Geoff Matthews believes he can save Tiwai Point.
The troubled aluminium smelter uses about 12 percent of New Zealand’s electricity every year, pays tens of millions of dollars every year for electricity infrastructure it doesn’t use and employs 1,000 Kiwis. In late October, its multinational owners, Rio Tinto, announced a strategic review of Tiwai
Now, Kiwi firm Energia Potior says it has a solution to everyone’s problems, addressing Meridian’s power needs, the Government’s decarbonisation goals and Rio Tinto’s concerns about profitability. The only problem, they say, is that Rio Tinto won’t play ball.
A complex issue
Rio Tinto’s October surprise sent everyone from Wellington to Invercargill scrambling.
In Parliament, Energy Minister Megan Woods told reporters that the Government wouldn’t ask the Electricity Authority to speed up its transmission pricing review in order to give the smelter some relief from burdensome transmission fees. She also said it was “highly unlikely” that the Government would bail out Rio Tinto, which paid nearly $10 billion in dividends to shareholders in February.
Meanwhile, NZAS, the Kiwi subsidiary to Rio Tinto that runs the smelter, said there was a real possibility that Tiwai would close up shop. “The strategic review is quite serious. It’s more signficant than our previous discussions around the ownership. It’s the first time that Rio Tinto has announced a strategic review of its interests in the smelter,” NZAS chief executive Stew Hamilton said at the time.
Closing Tiwai would leave a thousand New Zealanders without jobs and many other contractors would lose work. But it could also lower power prices for Kiwis in the rest of the country because the plant wouldn’t be hogging so much electricity.
A 2012 MBIE report on the possibility of closing the smelter found that wholesale electricity prices would have dropped by 10 percent for the period from 2015 to 2030 had Rio Tinto left New Zealand. Moreover, the report stated, “it may bring forward the expected decommissioning of the coal and gas fired Huntly units 1 to 4, which produces between 20 percent – 50 percent of the sector’s total emissions”.
As it stands, Meridian pays Genesis to keep some of these coal-fired units running in the event of a “dry year” where its hydro-powered stations can’t generate enough electricity.
That’s where Energia Potior comes in. Matthews, the company’s global head of strategy, insists that its technology can solve almost every one of the above problems.
The technology is called EnPot and it is fitted to the potlines on aluminium smelters to allow them to modulate their energy usage. Potlines are the electrolytic cells that smelters use to make aluminium. They use immense amounts of electricity and struggle to operate at anything other than a set level of efficiency 24 hours a day, 365 days a year. Power them down for longer than an hour and you risk “freezing” the contents.
EnPot gives potlines flexibility – and can be installed while the pots are still running. With EnPot installed, Matthews says, a smelter can “flex” its energy usage by up to 25 percent in either direction.
In the smelting town of Portland, Australia in January, several coal power stations went offline. In order to keep power running to the city, the local smelters were asking to shut each potline down for an hour at a time, over and over until the issue was rectified.
When, the next day, another station dropped off the grid, the smelter was unable to help and thousands of households lost power. With EnPot, this could be avoided. While coal-fired stations don’t usually power houses or the smelter in New Zealand, hydro stations do.
If water levels are low, the stations can struggle to generate enough power to keep the lights on. That’s why Meridian keeps the coal-fired units at Huntly running – and emitting. If, instead, Tiwai could reduce its power intake by 25 percent, selling that electricity back to Meridian for a handsome fee, the state-owned generator wouldn’t need to rely on Huntly.
In such a scenario, it would be even more profitable for Tiwai to flex down its electricity usage than to keep pumping out aluminium. “Let’s say they had a dry year and they asked them to turn down 30 percent. The energy arbitrage it would get would be the most profitable tonnes of aluminium they never made,” Matthews said.
Then there’s the less common flip side, in which Meridian generates more power than needed and Tiwai takes on the additional load. Australia has turned to a massive 100MW lithium-ion battery made by Tesla to store surplus electricity, costing it around $94 million. Meanwhile, Tiwai could use up an excess of 100 to 150MW and the installation would only cost $50-60 million, Energia Potior said in a submission to the Interim Climate Change Commission.
In essence, Tiwai would be turned into a virtual power plant and battery, supplying extra electricity when needed and “storing” excess power if necessary. Meridian would be able to stop paying for Huntly’s coal-fired units, leading to a big carbon emissions win for the Government and the new income for Rio Tinto might even take away the sting of the transmission pricing.
Alongside that, the installation pretty much pays for itself in a matter of months, Matthews says. For Tiwai, “the investment would pay, within under a year. It’s an instant payback for the power system because they avoid a massive bill” from Huntly or needing to build a backup power station.
Will it work?
The next most important question is a simple one: will it work? Matthews, as expected, swears by it. EnPot technology has already been fitted on smelters in Germany and, after the Portland outage in January, Australian firms are also looking to hire the firm.
In Energia Potior’s submission to the ICCC, the firm says that “Meridian Energy has shown interest in how the EnPot technology works as, if Rio Tinto was prepared to install the technology at Tiwai, it might allow Meridian to contract directly with the smelter for dry year support thus removing or reducing any need for Meridian’s current Swaption contract with the thermal generator Genesis”.
“Meridian had said publicly to the ICCC that fitting EnPot to Tiwai would be a potential solution for switching off the coal units at Huntly and it would allow Meridian to deal directly with the smelter to purchase that backup in a dry year,” Matthews said.
Meridian didn’t go quite as far in a statement provided to Newsroom, but it did acknowledge that it was interested in the potential use of EnPot.
“Meridian is aware of the Enpot technology and we have been talking to Rio Tinto about its application at the Tiwai Point Aluminium smelter for some time to understand what potential it might have for the smelter and as a means to integrating an innovative demand response mechanism into the New Zealand market,” a spokesperson said.
“For our part we will continue to work with Rio Tinto to see if we can find a way that it might be applied effectively.”
The International Energy Agency also sees EnPot as presenting intriguing options. In a February report on transforming China’s energy system, it recommended the fitting of EnPot to Chinese smelters and estimated the investment would pay for itself in less than two years.
A 2016 article in the scholarly journal Light Metals trialed EnPot on a German smelter in Essen.
“The Shell Heat Exchanger technology tested on 12 pots at TRIMET Essen gave much greater flexibility in energy input to and dissipation from the pots,” the authors wrote.
“This opens up a wider operating window for line current while still maintaining stable operation over both short term rapid modulations and long term sustained modulations, which can be highly advantageous given the electricity market in Germany, and particularly the continuing reliance on volatile renewable generation.”
Rio Tinto was less laudatory, in a statement provided to Newsroom. Hamilton didn’t answer a question about the viability of EnPot, instead simply saying, “We have previously trialled the technology at our Tiwai Point site, however we haven’t taken it forward”.
“We currently provide other forms of a demand response service – for example in dry hydrological years. NZAS and Rio Tinto are further exploring demand response technology that can provide a service that is valued by the NZ electricity market.”
Hamilton added that New Zealand’s needs are different from those of Germany or Australia. “The demand response options needs to take into account the electricity market that it is connected to. The electricity market in Europe has different requirements than in New Zealand, because of the type of load and the type of generation connected to the grid. We think we have other methods for demand response that are more suited to the New Zealand electricity system.”