US PACIFIC NORTH WEST, 2000-2001 The Bonneville Power Administration (BPA) generates hydro power from 31 dams built up since the 1930s, attracting a number of smelters and making the aluminium used for airplanes in WW2.
These smelters recognised an opportunity in 2000-2001, when a de-regulated power market, hot summer/heavy demand from California, low water levels and aggressive market players (like Enron) were factors which helped ramp spot power prices above $1000/MWh.
With cheap baseload contracts around $25/MWh, smelters shut production and sold their power back to the grid at record prices. With Californian consumers paying up for power, the BPA didn’t offer smelters the same terms on renewal (less power at higher prices) and almost all the 1.6m Mt smelter capacity closed in 2001 is closed today.
The BPA faces its own environmental pressures, with power generation limited to maintain river levels and restore salmon populations.
ALUMINIUM PRODUCTION HAS BEEN AFFECTED BY CHANGING WESTERN POWER MARKETS OVER THE PAST 20 YEARS.
ALUMINIUM’S A “GREEN” METAL? Aluminium’s environmental credentials rest on its use as a lightweight metal for transport, lowering fuel consumption, and high re-cycling rates using 5% of the power for re-melt compared to first smelt, but aluminium’s green credentials also depend on where it’s made:
• Hydro power is the dominant power source for smelters in North America (Canada), South America and Europe (some nuclear), and also drives 50% of African smelter output.
• Icelandic smelters use hydro and geothermal power.
• Natural gas supplies smelters in the Middle East (GCC), where gas may have been flared off previously. Gas flaring, where gas associated with oil deposits is burned off, is a massive resource waste and environmental problem globally, with the World Bank sponsoring reduction efforts. Satellite data suggests 145 billion cubic metres was flared off in 2018 (Russia/Caspian, Middle East and Africa are the main regions). For comparison, 145 billion cubic metres equates to 100m Mt/yr of aluminium production.
• China’s rapid industrialisation in the past 15 years has seen their smelter capacity approach 45m Mts (approx. 2/3rds of the world’s total smelter capacity) with coal feeding 90% of power to smelters in China and Asia, 70% in Oceania and 50% in Africa.
Global aluminium smelting is far from a level playing field, with smelters in Western Europe competing with domestic consumers for expensive power whilst facing higher environmental standards.
11 | ADMISI - The Ghost In The Machine | September/October 2019
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