So, it turns out that Whyalla will not become a ghost town after all. The carbon price didn’t kill it, and neither did the renewable energy target that Tony Abbott wants to finish off. And neither did the closure of the nearby coal generator that was supposed to destroy industry in the state.
What almost did kill it was an unflinching refusal to move with the times and embrace new technology. Now, however, Whyalla may come to haunt the likes of Abbott and the renewable energy nay-sayers:
It is going to be at the heart of a green energy industrial revolution. Australia’s largest integrated steelworks – under new ownership – will, in effect, be saved by a suite of wind energy, solar farms, battery storage, pumped hydro and co-generation.
That, at least, is the promise of UK billionaire Sanjeev Gupta, who followed up his purchase of the bankrupt Whyalla steelworks with the purchase this week of a majority stake in Zen Energy, the Adelaide-based solar and battery storage company chaired by economist Professor Ross Garnaut. (See our earlier story here).
In a week which saw Abbott threaten to cross the floor if the government supported another wind or solar farm, and say “you can’t run a steel plant on renewables,” while commentators foamed at the mouth over the prospect of more renewable energy (2GB’s Steve Price said Labor’s renewable energy target would “destroy” the economy), Garnaut was asked this by a disbelieving ABC.
“What’s driving this deal? Is it a belief that renewables can power steel works?”
To which Garnaut responded: “It is not a belief, it is the economic reality,” and pointed to the experience of Gupta’s operations in the UK, using renewables including tidal energy to rescue British Steel.
Garnaut told Reneweconomy on Thursday that SIMEC Zen, as the new joint venture will be called, hopes to reduce energy costs at Whyalla by at least the 30 per cent achieved by Gupta when he took over British Steel and transformed its energy supply to majority-based renewables.
“We think we can do at least that,” Garnaut says.
How? Well, Garnaut says Zen has already put in place plans for a 80MW solar farm to be built near Whyalla, to supply the steel works and the newly named Liberty OneSteel has already said it wants to increase the size of that project.
There are also plans for a 120MW pumped hydro facility – with “many hours of storage”, to be built in one of the depleted iron ore mines in the nearby Middleback ranges that supplied the ore for the steel mill.
And the steel works will look to tap in and contract the multitude of wind farms in the area when necessary. It will also look at co-generation, using the considerable amounts of waste heat and gas to generate more power. Australia, Garnaut says, is incredibly wasteful when it comes to heat.
Across the Liberty OneSteel portfolio in Australia, which includes steel mills in Melbourne, Sydney and Newcastle, and numerous other facilities, SIMEC Zen will also look to install solar on around 150 rooftops.
“Through the clever use of new technologies – with a preponderance of renewables – we will be able to reduce the costs of power, improve the reliability of power, and unlock australia’s potential as economically rational base for energy intensive industries of the future,” Garnaut says.
“We’ll find lowest cost sources in each case, and it will be with a lot of renewables.”
He says the deal with GPG and its offshoots gives Zen the “horsepower” to continue with its plans for large-scale solar and battery storage projects, and its first big customer in its new energy retail business (it formally applied for a licence last week).
Those plans include Zen’s own “big battery” near Port Augusta. It got pipped by the Tesla big battery” in the recent South Australia tender, but intends to proceed with its project, once its clear about the market opportunities.
Garnaut hints at a size of 100MW, but that and the amount of storage will depend on what it will be used for. “Once we have locked in enough contact we will finalise that investment,” he says.
“It turns out that Sanjeev’s (Gupta) view of the future is pretty much the same as ours,” Garnaut says. “This deal locks in one of Australia’s largest industrial customers, it gives us access to capital for expansion and experience in technologies that we haven’t ourselves employed to date.”
These technologies include bio-energy, the use of waste heat for power, and in tidal power. “It strengthens us all round to do the sorts of things we were going to do.”
It is just over six years ago that then Opposition leader Abbott visited Whyalla in anti-carbon price campaign mode, saying: “Whyalla will be wiped off the map by Julia Gillard’s carbon tax, Whyalla risks becoming a ghost town, an economic wasteland if this carbon tax goes ahead.”
Abbott then went on to say that the Coalition “has a strong and effective policy to reduce emissions by planting more trees, getting better soil and using smarter technology … What we don’t want is to damage Australians’ cost of living by putting up the cost of power and fuel and to destroy our manufacturing industry by making it uncompetitive with manufacturing overseas.”
The bitter irony is that energy prices have more than doubled for manufacturers since the Coalition took power and canned the carbon price.
South Australia premier Jay Weatherill said the deal was a major vote of confidence in the state’s economy and the State Government’s leadership towards a renewable energy future.
He said it reinforced the leadership of the Upper Spencer Gulf in renewable energy, given the largest solar thermal plant that will be built near Port Augusta, and other major solar PV and wind projects.
“This really is the holy grail of energy policy – a major industrial player choosing to invest in renewables to supply their large-scale power needs,” Weatherill said in a statement.
“It’s clear – coal is the past, renewables are the future.”
That message is also a challenge to other big steel-makers and energy users in Australia, such as Gupta’s big rival BlueScope, which allowed Abbott to campaign against the carbon price quoting them as saying a carbon price would be “economic vandalism” and has been railing against renewables ever since.
The real economic vandalism is coming from those who refuse to adapt.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.