The federal government is considering a power-purchase agreement with Snowy Hydro to supply electricity at a stable price to the struggling Tomago aluminium smelter, according to sources. The smelter's owner, Rio Tinto, has warned it may need to close the facility at the end of 2028 due to rising power costs.
Climate Change and Energy Minister Chris Bowen's department is exploring the option of a deal with government-owned Snowy Hydro, which could offer Rio Tinto clean energy at competitive rates. Another proposal under consideration involves the government acting as a middleman, signing long-term supply contracts with renewable energy developers and on-selling the power to heavy industrial users like Tomago at a stable price.
Former Clean Energy Finance Corporation chief executive Oliver Yates supports the middleman model, arguing it would reduce risk for wind and solar farm proponents by guaranteeing a buyer for their energy. Yates wrote in the Australian Financial Review that such a scheme could end the cycle of bailouts while lowering capital costs for developers.
Australia is not on track to meet its 82 per cent renewable energy target by 2030, facing challenges including community opposition, rising costs, and approval delays. No new wind farms had been committed in 2025, according to the Clean Energy Council's quarterly investment report in August.
Tomago, located in the Labor-held seat of Paterson, is Australia's largest single energy user, with power accounting for 40 per cent of its costs. The potential closure of the smelter, which employs 1,000 workers, threatens the government's Future Made in Australia agenda. Prime Minister Anthony Albanese visited the smelter in January to announce production credits for green aluminium.
Sources close to negotiations express more optimism about the smelter's future now than when Rio Tinto flagged possible closure in October. The government has already spent billions propping up other industrial sites, including $2.4 billion on Whyalla steelworks and $600 million on Glencore's Mount Isa copper smelter.
