PERTH (miningweekly.com) – The Australian government has offered aluminium major Alcoa a A$76.8-million commitment over a four-year period to support the Portland aluminium smelter, in Victoria, as the state struggles with energy supplies.

Minister for Energy and Emissions Reduction Angus Taylor on Monday pointed out that the Portland facility is a major user of electricity, representing around 10% of Victoria’s electricity demand.

To ease pressure on the Victorian electricity grid, which has been impacted by the premature exit of the Hazelwood power station and the rapid investment in intermittent renewables without firming, the smelter could reduce its demand to help avoid black outs in the region.

The federal government is now proposing to underwrite revenue earned by the Alcoa-owned facility for reducing its load when the supply-demand balance is tight.

Taylor said that the government would provide Portland with a guaranteed Reliability and Emergency Reserve Trader (RERT) revenue of up to A$76.8-million over four years to 2024-25, subject to negotiation.

The underwriting is temporary and will cease once post-2025 electricity market reforms are in place that better value the essential system services provided by large industrial loads.

In return for government underwriting, Portland would be required to participate in the RERT to the maximum extent possible.

Taylor said the government was focused on maintaining the reliability and security of the electricity system.

“The Portland aluminium smelter provides unique and valuable energy services and emergency reserves to the grid, particularly over summer. It is three times larger than the largest battery in Australia and has been vital to avoiding black outs in previous summers.

“The government will ensure Portland continues to play that important role and is appropriately compensated for the grid services it provides.

“However, the government’s underwriting is not a silver bullet. We need more dispatchable generation in the system, and we need mechanisms to keep providers of valuable system services participating in the energy market.”

Taylor said that the Australian Energy Market Operator and energy company AusNet also had an obligation to ensure Portland was able to continue to provide these energy services to the grid to deliver affordable, reliable power for consumers.

“The Commonwealth is working productively with the Victorian government to ensure assistance is provided, as it did back in 2017. The government will continue to take necessary steps to ensure an affordable, reliable and secure electricity system to power Australian homes, businesses and industries,” the Minsiter said.

The Portland smelter is a joint venture between Alcoa, CITIC and Marubeni Aluminium Australia, with Alcoa acting as project operator. The smelter has an annual capacity of 358 000 t and produces 22.5-kg aluminium ingot, with the majority of the product produced exported to customers in China.

The smelter is estimated to produce some 19% of Australia’s total aluminium production, and is the largest employer in the region, with 470 direct employees and 160 contractors.