The federal government is considering a dramatic intervention in the electricity market to save the struggling Tomago aluminium smelter while accelerating the rollout of renewables. Tomago's owner, Rio Tinto, has warned it could be forced to close the Hunter Region smelter when its current coal-fired power contract with AGL expires at the end of 2028 due to rising electricity costs.
Faced with the prospect of 1,000 workers losing their jobs, Labor has promised to find a fix and has been locked in negotiations with Rio Tinto, the New South Wales government and unions. The ABC has been told Climate Change and Energy Minister Chris Bowen's department is considering an energy supply deal with Snowy Hydro, a government-owned entity that could offer clean energy at competitive prices.
Another option under active consideration is for the government to become a middle-man in the market by signing long-term supply contracts with renewable energy developers, which it could then on-sell to heavy industrial users like Tomago for a stable price. This proposal, supported by former Clean Energy Finance Corporation chief executive Oliver Yates, would remove some risk for wind and solar farm proponents.
Australia is not on track to reach the government's target of 82% renewables by 2030, with the transition facing roadblocks including community opposition, rising costs and approval delays. According to the Clean Energy Council's quarterly investment report in August, no new wind farms had been committed in 2025.
If the government follows through, it would signal another intervention in the electricity market but one involving a longer-term fix rather than a taxpayer-funded bailout. Since January, the federal government has spent $2.4 billion propping up the Whyalla steelworks, $600 million for Glencore's Mount Isa copper smelter and $135 million for Nyrstar's zinc and lead smelters.
Tomago, located in the Labor-held seat of Paterson, is Australia's largest single energy user and is badly exposed to rising power prices that account for 40% of its costs. Sources close to the negotiations have told the ABC they feel more optimistic about the smelter's future now than they did when Rio Tinto foreshadowed its possible closure in October.
