Ross Greenwood speaks to Matt Howell, CEO of Tomago Aluminium, about why the electricity grid is at crisis point after they had to shut off its potlines last week due to power shortages
Introduction: The lights almost went out in New South Wales
Ross Greenwood: While all of the crisis in electricity was taking place last week, one person who was living with it real time is Matt Howell. Now, Matt Howell, and we’ve had him on the program quite a number of times before, is a chief executive of New South Wales’ biggest electricity consumer and that is the Tomago Aluminium Smelter.
The Tomago Aluminium Smelter as you maybe aware has in the past had almost crisis point during summer months, but in the past rarely is this occurred during winter. When all of that conspiracy of events took place last week, when there were the outages planned, and unplanned outages, especially of the coal-fired power stations, guess what?
Matt Howell, the largest user at the Tomago Smelter suddenly almost, again, had to compromise his own operations as a result of a need of the overall community to have that electricity. He’s on line right now. Many thanks for your time, Matt.
Interview with: Matt Howell, CEO, Tomago Aluminium
Matt Howell: Good to be with you, Ross.
Ross Greenwood: Okay, so you and I have discussed before, about your arrangements with AGL, and your arrangements are that they can come to you and seek agreements to be able to take down, potlines for temporary periods of time, to try make certain of the overall electricity grid in New South Wales remains robust. Is that pretty much what happened last week?
Matt Howell: Yes, last Tuesday and Thursday was a lack of dispatchable reserves capacity in the electricity market, and this was indeed confirmed by the market operator AEMO’s. Quite simply our energy system in this country has become degraded.
Now when that happens as it did on Tuesday and Thursday, wholesale prices spike to a crazy level, around $14,000 a megawatt hour. That may not mean a lot to the average listener, or certainly to motorists, we can put in terms they would understand, it would be equivalent to paying more than $400 a litre for petrol
Ross Greenwood: $400 a litre for petrol, think about that. That’s what its spiked to. It was only for a brief period of time. It came back relatively quickly, but they were the spikes. Those spikes happened not only on Tuesday but they occurred again on Thursday and again on Friday.
Coincidentally it happened, generally, when people came home at around 6:30 in the evening, and everybody got home, realized it was cold, turned their heaters on pretty much all at the same time.
Matt Howell: Correct and this is not about our contract with our energy supplier, that’s actually working exactly as what it was intended to do. What was not intended is the wholesale price spiking to ridiculous levels far too often. When we need the power most, as you say, early mornings and late evenings in the winter.
The solar resources are simply not producing, have a look on your window right now, and there’s often very little wind. When we don’t have the solar, we don’t have the wind, and the electricity system becomes distressed, somebody has to shed load.
It’s true that we could stay online, but we would be losing $5,000,000 per hour. Even then, if there’s insufficient reserve capacity, like we saw, it’s likely the electricity grid will hit a critical level, as it did in February 2017, and the market operator will physically remove our load to avoid rolling blackouts elsewhere.
Ross Greenwood: In other words, to avoid you having to pay $5,000,000 per hour, effectively, for your electricity, which makes yourself thoroughly uneconomic, you can deliberately take down your potlines, push the electricity that you might have otherwise used back into the grid.
That, of course, gives more supply into the overall market and hopefully means that others further down the line, maybe people at home or people in other sorts of industries don’t ought to have brownouts or blackouts.
Matt Howell: That is absolutely true. Last Tuesday and Thursday, late evening, when the solar panels weren’t working but very little wind. Something had to give that was us. What we say is that if we want to be a manufacturing powerhouse in this country, we need internationally affordable and reliable energy. It cannot be dependent on the weather.
This is the very essence of the Federal Government’s national energy guarantee, which we’re very strong supporters of that requires intermittent generators to firm up or guarantee their output by contracting this conventional thermal generators, because we just can’t have the lights going out in industry because the weather’s no good.
Ross Greenwood: Okay. A lot of people will come in, and I get abused of all sorts of people of being, “You’re old fashioned, you’re all about coal and this is all a terrible thing.” but the truth is if you actually have a look at where the electricity is generated, in not only in this state but all of the states around Australia, it is broadly the baseload of coal.
It’s not about putting more wind or more solar into it, because the truth is with the wind and the solar it’s not a lot of electricity in totality and secondly, as Matt says, if the sun is not shining and when you’ve got a very cloudy day, on very cold days when there’s peak electricity usage out there, guess what?
You don’t actually have any solar going into the system, that is part of the fundamental problem of why you need the baseload of something such as coal-fired power or gas generation or nuclear, if we had it, which we don’t. They’re the issues, aren’t they, Matt?
Matt Howell: That is absolutely true, there’s no aluminium smelter anywhere in the world powered by wind and solar and backed up with batteries. Then let’s call a spade a spade, the largest battery in Australia, the so called Hornsdale Power Reserve, in South Australia, it would power our smelter for less than eight minutes.
Clearly it’s a nonsense. There are smelters around the world that are powered by hydro but they all have access to a large nuclear feed. Canada, France, 70% of France’ energy comes from nuclear, the bottom line is if we want energy intensive manufacturing industries in Australia, we need conventional thermal baseload generation.
I would say that if it’s good enough to export millions of tons of high quality thermal coal from Australia to feed the world’s growing fleet of advanced low-emissions power stations, then it must be good enough to do the same thing here. To do anything less is rank hypocrisy.
Ross Greenwood: Okay. Then the final part of this comes in, that even though we have got those various power stations that were downed for either planned outages, because this is unseasonal weather that has conspired to cause this situation last week.
On top of that also those that had issues and because many of the coal-fired power stations are aging, they’re going to have increasing issues of maintenance going forward, especially if you close things such as, well, Hazelwood last year in Victoria. Now, Liddell is coming in 2020.
I did even notice today advertisements being put out through Seek, seeking teams of people to start in August this week, to actually facilitate the shutdown of the Liddell Power Station. God forbid that.
You also then had AEMO over the weekend, on Today, coming out with the statement saying, it again underscores AEMO’s concerns about the impact of the Liddell retirement and how support for the complementary emission and reliability components contained in the national energy guarantee.
Even the agnostic regulator is warning about the closure of Liddell.
Matt Howell: Correct and rightly so, because you will remember, Ross, back in February 2017, when we had, during the heatwave, all of our potlines off at one stage or another. Late afternoon, it was summer, but New South Wales solar resources were producing just 18% of capacity.
Anybody that tells you that we’re going to have a high proportion, 50% or more renewables and no coal, quite frankly that’s using a black and white mind on a color coded problem, it’s nonsense.
Ross Greenwood: Tell you what, always good to have you on the program, we’ll continue this conversation, because it’s too important to let it go, and it’s too important to let, not only industry go, but to basically allow the electricity grid to be held to ransom, and also for very very high prices.
Matt Howell is the chief executive of the Tomago Aluminium Smelter, the largest electricity consumer in New South Wales. Again, last week as a result of outages had real problems in trying to make certain of the electricity grid in his own smelter were not really compromised at that time.
Matt, many thanks to your time.
Matt Howell: Good speak with you, Ross. Thank you.
[00:07:56] [END OF AUDIO]
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