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.

Labour’s conflicting priorities with Tiwai

National are in a difficult position on Tiwai balancing then interests of employment in Southland, the electricity market and asset share sales.

Labour are also in a difficult position as they need to find a position that satifies their anti asset sales campaigning, anti foreign multinational investment, and employment.

In Stuff Labour’s financial spokesperson David Parker is reported as saying:

“The optimal solution is to walk away (from the smelter) and let New Zealand have lower power prices,”

After Labour’s campaigns for Government intervention in saving jobs at KiwiRail and Telecom this is a remarkable statement – the Tiwai smelter supports a workforce of about 3,000, and unlike Telecom employees most of them would have real difficulty finding alternative employment in Southland or New Zealand.

Radio New Zealand has reported David Shearer as saying that  “the Government should have stepped in earlier” and been “more hands on”.

He wasn’t clear whether that meant more hands on to walk away from the smelter and the jobs, or more hands on to do a subsidised deal with Rio Tinto on power.

So this leaves Labour in a conflicted and vague position.

Is their anti asset sales campaign more important to them than the Tiwai smelter and thousands of jobs?