state and federal governments to ensure its future.

　　The outlook for the facility has been of concern since Alcoa announced a review of all of its smelters internationally 12 months ago.

　　The Australian Workers' Union Victorian branch secretary, Ben Davis, has welcomed the subsidy as good news for the 600 people employed at the smelter.

　　He said that over the past five years the smelter had been forced to power down over summer and, as a result, the company's production levels and income had dropped.

　　But under the Federal Government scheme announced today, the smelter, which uses about 10 per cent of Victoria's power, will be able to draw on up to $19.2 million per year to subsidise its income when it is required to power down during periods of peak energy demand.

　　Member for Wannon Dan Tehan said this would enable power to be returned to the grid, without Alcoa losing income.

　　Mr Tehan said the funding would ensure the state's fuel security by enabling Alcoa "to get a payment which would be consistent with what they would get if normal production [was] able to continue".

　　"[The] Portland aluminium smelter is unique in that it acts like a giant battery for the grid, while at the same time producing export income for the nation," he said.

　　Mr Tehan said if the smelter were to close, Victorians would face higher electricity prices.

　　"If it closed, [it's] entirely likely we could lose another coal-fired power generator, and that would see prices go up and put more instability in the grid," he said.

　　He said the subsidy package would ensure baseload power remained in the grid, while additional renewables were brought online.

　　But Victoria Energy Policy Centre director Bruce Mountain said the Federal Government's announcement was disingenuous and the subsidy had nothing to do with securing the state's power supply.

　　"The way the Federal Government has dressed it up, is that this is a subsidy that needs to be paid in order to have flexibility of Alcoa's demand, and without that flexibility coal generators will leave, and the Victorian power system is going to fall over — I don't think that's right," Mr Mountain said.

　　"That's simply not a plausible explanation for the subsidy — the explanation for subsidy is the Alcoa closure will take a lot of jobs with them," he said.

　　"Keeping Alcoa available and able to reduce demand at short notice doesn't make the Victorian power system any more secure."

　　Mr Mountain said the Federal Government had missed a golden opportunity to make an Alcoa subsidy pre-conditional on a transition to renewable energies.

　　"I think such a major load could have been the basis of an offtake agreement, that could have seen much more wind and solar production construction.

　　"You get new investment to replace coal … and you will ensure Alcoa stays open. That was always the golden opportunity and it looks like the Federal Government has squibbed it."

　　'Long-term sustainability'

　　Alcoa is Victoria's largest exporter of goods and Mr Tehan said the funding would also ensure job stability in Portland.

　　"Through discussions that Alcoa is having with the State Government, hopefully [it] will lead to Alcoa being able to get certainty for another five years, as we continue to look at other options for the smelter — including the use of clean hydrogen," he said.

　　This would "put the smelter on a path for long-term financial sustainability".

　　Mr Davis said the announcement was good news for the staff and local community who had been nervous about the smelter's future since Alcoa announced its review of operations a year ago.

　　"They've announced two or three smelter curtailments or closures in other countries, and obviously we were really nervous about the future of Alcoa, their power deal is coming to a close next June," Mr Davis said

　　"If the package hadn't landed with the Federal Government and if it doesn't land with the State Government, you're not just talking about 600 jobs in Portland.

　　"The economic impact, modelled by The Australia Institute, is about 3,500 jobs across south-western Victoria — that's too high a price to pay to see a smelter disappear overseas.

　　"It's a lot easier to avoid economic carnage rather than trying to pick the piece up afterwards."

　　The Mayor of the Glenelg Shire Council, Anita Rank, said the announcement was a huge relief for the smelter's workers in the lead up to Christmas.

　　"It is about 650 direct (jobs), but because it has such a big multiplier effect with the supply chain, it's not just one business that is affected here," Councillor Rank said.

　　"When you take a major employer out of the community it affects retail, it affects sporting clubs, so they are really embedded and part of our community."

　　The funding scheme is due to end in 2025, when the Federal Government plans to have a new energy market in place to support key industrial players like Alcoa.

　　In return for the funding, Alcoa will be required to participate in the government's Reliability and Emergency Reserve Trader (RERT) mechanism to the maximum extent possible.

　　In a statement, Alcoa said it was encouraged by the Federal Government's proposal to underwrite Portland Aluminium's participation in the RERT scheme.

　　"We look forward to working with the Federal Government to establish an agreement that recognises the valuable contribution Portland Aluminium makes to grid security and helps to ensure the smelter's continued operation," the statement said.

　　"Meanwhile, we continue to work constructively with other industry stakeholders in order to ensure the smelter is globally competitive."