NW Aluminum Plant Shut-Downs Looming
Already operating at about two-thirds of capacity,
energy-intensive aluminum smelting plants in the Pacific Northwest
are facing further cutbacks and plant closings because of high
power prices that have some of the operators looking at developing
their own natural gas-fired generators. At risk are five companies
and ten smelting plants.
"The ones that have not locked up firm supplies of low-cost energy are the
ones that are closing," said a spokesperson for Portland, OR-based Bonneville
Power Administration (BPA), the federally-controlled marketer/transporter
of mainly hydro-electric power that announced last week it was raising its
prices by 15% starting next fall (see NGI, Nov.
13). The announcement was yet another blow to the multi-billion-dollar
aluminum industry that represents 3,000 MW of electricity load when it is
operating at full capacity, but has been using around 2,000 MW this year.
"Potentially, Kaiser Aluminum and some of the others will be
able to keep some pot lines up and operate at a reduced capacity,"
the BPA spokesperson said. "Virtually all of the plants have
partial service from us right now."
The spokesperson confirmed that BPA is talking to several of the
aluminum plants about plans they have to construct their own power
plants, with which they would like BPA's help. The power
marketer/transporter wants to help, but is concerned about pushing
some of its costs over to other, smaller customers as a result.
"They are all looking at whatever they can do to remain in
operation, so they are looking at natural gas-fired generation,"
said the spokesperson, noting that there is little chance that
wholesale electricity prices will drop enough to avoid implementing
the rate increase next October. "We're in the market so heavily
ourselves to purchase power, so unless there was a dramatic change,
we don't see the prices coming down. But this is a volatile market
and anything can happen, although it is unlikely."
BPA's average cost is in the $22/MWh range, so just about any
supplies it buys on the market will be higher than its own
federally produced supplies. Generally, the cause for the price
increases and the plant closings or cutbacks are a direct result of
the spreading generation capacity shortage throughout the western
states, the BPA official said.
"By the time it is delivered, you are looking at $29.50/MWh for
these (direct access industrial) customers with a delivery charge.
And we're looking at about 1,500 MW, or half the industry's total
smelter capacity in the Northwest," the spokesperson said. "The
ones closing down don't have service from us and are in the half
that doesn't receive power from us. The ones closing have the
smallest allocations from us.
"It is a complicated, diced up situation. Kaiser has probably a
500 MW load, and it is probably only getting 300 MW from us right
now. With this rate increase, it pushes our relatively low-cost
power to a point where it is too high for plants to operate unless
the price of metal is a lot higher."
The growth in higher priority residential loads has siphoned off
almost half of the 3,000 MW that went to the direct service
industrial (DSI) customers, said the BPA spokesperson, as a result
of the region's growing shortage of power. Environmental and public
power groups object to even this level of service to the large
Richard Nemec, Los Angeles