The clean energy industry recognises that there may be a special case for an increased exemption for aluminium smelting under the Renewable Energy Target (RET). While the evidence shows that the RET delivers lower wholesale and retail power prices for residential and business consumers, the long-term nature of electricity contracts for aluminium smelters means they may not be able to take full advantage of these lower prices.
The Clean Energy Council would support a proposal to increase exemptions for aluminium smelting if such a proposal also contributed to restoring bipartisan political support for the RET policy. Such a move would have a very low cost for other electricity consumers, adding between $2-4.50 per year for the average household.
However, suggestions that the level of the Large-scale Renewable Energy Target (LRET) could be reduced to offset this cost misunderstands the impact of renewable energy on electricity prices. Multiple studies in 2014, including analysis by ACIL Allen for the expert panel reviewing the RET, have shown that any scenario in which the level of the legislated target is reduced will actually increase power prices for consumers.
This paper explores the proposal for an increased exemption for aluminium smelters as a bridge to bipartisanship on the RET, as well as the effect of this proposal on power prices.