How Rio Tinto Kept Australia's Biggest Smelter From Going Dark
- 23 hours ago
- 2 min read
Tomago Aluminium's problem was not abstract. Its 40-year electricity contract with AGL, tied to the Bayswater coal plant, expires in December 2028, and power already eats more than 40% of what it costs to run the smelter. Buying replacement electricity at open market rates would have made Tomago uncompetitive against smelters overseas, and the company had already signaled it was preparing to close by the end of 2028, a move that threatened over 1,000 direct jobs and roughly 5,000 more tied to the plant.
A new coal contract was never really on the table. NSW's coal fleet is retiring on its own schedule regardless of what Tomago needed. Eraring, which supplies up to a quarter of the state's power, is now due to start closing units from 2029, and other plants are exiting through the 2030s. Tomago's chief executive, said plainly that the company had no confidence that enough renewable capacity was in the pipeline to keep the smelter running, and it could not keep relying on coal either. Renewables were not the preferred option. They were the only new capacity actually being built at competitive prices.
What makes the deal itself notable is how that gap was closed. Tomago draws roughly 950 megawatts almost continuously, about 10% of all of New South Wales' electricity demand. Federal minister Chris Bowen called the resulting structure "a very innovative arrangement," built with the Clean Energy Finance Corporation and Snowy Hydro, using Tomago's guaranteed demand to help finance and build three gigawatts of new wind and solar capacity backed by battery storage across the state. These projects would likely not get built, or built fast enough, on merchant market risk alone. Snowy Hydro's own supply commitment depends on its Snowy 2.0 pumped-hydro project coming online by 2033.
Tomago is majority owned by Rio Tinto, with Gove Aluminium Finance and Norsk Hydro holding the rest. The smelter is putting in A$1.1 billion through 2038, including A$100 million for decarbonizing work and grid demand-response capability, while Canberra and the New South Wales government are splitting a matching A$2.5 billion to help fund the new generation.
The result, once the switch to 100% renewables completes in 2033, is a 7.1 million tonne annual cut to Tomago's Scope 1 and 2 GHG emissions. But the more exportable idea is the structure underneath it: a single, guaranteed industrial buyer can be the anchor that makes an entire regional renewable build-out bankable. That's a template heavy industry elsewhere is short on.
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