Sky interviewing US Studies Centre CEO, Michael Green.

Oh boy. TDS on full display. Apparently “Trump doesn’t have as a big a mandate as people think”. Okay. All three tiers of government plus a reasonably conservative Supreme Court.

But Mandate!

I hope all those tears are being channeled towards LA’s empty hydrants. Sadly a fortnight too late.

What a smashing inauguration speach by Trump

Albanese’s exciting $2 billion Green Aluminium Production Credit scheme has been well received in the usual quarters. “Crucial support”, apparently.

But oddly the Government has provided absolutely no details of how the scheme is actually going to operate – other than $2 billion will be allocated over 10 years, on some unknown basis, per tonne of primary aluminium made with renewable electricity.

Equally oddly, there doesn’t seem to be any media or political eyebrows raised about this huge number being casually dropped on the election table without any supporting information.

So, let’s extract some.

Firstly, the Green Aluminium Production Credit scheme is a response to the industry threatening to shut down in Australia because of the massive cost burden of renewable electricity and the unwillingness of renewable players to come to the table with abundant, ‘too cheap to meter’ power for a solid baseload customer.

In 2017 Tomago smelter had a near death experience when it was curtailed for 4 hours due to a shortage of electricity in NSW (aluminium smelters without electricity freeze, and that’s it). As a result the company (and the industry as a whole) spent years trying to position itself as a prime customer to attract the hoards of renewables investors apparently itching to deliver cheap and abundant power – with Tomago promising Net Zero by 2035. 

To no avail. The Renewables Robber Barons are not interested; cheap power is for other people, renewables entrepreneurs are only interested in maximising returns by trading on the bleeding edge of the NEM, where power is most profitably expensive.

In July 2024, enter a new CEO at Tomago, who promptly declared that the Australian aluminium industry couldn’t survive on renewable electricity because the average power price is more than twice that enjoyed by the international competition – and getting worse. Mining giant Rio (who has interests in 3 of the 4 Australian smelters) joined in with calls for government support.

The result: a panicked $2 billion subsidy to prop up Albanese’s tottering Made in Australia and Net Zero policies and deflect the problem during the election.

It’s a big number but, despite the lack of detail, how far can $2 billion go spread across 10 years?

Firstly, remember the old maxim that ‘aluminium is solid electricity’. It takes about 140MWhr of electricity to produce one tonne of primary aluminium (“primary aluminium” is produced from bauxite ore, as opposed to recycled scrap metal).

Australia produces about 1.5 million tonnes of aluminium per annum – so around 15 million tonnes over 10 years.

Assuming that everyone plays and that $2 billion is spread evenly over 10 years from 2028 when the scheme kicks in, this subsidy equates to around $133 per tonne ($2 bn divided by 15 million) – or about 95 cents/MWhr of input electricity. 

Assuming the $2 billion is spread over, say a measly 10% of total aluminium produced with renewable electricity, this expands to a subsidy of $9.50/MWhr.

With average east coast NEM power prices now running between $140 and $210 per MWhr (currently heavily subsidised by coal baseload) there is something terribly wrong if $9.50 makes even a token renewable push viable. Particularly given that Australia’s aluminium competitors are working with electricity prices in the $50 to $80/MWhr range (actually way less in China).

I could easily be wrong, but without details, it’s hard to see this as a roadmap to the Sunny Uplands of Made in Australia.

But no doubt Top Men have thought all this through.