09 September 2012

Power to the smelter? Rio Tinto Alcan NZ Ltd wants to pay less for electricity for the Tiwai Point aluminium smelter

So, as of 10 August 2012, we know that New Zealand Aluminium Smelter Limited (Rio Tinto Alcan NZ Limited) say they are not profitable at the moment and the smelter may have to shut down.

Now they want to renegotiate their electricity contract with Meridian Energy. It could be tricky.

This is the secret contract for the aluminium smelter at Tiwai Point, where power from the Lake Manapouri Power Station is sold to a Rio Tinto Alcan NZ Limited subsidiary at what are suspected to be very cheap rates - possibly as low as 4.7 cents per kilowatt hour or one quarter of the price charged to the domestic consumer.

So how much electricity does the smelter use? How much does it pay? The old Ministry for Economic Development issues an annual report on energy use. The Energy Data File 2012 was published in June 2012 and this may help.

I downloaded a 5 megabyte zip file of spreadsheets.

Spreadsheet G records electricity production and use. Within it, worksheet G.6.a. is an 'Electricity Market Snapshot', giving electricity consumption by industry for the year ended 31 March 2011. I copied it and uploaded it to Google Docs. Funnily enough, aluminium smelting isn't mentioned.

However, there is 'Basic non-ferrous metals ANZSIC 2006 industry code C213'. This sector consumed 5,300,000 megawatt hours in the 2011 tax year. I looked up 'ANZSIC 2006 code C213 Basic non-ferrous metals' on the Statistics Department's website and it is:

"Aluminium Smelting This class consists of units mainly engaged in smelting alumina to produce aluminium, or recovering aluminium from scrap. The aluminium is cast into basic shapes or may be cast according to customer specifications. Also included in this class are units manufacturing aluminium alloys from primary aluminium smelted at the same unit."

In other words Basic non-ferrous metals code C213 is a 100 percent the bloody Tiwai Point Smelter! Now for some charts.

Okay, looks crap in Blogger. Click click for a 600 by 600 pix pick.

This dotchart makes it very clear that the Tiwai Point Smelter is by a huge margin, the biggest single consumer of electricity in New Zealand. A single company at a single plant used 5.3 million MWh out of 38.8 million MWh consumed in 2011, or 13.67% of the total consumption. Only the combined 4.4 million people in homes (the residential sector) used more, with 13 million MWh or 33% of the total. If we ust look at industrial use of electricity, and leave out the residential sector, the smelter uses 20.6% of all electricity used by industry.

Click click for a 600 by 600 pix pick.

This dotchart shows industry sector purchases of electricity from the generator/retailers at sales value. In spite of the smelter buying way way way more electricity than any other industry, the sales to the smelter in dollars are fourth in terms of value.

Click click for a 600 by 600 pix pick.

This chart shows industrial electricity users sorted by average rate including line costs in cents per kilowatt hour (i.e. its MWh divided by sales $$ times 100). You need to look at the bottom left hand corner, not the top. That's because New Zealand Aluminium Smelter Ltd pays the very lowest average rate for electricity in New Zealand; 5.03 cents! Residential users pay 22.6 cents per KWh, or four times as much.

New Zealand Aluminium Smelter Ltd is really demonstrating breathtaking audacity in threatening to close the Tiwai Point Smelter if they don't get their electricity costs lower, when they already enjoy the lowest electricity cost of any sector in New Zealand.

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