Cement maker stops work as electricity prices surge

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Boral boss Vik Bansal says spiking electricity prices and Australia’s patchy energy transition are prompting the country’s biggest cement, concrete and asphalt producer to temporarily halt manufacturing each day, leaving thousands of staff idle.

The construction materials maker said its electricity bills had inflated over the past year by 54 per cent, adding millions of dollars to its manufacturing costs, with prices now peaking at levels that force it to shutter its production at 300 plants around the country for up to half an hour a day to constrain costs.

Boral can’t get enough renewable energy to underpin its green journey.Credit:

Australia’s stuttering renewable energy transition, along with last year’s simultaneous breakdowns at ageing coal-fired power plants and high gas prices, created a perfect storm in energy markets, causing a sharp rise in wholesale prices that is still impacting local manufacturers.

“At a certain point during the day, when the price goes up to a certain level, our manufacturing stops,” Bansal told The Australian Financial Review energy and climate summit on Monday.

“We’ve worked out economically, it’s actually better to have thousands of people waiting idle for the prices to come down, then actually do the work. That’s a real issue we are facing every single day on 300 manufacturing sites across the country,” he said. Staff were working overtime and night shifts to manage energy costs and get supply of building materials to customers, he said.

More renewables and greater certainty around prices are needed, Bansal said.

The energy-intensive company has signed a fixed-price, 10-year power purchase agreement that will cover 19 per cent of its renewable electricity needs to 2035, but was struggling to find other cost-competitive offers.

“We can’t get enough renewable energy. In our green journey, there is not enough renewable energy to go and get it today,” he said.

A lag in the rollout of new renewables generation and a fast-approaching wave of closures of the country’s ageing coal-fired power stations are intensifying energy industry concerns that the Albanese government’s goal of doubling renewables’ share of the generation mix to 82 per cent by 2030 is falling away, putting the country at risk of missing its legislated climate target of reaching net zero by 2050.

The situation is likely to be exacerbated by an increasing push from developing countries to bring key climate targets forward to 2040 because of the increasing frequency of disruptive climate events, such as floods and wildfires, said Martijn Wilder, the chair of National Reconstruction Fund, which is tasked with funding $15 billion worth of renewables and low-emissions technologies.

“What you’re going to see as more of these climatic events happen is … there’s going to be an increasing call to get to net zero sooner,” Wilder said. “That doesn’t necessarily mean that government policy here will change immediately, but I just think you need to be cognisant of what is going on internationally and how fast things are moving, and that pressure will definitely come.”

Power companies are bringing forward their closure dates for coal-fired power stations, which supply two-thirds of the nation’s electricity, leaving the Australian Energy Market Operator fearful there will not be enough firming projects, such as pumped hydro, fast-start gas generators, and long-duration batteries, to support the grid in coal power’s absence.

More than 10,000 kilometres of high-voltage transmission lines will need to be built across the country to link new renewable energy zones and facilitate the flow of clean electrons to replace coal generation, but the rollout is happening too slowly, bogged down by planning difficulties, cost increases and local community opposition.

AGL chief executive Damien Nicks told the summit he was confident Australia’s second-largest energy company could deliver on its five-gigawatt renewable target by 2030. He said priority and planning approvals should be sped up for projects located near existing grid connections.

“That’s the way, ultimately, we can fix some of these planning issues right now because it is a real bottleneck in the market,” he said. “This is a huge project this country’s undertaking. There’s so many planning approvals that are going into government. So this is not a criticism, but we do need to think about how we do it differently.”

Clare Savage, chair of the Australian Energy Regulator, said the greatest challenge the country faces in its bid to keep on track is the clash between affordability and the scale and pace of the energy transition. “If we’re to electrify the economy, we need to double the size of the system we have today. If we want to have an export industry that’s hydrogen-based, we need to have a system that’s four times larger than the one we have today.”

“Everyone in the world is trying to do this at the same time,” Savage said, which was feeding supply chain pressures, labour, critical minerals and other metals shortages.

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