Is The Aluminium Industry In South Africa Enjoying Preferential Treatment From Eskom?

Aluminium production in South Africa – an unwanted industrial cluster? Does our Aluminium sector enjoy inappropriate subsidisation and preferential treatment compared to the poor delivery service local industries and consumers enjoy?

One of the best definitions I know of aluminium is that it is solidified electricity. Electrolytic conversion is essential to refine aluminium from its source mineral, bauxite.

With some of the cheapest – and dirtiest –  bulk electricity supply in the world, South Africa has attracted huge investment in aluminium smelters. First came the Hillside and Bayside smelters in Richards Bay. Eskom, the national electricity utility also supplies to the Mozal smelter in Maputo and the new industrial node of Koega.

Now that Alcoa Aluminium has evidently been lured to Koega by the carrot of ‘cheap’, externalised impact energy, the time has come for South Africans to properly consider whether we really want or need aluminium refineries here.

It is ironic that the arrival of Alcoa in Port Elizabeth will make South Africa one of the largest global raw aluminium producers. We also hold the number one slot as the worlds biggest greenhouse gas polluter per unit of GDP. So for each ton of greenhouse gas emitted, we produce the least product. Does this not twang your heartstrings with pride?

This irony is compounded in that South Africa, a veritable treasure-trove of mineral wealth, produces absolutely no bauxite, the raw material from which aluminium is refined. All bauxite is imported from either Australia, India or Brazil, producing yet more greenhouse gasses as these are transported by ship.

Aluminium is not only energy dependent, its refining also emits two perfluorocarbon compounds (PFCs) that are far more potent global warming gasses than CO2 and which remain in the atmosphere indefinitely. These are known as the perfluorocarbon compounds (PFCs) tetrofluormethane (CF4) and hexofluormethane (C2F6). One kilogram of CF4 PFC is equivalent to some 6500 kg of CO2.

For each ton of aluminium refined around 1.7 tonnes of CO2 is emitted from the refining process. An additional two tonnes of CO2 equivalent are emitted by the PFCs. Taking a full life-cycle analysis of aluminium, it produces around 12 tonnes of CO2 equivalent per tonne of material produced.

Even though the Aluminium industry insists that its products reduce global CO2 emissions, it is clear that this is a self serving truth that carries little weight beyond selling their product to a world creaking under the strains of climate change.

Given that Aluminium smelters indirectly pollute our national and global atmosphere, and given that they produce extremely few jobs per unit of energy used, it appears an unwise decision to have enticed these aluminium refineries to our shores. This is especially relevant when we the very presence of these refineries has undermined our national energy security.

The Richards Bay smelter cluster has an estimated electricity demand of around 1.5 megawatts (Mw). This is the same demand as a large city. It is around 4% of our national generation capacity. The Alcoa plant will probably draw around 1Mw. The Mozal plant uses around 1Mw.

What becomes clear here is that together with transmission line losses the aluminium industry in Southern Africa probably accounts for around 10% of our total present electricity generation capacity of around 37Mw. If we include our other small smelters, that 10% level is constantly achieved.

We know that Eskom plans to build at least two new ‘six packs’ - huge generation plants, producing around 4, 000 Megawatts. One of these is sufficient to drive the local aluminium smelting industry. So we shall have to build yet more power plants to supply our existing needs.

This effectively subsidises the global aluminium industry at the cost of greater potential economic growth drivers of new and existing indigenous industrial growth industries. Each six pack has an estimated price tag of around R80 billion (US$ 12 billion), a nice gift to the aluminium industry. Why don’t they build and pay for a six pack?

Given that Eskom refuses to inform the public of the actual cost of the power it has contracted to supply to the aluminium cluster - rumoured to be around 10 South African cents per kilowatt - it appears that other consumers such as farmers and home-owners effectively subsidise this (as well as other energy intensive industries), by paying around three times that amount.

Given that South Africa’s coal power is the dirtiest in the world per GDP output, there is a strong case to be made to kerb this insane abuse of fossil fuel to benefit private capital at the cost of environmental and human health, both locally and globally. Ever wondered why our fish are loaded with mercury? Look no further than coal fired power stations.

It is notable that Eskom has warned of power cuts to consumers until two new six packs are installed by around 2015. While the rest of us suffer unpredictable power losses, discouraging new industrial investment, the contracts with the aluminium industry stipulate fines to be paid by Eskom when they lose power!

It would appear rather more just if the state-run power company instead compensated the public. In fact the reverse is happening, with Eskom trying to hike power costs by around 18% this year, with further increases coming due in future.

South Africas choice to locate aluminium smelters is neither green nor beneficial. Most of the profit generated from this activity is repatriated offshore. South Africa gets the crumbs, the smog and the reputation of a wanton atmospheric polluter, while simultaneously discouraging new investment because of power outages.

The public, local industry and consumers are the ultimate losers in this unevenly weighted game.

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