Energy Use in Victoria

There is a misconception among some that Alcoa receives a subsidy from the Victorian Government as part of the complex energy supply agreements between the two parties.  This is not true.
When the Portland Aluminium project was given approval in the 1980s, power contracts were put in place for both Portland Aluminium and the Point Henry smelter.  Under the contracts, the power tariff paid by Alcoa increases and decreases in line with the world aluminium price which is represented by the London Metals Exchange (LME).  These contracts last until 2014 (Point Henry) and 2016 (Portland Aluminium).
The flexible tariff arrangements effectively shared the risk of Alcoa building the Portland Aluminium smelter at a time of low global aluminium prices.  The tariff and arrangements under these contracts offered two major advantages to the Victorian Government and community:
1. It allowed the State to share in the economic benefits of the aluminium industry; both good and bad. It shared the profit when the LME was high (and profits were high), and allowed the smelters to keep operating when the LME was low.
2. The Portland Aluminium power contract was instrumental in
providing the base load usage required by the expanded Loy Yang complex.Any increase in power costs would have been passed onto Victorian industry and households.  The continued smelter operation resulted in a much lower average cost of power.

Supporting System Security
Alcoa of Australia has an arrangement in place as part of the supply agreement that allows the power system operator to shed Alcoa electrical load at times when there is insufficient power generation to meet the State’s demand, and at times when the electrical system becomes unstable.
Alcoa has provided this service for more than 20 years. This process delays the shedding of other customers power supply in the State.
We manage these power outages through periodic curtailments at the Point Henry and Portland Aluminium smelters.

Anglesea Power Station
Over 90% of Victoria is powered by brown coal.  Alcoa has a brown coal mine and power station at Anglesea which supplies around 40% of the power needed for the Point Henry smelter.  The Anglesea Power Station runs at benchmark efficiency for a plant of its age, and is amongst the lowest greenhouse gas emissions per megawatt hour for brown coal generators in Victoria.
In 2013, Alcoa spent $32 million on essential maintenance at Anglesea and to optimise efficiencies.

Renewable energy
Unfortunately using renewable energy to power our Victorian operations is not currently a viable option, for a number of reasons.
First, there is simply not enough renewable energy available in Victoria to power all our operations in the State. Second, renewable energy is cost prohibitive for Alcoa in Victoria in that switching to renewable sources would render our operations in the State financially unviable . This would in turn have negative flow on effects to the economy, through loss of jobs and investment in local communities.
However Alcoa is playing an important role in facilitating the Portland Wind Energy project via the connection of infrastructure. Read more. 


Find out why the Electricity Allocation Factor is a critical issue for Alcoa in Victoria
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