Do both Rio Tinto and the Government want Tiwai smelter closed?

There is no doubt that if the aluminium smelter at Tiwai Point was closed it would have a massive negative impact on Invercargill and Southland. But owners Rio Tinto are considering shutting the smelter down.

And it’s possible the Government would be happy to let this happen. The Greens have never liked big industry, Labour may be able to use the large amount of power used by the smelter to be diverted into electrifying transport, and NZ First’s regional development handouts seem to be stacked northward.

Stuff: Rio Tinto ‘not bluffing’ about threat to shut Tiwai Point smelter

A Rio Tinto “closure team” will arrive at the Tiwai Point Aluminium Smelter near Bluff next week to assess what needs to be done if a decision is made to close the site.

NZAS chief executive Stew Hamilton confirmed members of the Rio Tinto closure team would travel to Tiwai next week and be at the smelter for four days.

The work would be ongoing in the coming months, he said.

The team would be tasked with commencing the detailed work needed to assess what was required to be done, should a decision be made for NZAS to close following the conclusion of Rio Tinto’s strategic review.

The closure review work would cover a range of issues which would need to be considered when preparing for a site closure, including regulatory matters and logistics and scheduling.

Last week, Hamilton said an update of the strategic review would be given in February or March.

Hamilton said the financial position of the smelter was serious, hence the option of closure.

“It’s the first time Rio Tinto has announced a strategic review for the site and that means they are actually going to formally go through the process of assessing all the options including curtailment and closure.”

It was “hard to know” how likely closure was, but it was one of the options, he said.

“We have been losing money for some time and we need to make a fundamental improvement in the financial status of the smelter.”

Options ranged from operating at the status quo, which would require cheaper power, to closure of the plant, he said.

Energy Minister Megan Woods  ruled out taxpayer help to keep the Bluff smelter open.

Thomas Coughlan (Stuff): MPs turn up the heat as Rio Tinto Tiwai Point closure consensus grows

There’s a barely perceptible consensus emerging within Parliament that Rio Tinto’s Tiwai Point aluminium smelter should close.

No-one wants to say it in public – what politician would want to stick their neck out for job losses? – but for their own reasons, politicians from most parties think the smelter’s days are numbered.

The reasons are complex. Some of a free-market persuasion see Tiwai as a business on life support, kept alive as a result of a sweetheart deal from Meridian Energy and propped up by a $30 million cash payment from the government in 2013.

Others say the smelter should close for environmental and social reasons.

It consumes 13 per cent of New Zealand’s entire electricity supply. Almost all of its electricity is sourced from a hydro dam in Lake Manapouri that was built for the purpose of supplying the smelter. This allows Tiwai to claim it produces the greenest aluminium in the world, but it also means that an enormous amount of clean hydro-energy is tied up supplying the smelter. Freeing up the 13 per cent capacity and feeding it into the grid would mean we could probably afford to reduce our reliance on the Huntly coal generator.

This coal-fired power plant is kept online to accommodate for peaking periods and dry seasons, when the hydro lakes that generate the majority of our electricity are stretched.

In fact, the strongest arguments for closing Tiwai aren’t actually about closing Tiwai at all – they’re about significantly reducing our reliance on Huntly.

But Manapouri and Huntly are a long way apart.

Someone, either the government or consumers, would also have to step up to pay the cost of getting the electricity from Manapouri to the rest of the country. It’s already hooked up to the national grid, but Treasury estimated in 2012 that an additional $200m will need to be invested to upgrade the lines.

That doesn’t sound much in the whole scheme of things.

But the cost to Southland would be huge.

Southland would be particularly hard hit. Nearly 1000 jobs would go and investors who bought shares in the power companies partially privatised by the previous government would be burnt badly.

Labour and Greens tried hard to burn the partial privatisation of the power companies, arguably reducing the value to the Government in the sales.

The biggest effect of closing the smelter would be on New Zealand’s emissions. Again according to Treasury, Huntly produces 20 per cent to 50 per cent of the generation sector’s total emissions – these would be slashed by closing the smelter.

Some would see that as a compelling reason to let Tiwai close. But:

Tiwai is itself a large emitter, but here’s the rub: it’s a much cleaner smelter than anyone else has got. Closing it would just mean a much dirtier smelter producing aluminium elsewhere. It’d make our emissions look good, but do little for climate change.

Similar claims were made with the oil and gas exploration ban – it could lead to importing more dirtier fossil fuels.

But New Zealand has to take a hit somewhere. We can’t keep saying our aluminium, like our agriculture, is dirty, but cleaner than everyone else’s.

he unforgiving truth is that extra generation will have to come from somewhere and 1000 jobs and $200m worth of power lines is a rather low cost for the “nuclear-free moment” this Government wants climate change to be.

But shutting Tiwai, oil and gas and downsizing dairy may just move the emissions problems to less clean and less efficient places in other countries.

There is another issue we need to face – if New Zealand wants to make a major change to electric transport, it needs more electricity. Or it needs our largest electricity user to shut down, freeing up a large amount of hydro energy.

And there’s another possible complication. Shutting the Huntly coal station, and moving to greater reliance on hydro electricity for transport, leaves us vulnerable to the weather.

Perhaps we can hope that climate change will make our rainfall more reliable, to keep the lakes and dams that power the country full.

Leave a comment

15 Comments

  1. NOEL

     /  30th October 2019

    Report due in March 2020 and a commitment to take power for 12 months if they want to terminate would put closure in 2021 earliest.
    Changing the baseline generation if it folds and possible reduction in my electricity charges is very attractive. Sorry smelter workers and those who picked up those partial privatisation shares.

    Reply
    • Kitty Catkin

       /  30th October 2019

      Sorry, taxpayers who’ll be forking out for 1000 unemployed workers. Even at $300 a week each, that’s $300,000 a week. $1,200,000 a month, so much a year that I can’t work it out.

      Then then there are the businesses which rely on the 1000 workers.

      Reply
      • Blazer

         /  30th October 2019

        Key gave them 30million to stop them whinging.
        By your figures that pays the wages for over 2 years.
        Of course Key also changed the law for Warners…who gratefully referred to NZ workers as ‘Mexicans with cell phones’.

        Reply
  2. Blazer

     /  30th October 2019

    Call the Rio bluff.
    Let them close it down…the world will keep turning,and power capacity could lead to lower prices for hardworking Kiwis! 😉

    Reply
    • Gerrit

       /  30th October 2019

      That assumes that the majority (51%) electricity distribution owner (the State) may pass on the savings to the customer. I would hedge bets on that happening under a state run by a socialist government. The remaining 49% shareholders will equally want to see their dividends increase as well

      They (the socialist government) will know far better how to distribute your money than you do.

      Reply
      • Blazer

         /  30th October 2019

        A non socialist Govt would want to privatise the lot and keep all the profits .
        That’s how NZ’s richest got…rich!

        Reply
  3. Tiwai may claim it produces the greenest aluminium in the world but that claim’s funded by NZ taxpayers.

    The most efficient aluminium smelters are not in the west, where government regs and high energy costs have driven efficiency improvements, but where the main driver behind increasing efficiency is simply to make more metal – China.

    Close Tiwai and let the Chinese get on with it, so that we taxpayers can get a better deal on our power charges.

    Reply
  4. It’ll all come down to haw many votes Labour believes it’ll lose if it shuts. Won’t be winning any electorate seats down there in any case.

    Reply
    • Corky

       /  30th October 2019

      Labours wagon is already down to three wheels, Arty. The passengers are moving to the right side to keep it balanced and moving. Not good for Labour.

      Reply
  5. Corky

     /  30th October 2019

    Close it down. Any honest capitalist has no time for phoney crony industries propped up by other peoples money. But as stated above, the impact for Southland would be huge. Will Southland become the Northland of the South?

    Labour may want to look at what it’s being smeared with before making a decision: 1) All Black loss, 2) Reneging on promises,3) Possible closure of Tiwai Point. Not good going into an election.

    The irony here is this is a situation begging for socialist government intervention to protect workers. Labour has frittered away massive amounts of taxpayers money already…yet they may now be baulking at a ‘bale out.’ for a hugely important industry.

    Reply
    • duperez

       /  30th October 2019

      Bit of a dilemma if no honest capitalist has time for phoney crony industries propped up by other peoples money and no honest capitalist who wants to get into power in the bottom of the South Island would want the smelter to go its own way or close, eh?

      (Just kidding!) The various realities addressed in the smelter story are nowhere near as important or as real as voting box realities.

      Reply
      • Corky

         /  30th October 2019

        You may have to simplify that for me. I think I understand your point(s), but I wouldn’t want to go off on a tangent.

        Reply
        • duperez

           /  30th October 2019

          The honest capitalists in Southland don’t want industries propped up by other people’s money.
          The honest capitalists in Southland want their mob to be in Parliament.

          The honest capitalists in Southland who have grounds to think Tiwai should close down and that Rio Tinto should take a running jump won’t say it or progress that argument because their mob would not get votes. In other words they stick to their principles; the ones about getting and keeping votes that is.

          Get that? Business sense, power supplies, financial position of the smelter, environmental factors, social reasons? Not important, it’s all about the vote.

          Reply
          • Gezza

             /  30th October 2019

            It’s not all just about the vote though. The local spend by those 1,000 workers will be important to the operation of many other businesses, so the loss of those jobs will likely have a ripple effect on the viability of other jobs, housing etc, in the local area & maybe the wider region. That’s the tricky bit for any government I imagine. Calculating the size of the likely tab they will end up having to pick up & budget for.

            Reply
  6. Gerrit

     /  30th October 2019

    Be interesting to know if the original agreement to build the smelter included a site remediation clause. I suspect it may have in which case Rio Tinto cannot just close the plant, it has to completely remove all traces, remove any soil contaminants and reinstate the site to original condition.

    Somehow think that cost is going to be way higher than keeping the smelter going.

    If they do “mothball” the smelter as a way of getting out of a ground remedial clause, the state should force a $300M deposit in an independent trust account somewhere to cover the remediation costs for Tiwai Point in the future.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s