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The chief executive of Australia's largest aluminium smelter says the national energy system is "dysfunctional" and needs an overhaul to avoid another security risk like the one that forced the Tomago smelter to cut production last Friday to avoid blackouts in NSW.
With the issue of energy security continuing to dominate Federal Parliament on Monday, Tomago Aluminium chief executive Matt Howell said it would take a week for the smelter to return to normal operations after AGL Energy asked it to curtail production by30 per cent or 300 megawatts last Friday after the heatwave hit the eastern states.
Mr Howell said big industrial users were struggling to be internationally competitive when they couldn't receive reliable and affordable energy.
"It's fair to say the way the energy system is working at the moment, it is dysfunctional. What we saw on Friday was a genuine system security risk," Mr Nowell said in an interview with The Australian Financial Review.
He said the massive fluctuations of spot electricity prices – which are being investigated by the Australian Energy Regulator – cannot by brushed aside as simply supply and demand in the National Electricity Market.
"If you look at the NEM, why is it we have a system that allows the spot price to go to $14,000 per megawatt hour?," he said. "What would the average person say if they went down to a petrol station to fill the tank and instead of paying $1.30 per litre, they're paying $350 per litre because that's the equivalent.
"If the government tried to tell the public it was market forces and just supply and demand, do you think they would buy it? Then why are we allowing this to become a daily occurrence in the NEM?"
AGL Energy ordered Tomago to curtail production for almost four hours on Friday after the Australian Energy Market Operator (which runs the national electricity and gas market) asked the NSW government to urge consumers to cut their power use to avoid "load shedding" – a deliberate shutdown of power in part of the grid – that could lead to blackouts.
It was the first time in 10 years that the market operator had intervened in such a way in NSW.
Tomago Aluminium – a joint venture of Rio Tinto, CSR, Alcan Australia and Hydro Aluminium – consumes about 952 megawatts of electricity each year or 12 per cent of the state's total power consumption.
The smelter was on standby on Saturday after a notification from AGL about another possible curtailment but it didn't eventuate.
No compensation
Mr Howell said the smelter had returned to "full current" but efficiencies at the plant had been compromised by Friday's event and it would take almost a week to recover from.
He confirmed there was no scope for compensation for the lost production in the power supply agreement with AGL that dates back to 1991. He said the reality was only coal or gas-fired power could provide reliable power to the smelter, which has operated 24 hours a day since 1983.
It comes as Prime Minister Malcolm Turnbull renewed his criticism of the Labor Party and its ambitious renewable energy target of 50 per cent, while the opposition accused Mr Turnbull of blaming September's state-wide blackouts in South Australia on renewable power.
Mr Turnbull said it was a "colossal failure" of the SA government to dive headlong into renewable energy without having any synchronous generation from coal or gas as a back-up when the wind was not blowing. He said this left them with a lower resilience to extreme weather events.
"Of course it wasn't a windmill that caused the transmission line to fall down. No one said it was. What happened was typical of the lazy, negligent, complacent Labor government. They introduced more and more renewables into the mix, increasing the vulnerability of the transmission network," he said.
"The reality is that the South Australian Labor government introduced a massive amount of renewables into their grid and did not plan for the consequences," Mr Turnbull said. "It is perfectly obvious that what was done was mindless, negligent and incompetent."
After a coalition of business and industry groups called on both major parties to fix the energy crisis, opposition energy spokesman Mark Butler said bipartisan energy policy was possible if the Turnbull government stopped attacking renewables.
"Make no mistake – the Liberals' attack on renewables will mean fewer jobs, higher power prices and more pollution," Mr Butler said. "Labor stands ready to work with the government on real solutions to real challenges, solutions that are informed by the experts and industry, like an emissions intensity scheme."