Even if Hydro-Québec electricity is scarce for major industrial projects, the Legault government does not intend to drop the particularly energy-intensive aluminum smelter sector.
Monday, in Saguenay, Prime Minister François Legault, flanked by the essential Pierre Fitzgibbon and the minister responsible for the region, Andrée Laforest, announced the granting of financial assistance of 150 million to Rio Tinto for the construction, at a cost of 1.4 billion, a new aluminum smelter at the multinational’s Jonquière complex. The aid consists of a loan which will become a grant if the jobs are maintained.
This involves adding 96 AP60-type tanks to the 38 others that Rio Tinto already operates in Quebec. This addition comes in the wake of the closure, at the Arvida plant, of the tanks using a technology that is less efficient from an environmental point of view. The new tanks reduce greenhouse gas (GHG) emissions by 50%.
The new smelter will create 100 jobs. This is less than the 350 positions associated with the tanks whose production must cease in 2025, according to what is planned. But, through reassignments, Rio Tinto plans to avoid any layoffs. “Ideally,” said its CEO, Jakob Stausholm.
For the new tanks, the electricity tariff will not depend on a so-called risk-sharing contract, but on a tariff approaching the L tariff intended for very large industrial consumers. Under these risk-sharing contracts, the tariff fluctuates according to the price of aluminum; they proved to be advantageous for the producers, who were thus able to pay Hydro-Québec 1.4 billion less in eight years, according to the calculations of The Press.
If the multinational agrees to pay close to the L tariff, it is because the price of aluminum is experiencing peaks, having more than doubled in two years. The world is upside down: risk-sharing contracts are becoming advantageous for Hydro-Québec.
The Legault government wishes to replace these contracts, some of which are expiring, by the application of tariffs which are not subject to the vagaries of the market.
The aluminum lobby raises the specter of international competition from countries that produce green aluminum, such as Norway and even the United Arab Emirates, which use solar energy, or from China, the largest producer in the world, which plans to use renewable energy instead of coal to power its aluminum smelters. Quebec would only have a competitive advantage for a few years.
Rio Tinto’s long-term investment contradicts this pessimistic vision on which the industry relies to demand the maintenance of ridiculously low tariffs. What’s more, Quebec aluminum smelters are asking for more energy, that is 1,000 MW more, according to The Press, the equivalent of 30% of their current consumption. This is another sign that the industry is doing well.
The time for surpluses at Hydro-Québec is over and, as Minister Pierre Fitzgibbon indicated, the Legault government must make choices among the new industrial projects that will be presented to it. And that’s not to mention the decarbonization of Quebec as a whole, which will require large volumes of electricity. The battery sector that is being established in Bécancour is an example of these choices. Quebec simply cannot put all its eggs in one basket.
On Monday, the Legault government and Rio Tinto also indicated that they will soon finalize a partnership for the first deployment of a GHG-free aluminum production technology called Elysis. Self-serving doomsayers should not be believed. The aluminum industry in Quebec is promised a solid future. It will have to resign itself to paying more for its energy, renewable electricity from Hydro-Québec, which many industrialists ogle.