Aluminium
I had fun catching up with family on the weekend. My frequently green brother in law and I were talking about alternate energy (we both did degrees in engineering) and I found what I felt to be a reasonable amount of common ground on the issue of aluminium production in Australia. He was mostly looking at it from the point of view of reducing CO2 emissions and I was mostly looking at it from the point of view of market liberalism, however it was interesting to explore the cross over.
I thought it might be worth my while to do some more digging and I found the following news article that whilst a little old seemed relevant:-
Report claims Aluminium industry a ‘liability’
The Institute estimates that the industry pays only 1.5 and 2.5 cents per kilowatt hour (kWh) for electricity, compared with 5-6 cents per kWh by other large industrial users.
Making the Aluminium industry pay market rates for electricity would seem to achieve three things:-
1. It would provide more revenue to the government owned electricity producers allowing for tax cuts (or a bigger privatisation price).
2. It would remove a major distortion from the market place.
3. It would reduce Australias CO2 emissions.
It may be that reforms have happened since the article was written and if anybody has relevant information I would be interested in an update. And it may be that the price paid by the aluminium industry might be justified either by the shere volume of power they buy or else by long term contracts put in place to fascilitate the original building of electricity plants. However for the moment it looks to me like a possible common cause between market liberals and greens.
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This looked interesting also in this context:-
http://www.isf.uts.edu.au/publications/CR_2003_paper.pdf
I’ve been harping on about the link between market liberalisation and conservation for a while. It should be taken quite seriously.
Of the perverse subsidies for fossil fuels discussed in the paper, about 90% are claimed to arise from road transport and include notional costs for accidents, congestion and noise. It’s a trifle bizarre.
Still, the removal of some perverse subsidies (eg government regulation) is justified on market efficiency grounds irrespective of the greenhouse argument. However, the same goes for direct subsidies for wind power etc, an idea the authors (and green advocates) don’t like.
Victoria’s privatised electricity generators sell electricity to Alcoa in Portland, presumably at market prices, so I doubt if below market pricing is typical. Perhaps it happens when the generator is government owned, as in Queensland.
One of the features of aluminium smelters is that they are base load consumers of electricity. Most industrial consumers are peak users, which requires the generator to have excess spinning capacity most of the time. The cost structure is different.
I would agree that this form of analysis might make sence. However the price they pay seems to be below normal baseload costs. And if you build an aluminium smelter you will need to build extra baseload generation that does not have a ready alternate market. As such baseload generation would seem to be an integral part of an aluminium smelter fascility and without subsidies would seem like something that should probably be owned and operated by the same firm that operates the smelter (with any surplus power sold back into the grid).
This issue certainly gives me more reason to believe the electricity producers should all be private companies.
This issue certainly gives me more reason to believe the electricity producers should all be private companies.
No argument from me about that. The LDP needs a privatisation policy – would you like to write it?