Originally published by Editorial of The Australian.
14.08.2026
Anthony Albanese has hailed the $2.5bn taxpayer subsidy for the Tomago aluminium smelter as proof of the wisdom of the federal government’s Future Made in Australia approach to business. It is nothing of the sort. Rather, the bailout is confirmation that the government has lost control of energy policy and the quest for net zero is a curse on high-emissions heavy industry, as was always going to be the case.
Tomago owner, mining giant Rio Tinto, had said that without certainty on future power prices, it would likely be forced to close when its existing electricity agreements expired at the end of 2028.
The Tomago deal follows a $2bn funding partnership with the Queensland and commonwealth governments, signed in March, to secure the long-term future of Rio’s Boyne aluminium smelter in Gladstone. In addition, there have been government bailouts of $2.4bn for the Whyalla Steelworks, $600m for Glencore’s Mt Isa copper smelter, and $240m for Nyrstar’s zinc and lead smelters in South Australia and Tasmania.
Mr Albanese is keen to portray the intervention as a nation-building initiative to secure the nation’s industrial base. He said the federal government had learned from “mistakes of the past” and the Rio deal was an example “of governments working with the private sector to make sure that we are not at the end of supply chains”.
There is a very good reason why Australia should continue to produce essential industrial inputs such as aluminium, steel and petroleum at home but it is important to correctly identify where the real problem lies. This is a government-initiated crisis and the real problem is a complete failure of energy policy. Aluminium smelting, in particular, is an energy-hungry business that requires large amounts of cheap and reliable electricity. Extended power interruptions can cause the molten electrolyte in the aluminium smelter to freeze, ruining the pots and requiring multimillion-dollar, multi-month repairs.
As the power transition has dragged on, Australia’s aluminium industry has warned the government that power security was fundamental to retaining a domestic industry. Yet as baseload coal plants retire, the options for industry have been both expensive and limited. Like switching to green steel, moving to aluminium production using renewable energy is easier to speculate on than deliver. Industry heavyweight Alcoa has publicly noted internationally that batteries cannot yet economically backstop massive industrial smelter loads over long periods, making access to stable hydro, gas or nuclear infrastructure critical. Thursday’s multibillion-dollar deal with the government does not mean the problem has been solved. Rather, the risk has been transferred from industry to taxpayers.
Under the Tomago deal, liability will be shared 50-50 between the commonwealth and NSW governments, with the NSW liability capped but not the federal government’s. Tomago Aluminium will enter a 10-year power purchase agreement for electricity supply to the smelter to 2038, with the power to be supplied entirely from renewable sources from 2033. Tomago will invest $1.1bn in the smelter between now and 2038, including $100m for decarbonisation initiatives. The deal relies on government finance through its green bank and the involvement of the wholly commonwealth-owned Snowy Hydro, best known for the massive cost overruns on the Snowy 2.0 hydro-electric project. It is all a big bet on the government’s wishes for a renewables-only electricity grid coming true. Industry is prepared to play along but not willing to wager that it can be done at a reasonable cost to shareholders. With its Future Made in Australia policy, the Albanese government is happy for taxpayers to take the risk. Caveat emptor, buyer beware.
Anthony Albanese has hailed the $2.5bn taxpayer subsidy for the Tomago aluminium smelter as proof of the wisdom of the federal government’s Future Made in Australia approach to business. It is nothing of the sort. Rather, the bailout is confirmation that the government has lost control of energy policy and the quest for net zero is a curse on high-emissions heavy industry, as was always going to be the case.
Tomago owner, mining giant Rio Tinto, had said that without certainty on future power prices, it would likely be forced to close when its existing electricity agreements expired at the end of 2028.
The Tomago deal follows a $2bn funding partnership with the Queensland and commonwealth governments, signed in March, to secure the long-term future of Rio’s Boyne aluminium smelter in Gladstone. In addition, there have been government bailouts of $2.4bn for the Whyalla Steelworks, $600m for Glencore’s Mt Isa copper smelter, and $240m for Nyrstar’s zinc and lead smelters in South Australia and Tasmania.
Mr Albanese is keen to portray the intervention as a nation-building initiative to secure the nation’s industrial base. He said the federal government had learned from “mistakes of the past” and the Rio deal was an example “of governments working with the private sector to make sure that we are not at the end of supply chains”.
There is a very good reason why Australia should continue to produce essential industrial inputs such as aluminium, steel and petroleum at home but it is important to correctly identify where the real problem lies. This is a government-initiated crisis and the real problem is a complete failure of energy policy. Aluminium smelting, in particular, is an energy-hungry business that requires large amounts of cheap and reliable electricity. Extended power interruptions can cause the molten electrolyte in the aluminium smelter to freeze, ruining the pots and requiring multimillion-dollar, multi-month repairs.
As the power transition has dragged on, Australia’s aluminium industry has warned the government that power security was fundamental to retaining a domestic industry. Yet as baseload coal plants retire, the options for industry have been both expensive and limited. Like switching to green steel, moving to aluminium production using renewable energy is easier to speculate on than deliver. Industry heavyweight Alcoa has publicly noted internationally that batteries cannot yet economically backstop massive industrial smelter loads over long periods, making access to stable hydro, gas or nuclear infrastructure critical. Thursday’s multibillion-dollar deal with the government does not mean the problem has been solved. Rather, the risk has been transferred from industry to taxpayers.
Under the Tomago deal, liability will be shared 50-50 between the commonwealth and NSW governments, with the NSW liability capped but not the federal government’s. Tomago Aluminium will enter a 10-year power purchase agreement for electricity supply to the smelter to 2038, with the power to be supplied entirely from renewable sources from 2033. Tomago will invest $1.1bn in the smelter between now and 2038, including $100m for decarbonisation initiatives. The deal relies on government finance through its green bank and the involvement of the wholly commonwealth-owned Snowy Hydro, best known for the massive cost overruns on the Snowy 2.0 hydro-electric project. It is all a big bet on the government’s wishes for a renewables-only electricity grid coming true. Industry is prepared to play along but not willing to wager that it can be done at a reasonable cost to shareholders. With its Future Made in Australia policy, the Albanese government is happy for taxpayers to take the risk. Caveat emptor, buyer beware.