Federal Government under internal pressure to scrap Renewable Energy Target costs for aluminium industry

Updated

A call from Federal Government backbenchers to scrap Renewable Energy Target (RET) costs for the aluminium industry is understood to have the Environment Minister's support.

Twenty-five Coalition backbenchers have signed a letter to Greg Hunt and Industry Minister Ian Macfarlane calling for aluminium production to be fully exempt from the target from next year.

The RET is designed to ensure Australia gets 20 per cent of its electricity from renewable sources by 2020. Aluminium smelting already gets a partial exemption from RET costs.

Victorian Liberal backbencher Dan Tehan is leading the charge for a 100 per cent exemption and says the industry forecasts it will be paying up to $80 million a year in RET costs by 2017.

"They are concerned that there has been a smelter that has closed in the last two years, one which is scheduled to close this year," he said.

Norsk Hydro mothballed its Kurri Kurri smelter in New South Wales in 2012, and Alcoa is closing its Point Henry smelter in August.

Mr Tehan says aluminium smelting should be treated as a special case because it uses so much energy.

"The amount of electricity they use in production means that they stand alone when it comes to the cost that the RET imposes on them," he said.

He says the industry is also important for the stability of the electricity grid.

"For instance the smelter in Tasmania uses 25 per cent of the electricity in Tasmania, in Victoria it's roughly 10 per cent," he said.

The Government says it remains committed to the RET but the ABC understands Mr Hunt believes the push regarding aluminium is sensible.

Australia on track to reach RET: Origin Energy

Falling energy demand has some predicting Australia will well exceed the 2020 target.

Origin Energy quotes figures indicating Australia is on track for 27 per cent of its energy to come from renewable sources by then.

Mr Tehan says the aluminium industry has done modelling showing Australia could still meet the 2020 target, even if it was granted a 100 per cent exemption from RET costs.

A Government-commissioned review of the RET is due soon but crucial cross-bencher Clive Palmer has dealt a blow to anyone hoping it will lead to a lower target, saying he will not support changes until after the next election.

Mr Tehan says he is particularly concerned about the RET costs the industry faces because the Portland Aluminium smelter is in his electorate.

He says the smelter employs 725 people and accounts for about 10 per cent of the electricity used in Victoria.

Portland Aluminium is a joint venture managed by Alcoa.

The company has not indicated plans to close it or cut jobs but Mr Tehan says the industry as a whole is under pressure.

"With the dollar where it is, with the aluminium price where it is, there are pressures on the sector and if we're putting additional costs on the sector as well there is the potential for the industry to be hurt ... that's why I'm speaking out now," he said.

Tasmanian MPs point to Bell Bay smelter as case for exemption

Tasmania's Premier Will Hodgman has added his voice to the call to exempt Rio Tinto's Bell Bay smelter.

He argues the state's aluminium producers are a special case.

"It's critical though that Tasmania is recognised for leading the way in renewable energy, and we've made significant investments over many decades," he said.

"Equally we've got important employers in Tasmania who themselves are making considerable effort to reduce their environmental impact.

"We need to argue strongly as we're doing to have them exempted from this regime."

The petition has also been signed by Tasmanian Liberal MPs Andrew Nikolic and Eric Hutchison as well as Queensland Nationals MP Ken O'Dowd.

Mr Hutchison says the smelter in northern Tasmania is a significant employer in the state.

It uses about a quarter of the energy generated by the state's major power company, Hydro Tasmania.

"It's such an important sector; jobs are so vital in this part of the world. Anything that actually is a burden on that we should be looking to support."

The Bell Bay smelter's general manager Ray Mostgol said earlier this month energy made up about 30 per cent of smelting costs and the RET requirements were compromising the industry’s sustainability.

The smelter, which employs 500 people, has cut 20 per cent of its workforce in the past two years and reduced costs by $250 million because of historically low prices.

Mr Nikolic says the exemption would save the business about $10 million a year and should be ongoing.

"Tasmania is unique as well because the power we use in Tasmania is over 80 per cent renewable energy so from my perspective I think this should be a continuing thing in the future," he said.

But the previous Labor government's climate change adviser, Ross Garnaut, says the aluminium industry should not get a full exemption from RET costs.

"To exclude the aluminium industry from the costs of the Renewable Energy certificates but to allow them to gain from wholesale prices being lower would just be to take business entitlement to a new level," he said.

Topics: federal-government, electricity-energy-and-utilities, alternative-energy, federal-parliament, australia

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