More than 1,000 direct jobs at Tomago Aluminium and an estimated 5,000 indirect jobs across the Hunter have been secured under an agreement between the Australian and NSW governments and the aluminium producer.
The two governments have jointly committed $2.5 billion to support the smelter beyond the expiry of its current electricity supply contract on 31 December 2028.
Tomago Aluminium has agreed to invest at least $1.1 billion in the facility as part of the arrangements, including $100 million for further decarbonisation work and an electricity demand-response program.
The agreement is intended to provide the smelter, Australia’s largest single electricity user, with a long-term renewable energy solution that allows it to continue commercially sustainable operations beyond 2028.
Nearly 3 GW of generation and firming capacity
The government investment is expected to underpin nearly 3 GW of new renewable generation and firming capacity for the NSW electricity system.
Tomago’s electricity requirements have been central to negotiations over the smelter’s future because of the scale of its power consumption and the approaching end of its existing supply arrangements.
Federal Climate Change and Energy Minister Chris Bowen said the company had approached the Australian Government last year over its future electricity requirements.
“Tomago Aluminium has made it clear: to remain competitive and secure its future the smelter needs a reliable and affordable supply of renewable energy, with ageing coal-fired power options being prohibitively expensive.”
At a press conference in Tomago on Thursday, Bowen said the 3 GW would come from a portfolio of projects, predominantly across NSW. He said potential sources included wind projects and solar backed by batteries, including projects already in development that had not yet reached final investment decision.
The government announcement said the new generation and firming capacity would support energy reliability and affordability in NSW while helping decarbonise electricity used by the smelter.
Smelter to change how it uses electricity
The agreement also involves changes within the Tomago operation itself.
Of the company’s minimum $1.1 billion investment, $100 million has been allocated to further decarbonisation activities and a demand-response program designed to provide flexibility services to the NSW electricity grid.
Under demand response, the smelter would adjust its electricity consumption to support the power system when required. The program aims to position Tomago as an international leader in electricity demand response and flexibility services.
The arrangement links the continued operation of a large industrial electricity consumer with investment in additional generation and the ability to alter demand as conditions on the grid change.
Governments share $2.5 billion commitment
The Australian and NSW governments are sharing the $2.5 billion commitment equally, with NSW’s contribution capped at $1.225 billion over the decade from 2029.
The arrangements also include a mechanism under which revenue will return to the Australian Government when aluminium prices are high.
Prime Minister Anthony Albanese said maintaining aluminium production in Australia was connected to the country’s broader manufacturing capability.
“This site isn’t just important for Newcastle and the Hunter, it’s a critical asset for the country and our manufacturing future.”
Australia has an end-to-end aluminium supply chain encompassing bauxite mining and alumina refining through to aluminium smelting and advanced manufacturing.
Tomago is Australia’s largest aluminium smelter and the country’s largest single electricity user. The government’s announcement said keeping the facility operating would retain domestic industrial capability as well as its direct and indirect employment.
Certainty beyond current power contract
The agreement resolves a key question over Tomago’s operations after its existing electricity supply contract expires at the end of 2028.
The company will now continue operating beyond that date, subject to implementation of the arrangements announced by the governments.
“This is a great outcome for our workers, who have lived through a great deal of uncertainty over the last two years, and for the Hunter region and local businesses and suppliers who Tomago is such an important part of the community,” Tomago CEO Jerome Dozol said.
“This agreement provides the certainty needed to invest in the future of the smelter. Over the coming years, we will invest A$1.1 billion to improve reliability and performance, extend asset life, and strengthen our competitiveness.”
