Closing the Tiwai Point aluminium smelter down entirely isn’t the answer, but neither is letting it run as before. Jeanette Fitzsimons has a compromise plan

Closing the Tiwai Point aluminium smelter down entirely isn’t the answer, but neither is letting it run as before. Jeanette Fitzsimons has a compromise plan
Tiwai Point aluminium smelter, Southland. (Photo: Creative Commons).

By Jeanette Fitzsimons*

An asset or a liability? Actually, Tiwai is both, but the liability could be turned into an asset with some creative thinking. A structural change in New Zealand’s relationship with the aluminium industry could provide a way forward.

On the one hand, Tiwai uses 13% of our national electricity supply, all renewable hydro from Lake Manapouri. Some want to see that freed up for other uses, to replace coal and gas from Huntly and elsewhere, and give cheaper power to households and other businesses.

Shutting the smelter down would also reduce our national greenhouse gas emissions from all sources by 0.8%, making it easier to meet the targets in the Zero Carbon Act and our commitments under the Paris Agreement. What’s more, those emissions are heavily subsidised by taxpayers because the government gives Rio Tinto free carbon credits under the ETS. This will total some billion dollars by 2030 if the smelter stays that long. There are better uses for a billion dollars than subsidising a rich multinational.

On the other hand, assimilating 13% of our power and 1,000 skilled workers is a very large lump for the national economy to digest. At present the transmission infrastructure to take all that power north from Lake Manapouri doesn’t exist and building it would take a few years, at an estimated cost of $600 million.

While our national climate targets would benefit, the global climate wouldn’t. Tiwai is one of very few smelters powered by renewable electricity, although it is still far from carbon zero (the carbon anodes yield one molecule of CO2 for every molecule of aluminium metal). Tiwai is said to produce the cleanest and purest metal in the world. Globally, three quarters of aluminium is made with fossil fuels, mainly coal, and this would likely replace the product from Tiwai. So if aluminium sales remained the same, global greenhouse gas emissions would rise, but New Zealand would get a boost towards our climate targets. That doesn’t help transform our economy towards zero carbon. We haven’t done much yet, and don’t need a free pass to climate sainthood.

The world needs to reduce its use of aluminium (along with steel and cement) if we are to make any impression on our alarming climate chaos statistics. There are ways of doing this which would result in some smelters closing, but preferably we wouldn’t start with the cleanest, most efficient ones.

The problem that remains if the smelter closes is the size of that big lump of power and people. However the announcement of Rio Tinto’s strategic review hints at a way forward, referring to “curtailment or closure”.

The big issue with 100% renewable electricity is how to meet demand when the lakes are low, the sun doesn’t shine and the wind doesn’t blow. This issue has been greatly overblown – these three things normally don’t all happen at the same time so a mix of the three  gives a reasonable level of security. There are many technologies that can help, from batteries to pumped storage to winter-focussed efficiency. Then there is significant geothermal – not strictly renewable or zero carbon (though generally treated as such) but highly reliable.

However storage – daily and seasonal – is still an issue and electricity is difficult and expensive to store. The government, driven by the electricity industry, plans to provide short-term back up with a number of new gas-fired peaking power stations. This would rule out any hopes of getting to zero carbon by 2050 as these stations will have design lives of at least 40 years, and will need a major new gas user such as a petrochemical plant, to keep the gas flowing.

While you can store electricity short-term in batteries, it is difficult to store it from one season to the next. However it could be embodied in aluminium. The metal ingots will not rot or rust or be eaten by pests, are convenient and not too bulky to store. Contracts can be met by planning to release the ingots during a shutdown to provide continuity to  markets. A “curtailed” – ie scaled down – smelter could be run as part of the electricity system’s dry year storage: making aluminium, and storing some of it, when power is cheap and available, with planned shutdowns when it is not.

Unplanned shutdown at a smelter is a disaster, with the metal “freezing” in the pots, and this has given rise to the perception that they can’t ever close. But these days they can be designed to survive planned closures. Low rainfall in the hydro lakes is fairly predictable and the impact of hydro shortages on the electricity system takes time to develop, so there is time to manage a smelter in response. Stockpiled aluminium ingots can be used to fulfil contracts.

There are four potlines at Tiwai. The plant has been on the market since 2011 with no takers so it would be a buyer’s market. I propose we create a small SOE, linked in with the electricity system, to offer Rio Tinto a reasonable price for the newest, most efficient line – or possibly even two. Meridian, the main power supplier to the smelter, could even start negotiations by offering them $1 for it, absolving them of the legal requirement to clean up the considerable mess there will be when it finally closes. The new owner would market a smaller quantity of premium, renewably powered, very pure aluminium, and usefully release extra no-emissions Manapouri hydro power onto the market.

The lump of extra power then becomes digestible. It could help with the transition away from coal in the South Island where milk and other food processing, schools and hospitals and various small industries are still reliant on coal. Voluntary redundancy might take care of many of the displaced workers, and we retain the skills, earnings and tax contributions of the others. We retain a (scaled down) export industry and the new company becomes part of the operation of the grid. Less transmission infrastructure needs to be built. We save all or most of the ETS carbon subsidy and stabilise our now genuinely “100% renewable” electricity system.

Unfortunately such a commonsense scheme could not possibly emerge from the current cartel-like electricity industry which is totally focussed on increasing its sales and profits. They want to retain thermal power stations because that raises the price they can charge for all electricity. There is ample evidence that they are actively discouraging solar, clean domestic-log burning in winter, and energy efficiency. For example, they want to get rid of the low fixed charge for small users, raising fixed charges to up to $2/day and lowering per unit charges which penalise the thrifty and makes alternatives uneconomic. The public good just doesn’t figure.

This outcome is the eventual consequence of the Max Bradford restructuring and privatisation of the 1990s. It will take a brave, very well informed and advised government to turn this round. No-one in the last 20 years has had the understanding and the courage to take action for the public good. I’m not holding my breath.


*Jeanette Fitzsimons is an energy analyst with a particular focus on climate change and a former Green Party co-leader. This article first appeared on The Spinoff and is used here with permission. 

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Very sensible. Thought the same thing myself.
Hard to see why finding work for 1000 people is such a problem, when we allow more than this many immigrants into the country per week and employers are screaming out that they cannot find staff? Or is this somehow different. The jobs are meaningful, pay decent wages and produce real income for the country. Where as all these immigrants are doing is propping up our ponzie economy, keeping down wages and keeping up up house prices. Thank you Labour Government, you are no better than National and probably worse because of the way that you make so many foolish and costly decisions.

Wow, only a politician could suggest buying a $2B asset for $1 and then get people to say "hey, what a great idea".
Dam I'll pay them double that if they will take $1, do you think Rio is run by idiots ?
You think its just 1k jobs that would be lost, the affect would be 10x that with associated businesses.
Lots of prov ado from all those who would not be affected. This idea has ZERO merit.

Let me remind you that the government can render the smelter totally worthless at the stroke of a pen. (even less effort than that, just fail to pick up the pen.) They own the power station that provides the power and if push comes to shove they can charge what they like. Rio's only option is to walk away and face an enormous cost of re mediating the site. Who else could they sell it to? Also the government could at some point remove the billion dollar carbon emissions subsidy. Ditto above.

My guess is whatever happens, the site will never be remediated by anyone other than the taxpayer, and it's doubtful the taxpayer will pick it up either.

This feels like a solution looking for a problem to solve.
Why would we absolve the owners of a decommissioning cost in exchange for a smelter operating with high fixed costs and a low output, producing aluminium in competition with Iceland’s geothermal at 5 cents a kilowatt hour. Worse than that we would buy bauxite from Australia, add electricity and export aluminium, are we nuts?

I suggest Instead the cleanup cost is of the same order as the transmission line upgrade and the line has a far higher value in the long term as we switch to alternative transport systems.

Also the change to consumer pricing appears to have been kicked down the road, we are existing 4000kwhr annual users and we have a plan with low fixed costs, two rebate structures and a modest monthly total, over the weekend we were advised we can stay on that plan, who would not.

So this article needs an update in my opinion.

"1,000 skilled workers is a very large lump for the national economy to digest. At present the transmission infrastructure to take all that power north from Lake Manapouri doesn’t exist and building it would take a few years"
So...offer those 1,000 displaced workers jobs building the infrastructure then? It might not be what they want, but at least there's an option for those who want work.

The cost of re-skilling would have to be factored in if they were to be moved to building the infrastructure but if the money is there I say why not?

Well written. A timely piece of reasoning is always welcome.

Interesting article! I like the idea as a good trade off.

Tiwai has no future. Cost of electricity in Middle east is about $.01-.02/kWh when made from the very cheap natural gas they have - and will continue to have for decades if not centuries - Aluminum production will inevitably shift to cheapest power source. NZ wholesale is $0.08/kWh. Downside of Tiwai closing is we lose $1Billion a year exports for maybe 10 years, but after that rise of EV's will see us displacing ~$1billion a year in fuel imports so no net loss to balance of trade. Optimum probably to keep Tiwai going for another 5-10 years as we also build up PV generation + Roxburgh pumped storage project.

Was it Greta Tunberg who pointed out that the solution to global warming was already looking us in the face but we just didn't understand it? Likewise with Tiwai, it just needs a different, less greedy set of eyes looking at it to see there are boundless opportunities. I see 'green' aluminium as a premium selling point not unlike 100% pure nz (if that were actually a fact but I digress) If we took the smelter back and put in the switchgear to redistribute unused power during downturns it could be a gamechanger. But first we need to renationslise the entire energy grid, gas, coal and oil so it can be run in a cohesive, smart tech, not for profit manner which will make a huge contribution to the productivity of this country by ending energy profit exports to foreign owners...who's with me on that?

I thought we already had a use for surplus electricity in production of hydrogen as a natural gas substitute.
Not that I believe the hydrogen hype..

Hydrogen is a terrible battery. Expensive, dangerous, inefficient. There is a proposal for a huge pumped hydro scheme high in the hills above Roxborough on the Clyde River with huge height difference that would serve NZ well for making high-percentage pv and wind viable at high efficiency and modest cost. If we want to go the fully renewable non-nuclear route that is probably the best option.

There is no "surplus " electricity as evidenced by the thermal stations running 24/7 baseload.

Buring gas to make hydrogen to substitute gas is about as crazy as it gets - what Dutch would call pxssxng in the soup !

I am not sure the idea of variable output is valid for a smelter.

Once a pot cools down - even if emptied first - the refectory lining of the pot has to be renewed is my understanding.

The low user charges are to be phased in - coming not just yet !

If only we had proper environmentalist Green MPs like Jeanette nowadays.

Unfortunately, what we have now is a bunch of raving bleeding hearts and anti-capitalists masquerading as Greens.

Curate's egg article - good only in bits. The omissions or misapprehensions include:

  • Transmission line upgrades to feed Manapouri power north are likely to exceed the quoted figure by a factor of 2 to 5. No-one has properly estimated any of this, so any figure is PDOOMA.
  • The figure for people affected, quoted as 1,000, is direct workers only. Depending on the multiplier used, direct plus indirect effects are likely to be of the order of 5-10,000. And any wobble in the transitioning period is gonna be reflected directly in welfare costs.
  • Any metal can be re-refined from the ingot to any desired level of purity. All it takes is process heat, catalysts, and expertise. The likelihood that a market for 'clean green Al' actually exists and can command a premium is vanishingly small, particularly when one considers the whole of the production cycle where transport costs (bauxite OZ-NZ, finished goods NZ-buyer) include bunker-fuel-driven ships travelling many thousands of nautical miles. It's far more plausible that closer, cheaper, dirtier, less pure Al would suffice for many end users.
  • The 'battery' concept of perched water (the Manorburn Depression concept) is technically feasible but requires a lotta dead rats to be swallowed by those of the Greenish religion: consents, a 50-100m high dam, extraction from the Clutha to feed the lake, seismic issues, and new generation/pumping infrastructure to run the thing. No-one has PDOOMA'ed a cost for the concept, nor a timeframe assuming consents would be granted at all. It's pixie dust and unicorn grease right now.

None of this absolutely prevents something of the sort Ms Fitzsimons envisages as to overall configuration. But it's a formidable obstacle course, even technically.

The national grid meets Manapouri at Invercargill so feeding power north can’t be too big a problem.
We should spend $250 million on transmission lines rather than cleaning up Tiwai, that is a ANZAS problem.

No you are wrong.
To get the power north needs an extra 700MW capacity. The line is already near overload from Roxburgh to Twizel a lot of the time. They generally need to run Manapouri baseload at greater than 500MW otherwise they spill. Once to Twizel (or another site in that area) Then you need another full DC line north to Whakamaru. A lot of the time the current DC is running at its limit (which isn't 500MW a pole) because there aren't enough thermal stations up north running to cover N-1. Don't take my word for it - read the Transpower reports. v

We routinely spend $250 million on power infrastructure around Auckland, whatever the bottlenecks they are resolvable without budget surprises, it’s business as usual, however you are adding to the big picture, SI is stabilising the NI and will continue to..

You seem to be merging the distribution spend with the transmission spend. Much of that is just enhanced or overdue maintenance. Uprating the lines as done in the reports often just means stringing the lines tighter so they can sag more when overloaded. The capital cost of a new double circuit line is about $3-5M a kilometre. That is, assuming it gets a resource consent

Well let’s go to the bottom line.
What would be your budget to deliver 600 megawatts from Invercargill to Wellington?

You can't deliver it to Wellington. It is already overloaded there. You have to go to Whakamaru.

It’s very Catch 22 like the BBC “Yes Minister”.
It’s a good case for splitting Meridian into two independent organisations, North and South Island.
Then sit back and watch North Island prices rocket and South Island prices collapse.
Some good will come of it.
Take care and buy a portable generator.
From a Southland perspective a short term solution is close a couple of generators at Manapouri and send the water back down the Waiau, a good environmental outcome.

If they keep Huntly or the equivalent burning coal, that won't happen. And they are bringing the 3rd Huntly unit back next year for the long DC outage. Clean green won't count for much when it causes power cuts.
There are massive constraints in the South Island getting power even to ChCh. That needs a new double circuit transmission line from south of Livingstone to Rangiora. Either that, or more hydro on the West Coast and feed the power back down from Kikiwa. Oh that's right, the Government won't allow that.

Grid reliability is fiction at the best of times, we had a several hours outage recently that was blamed on birds.
Best to have a Plan B.

It was bird shit and a flashover.
Look at the grid map north of Otahuhu and see if you can spot the problem. Then tell us how you would fix it.
The RMA gives to much power to NIMBYs and special interest groups

I wouldn’t bother trying to fix their problems, I’m the consumer.

No - but you seem to be vocal about wanting things changed because you were inconvenienced. How much are you prepared to pay for increased security of supply? Or are you another person who wants other people to fix your problems? That is what the Tiwai dispute was about. They objected that their grid line charges were being used to fix Auckland's problems.

You appear to be an authority on the problems of electrical networks but but short of answers.
That’s fine, this is the internet.

Both Chris and I know enough about the technicalities to know that, given appropriate funding, it's all technically possible. The answer is simple: do a proper costing, inclusive of consents, easements/land purchase, lines and contingency, and ask nicely for the several billions involved. That's the hard part - getting the munny.....

Oh, and articulating exactly where the power needs to run to (the end consumer). Because at Chris' figures of $3-5m/km, plus if it needs to cross Cook Strait there's DC-AC conversions each end and more cross-strait cables to be laid, the whole cost could easily multiply severalfold, if that end point was, f'rinstance, Awkland.

I think the days of Muldoon mega projects are over.
Disposing of a surplus 600 megawatts could be a series of projects up the south island terminating in Wellington, starting in Invercargill.
But don’t forget to send 10% of the flow down the waiau river.
The water rights for Manapouri are up for grabs, by the way, in the foreseeable future. And the contract with Tiwai renews in 2030 I believe...or not..

WM - tks for that. Educational.

Here is the grid map so people can see the issues getting Manapouri power north. https://www.transpower.co.nz/sites/default/files/bulk-upload/documents/S...
Many of the lines operate near rating at peak conditions

Chris Morris-- Agree entirely with your comments re costs of getting SI power from south to north. I did some field work for Transpower about fifteen years ago and that was a conversation topic then. Also being discussed was the cost of purchasing the land to put any new transmission lines on - because of pivot irrigation it is not feasible to simply purchase a corridor because to do so would ruin the operational logistics of most Canterbury farms. Transpower can no longer rely on the Electricity Act as the old Electricity Department used to, it has to be commercial. The job I was involved with was negotiating easements with landowners so TP could string an extra line from Rangiora to Kikiwa, some payments for a simple easement were as much as $100k per pylon. A rough estimate of the cost of acquiring the land represented by a 200 metre wide corridor from behind Oamaru to Chch would be $210m, and many years of negotiation.

Why spend big money to ship electricity to the overcrowded north? Why not invest a relatively modest amount of money to encourage businesses to go to the electricity? New Zealand needs efficient resource allocation, not populist vote-buying resource consumption.

That is thinking outside the square

A relevant release on the Transpower website as of today.
It mentions the possibility of making Manapouri power available further north with a few upgrade projects.
https://www.transpower.co.nz/news/work-recommence-transpower’s-clutha-upper-waitaki-lines-project

You continue to show that you don't understand what you are talking about and latch onto anything that you think supports your case. Pope's aphorism about learning applies here.
There is currently a major constraint getting power north out of Clyde, even with Tiwai taking 600MW. They often have to shut units at the big hydros off and spill. That costs both Contact and Meridian so that is why they put the money in to fix an existing problem. That constraint is why it is quite common to see price separation between North Otago and South Canterbury. The single circuit and Livingstone switchyard is only part of the issue. The double circuit may take an extra 100MW north, at least until they run into the other constraints. And those are many, and will come to the fore, all needing billion dollar fixes.
As Dennis Barnes said "Contact says any material reduction in consumption or closure of the smelter would further accelerate the need for investment in transmission upgrades. " Transpower in their report says "Otago-Southland is a generation-rich region. Surplus generation export is currently constrained during light load conditions to avoid overloading of the 220 kV Naseby–Roxburgh–Livingstone circuit under both normal operating conditions and during contingency events."
Think about what that says and then read the Transpower technical papers, like their latest Transmission Planning Report, not the press releases. To quote from the former "
Key findings for the South Island grid backbone include:
• Transmission capacity to the upper South Island is first limited by a voltage stability constraint, and later by thermal constraints on the Ashburton–Timaru–Twizel circuits.
• Transmission of generation from the lower South Island area to the Waitaki Valley is first limited by the capacity of the Livingstone–Naseby–Roxburgh circuit, and later by the thermal capacity of the Cromwell–Twizel sections of the Clyde–Cromwell–Twizel circuits.
• The limit on transmission from the Waitaki Valley to the lower South Island area depends on the generation source. With high Waitaki Valley generation, the Livingstone–Naseby–Roxburgh circuit sets the transmission capacity limit. With high HVDC south transfers, the Aviemore–Benmore circuits set the limit, followed by the Benmore–Twizel circuit.
• With the above constraints between the Waitaki Valley and lower South Island area resolved, higher transmission between them will cause constraints within the Waitaki Valley and into the Southland area to appear.
• Transmission out of the Waitaki Valley will then be limited by the Benmore–Twizel circuit capacity. Transmission capacity into the Southland area will be limited by voltage stability in the area and later, by the thermal capacity of the Invercargill–Roxburgh circuits.
• During light load periods, the high voltage issues in the upper South Island area is becoming increasingly difficult to manage. We are running out of operational measures to resolve the high voltage issue if it continues to worsen.
And all of this is premised on the assumption that Tiwai is taking 600MW.b

I wouldn’t bother careing about engineering issues, but the white baiters in Western Southland may benefit if the flows in the Waiau increase and that matters, the rest can be fixed with money.