Thursday, July 09, 2020

Dancing on Tiwai's grave

This morning, after years of threats and demands for subsidies, Rio Tinto announced that it would be closing the Tiwai Point aluminium smelter. Good. Because as I've argued before, the best thing this foreign polluter can do is close. Doing so will free up 12% of our electricity supply, not to mention $70 million ($90 million at today's carbon prices) a year in carbon subsidies. The latter is $70,000 per direct job, which shows you where Tiwai's economic "benefit" really came from.

As for what to do next, Rio Tinto has been threatening this for years, and I would hope that the government has been using that time productively to come up with a rescue plan if they followed through. They have a billion dollar regional growth fund, plus a $20 billion pandemic contingency, plus the effective annual cost of those carbon subsidies. Which gives them a lot of scope for investment to replace those smelter jobs. Data centres and hydrogen production are two of the obvious answers, though the latter also means finding things to use the hydrogen (which means chemical manufacture, until there's demand for it as a transport fuel). But they've also suddenly got a huge amount of electricity in the South Island to help power a recovery, and things like industrial electrification (getting coal out of the milk) and electrifying South Island rail are suddenly possible. And of course its a ready-made power source to power the shift to electric vehicles we need to make.

In terms of flow-on effects, Huntly is now dead (or rather relegated to dry-year backup, which is basicly the same thing), as are the coal mines which supply it. We shouldn't mourn that either - it was dirty and inefficient and meant higher prices for everyone. But the government will eventually need a rescue package for them too. But its death makes it a hell of a lot easier to shift to a cleaner, greener economy. And the quicker we do so, the better.