'Critical': Smelter negotiates for competitive power deal

THE state's high electricity price continues to be a challenge for Boyne Smelter Limited which is yet to secure a competitive power deal for this year.

BSL general manager Joe Rea said securing a viable power deal was critical for the business to remain competitive in the global market.

Boyne Smelters Ltd general manager operations Joe Rea in the metal products area. Photo Mike Richards / The Observer
Boyne Smelters Ltd general manager operations Joe Rea in the metal products area. Photo Mike Richards / The Observer Mike Richards GLA201014BASMLT

They are continuing to negotiate a new electricity supply agreement with state owned generators.

"Recognising an internationally competitive power price is critical for BSL's long-term viability," Mr Rea said.

The smelter became a part owner of the NRG Power Station in Gladstone in 1994 and at the time agreed on a 810 megawatts annual power usage deal was made, current until 2029.

While negotiations are continuing with the power station to increase the annual usage, the smelter is forced to purchase the remaining 15% (140-150MW) from the open market.

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In comparison, the 150MW is enough energy to power every home on the Gold Coast.

"BSL continues to pursue opportunities to secure a competitive price for its 150MW additional load in an environment where the wholesale market price for electricity in Queensland doubled since October 2014," Mr Rea said.

The price of aluminium globally has plummeted over the past seven years. The average price between 1995 and 2008 was $3420US a tonne.

As of 9 January the London Metal Exchange spot price was $1717.

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>> High electricity prices will cause destruction: O'Dowd

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The severe fall in aluminium has come about because of an over-supply in the global market, mainly driven by massive volumes being produced in China. Australia and New Zealand produces 2.1 million tonnes each year, while China produces in excess of 30 million tonnes.

The state's high electricity price has long been a challenge for Boyne Island's largest employer.

Boyne Smelters Ltd, the aluminium smelter on Boyne Island, as seen from an aerial taken December 2014.
Photo Mike Richards / The Observer
Boyne Smelters Ltd, the aluminium smelter on Boyne Island, as seen from an aerial taken December 2014. Photo Mike Richards / The Observer Mike Richards GLA230115SMLT

In the first three months of 2014 the smelter reduced its aluminium production by about 14,000 tonnes because the high electricity price made it uneconomic to run at previous levels.

The three month curtailment reduced production at the smelter by 8 per cent (80 MW) during the summer months.

"The curtailment of production is extremely disappointing given the smelter's owners have invested more than $750 million on capital improvements in recent years," Mr Rea said at the time.

How electricity prices work

Wholesale trading in electricity is conducted as a spot market where supply and demand are instantaneously matched in real-time through a centrally coordinated dispatch process.

Generators offer to supply the market with specific amounts of electricity at particular prices.

Offers are submitted every five minutes of every day.

From all offers submitted, Australian Energy Market Operator determines the generators required to produce electricity based on the principle of meeting prevailing demand in the most cost-efficient way.

AEMO the dispatch these generators into production.

AEMO manages the market in-line with National Electricity Law and National Electricity Rules.



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