December 1, 2022

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Alcoa's Energy Access Concern - E24

Alcoa’s Energy Access Concern – E24

If wind power plants go bankrupt, favorable long-term power agreements in the industry can be affected. According to wind power agreements, Alcoa says.

Director Åslaug Haga at Industry Organization Norwea and Director of Energy Ole Løfsnæs at Alcoa Industrial.
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Åslaug Haga Leader of Industry Organization Norwea and Director of Energy Alcoa Ole Løfsnæs meets with E24 outside Storting, where a series of hearings are taking place this week on the 2023 national budget.

Alcoa and Norwea are concerned that wind power plants may go bankrupt following budget tax measures. The government is proposing a base rental tax of 40 per cent on wind energy. This reduces profitability, especially in older plants.

In the event of bankruptcies, industry players such as Alcoa could lose important long-term energy agreements. The company buys power for its Mosjøen plant through long-term agreements with several wind power plants, and is involved in this.

When taxes tighten on both wind and hydro power, there will be higher prices for energy contracts and a less competitive industry, says Løfsnæs.

Among the players in the industry are Norsk Hydro, Alcoa and Iramit It has entered into long-term agreements with Norwegian wind energy. It also has major technical players such as Google and Facebook.

– You will go bankrupt

On Monday, Adar Kreutser, CEO of Finans Norge, criticized the wind energy tax at a hearing in Parliament. He fears bankruptcy in wind power and a decline in foreign investment, describing it as an “international scandal”.

On Wednesday, Norwea presented its contribution to the Energy Committee’s session on the national budget. They have made players in the industry open their books to KPMG, and the numbers show a clear risk of bankruptcy, the organization claims.

– We have calculations that show that some power plants will go bankrupt. This applies primarily to those who have a full consumption. That’s about half of the wind power plants we have. The drama of this could be great, Norwea CEO Åslaug Haga says for E24.

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According to Noroya, nearly half of Norway’s wind energy is delivered to the industry through long-term agreements at affordable rates. Bankruptcies can affect jobs, and Haga doesn’t think that’s the purpose of raising taxes.

– If companies go bankrupt, there will certainly be consequences for industrial power agreements, she says.

According to the power agreements

Alcoa buys power for its Mosjøen plant in northern Norway through long-term agreements with the Guleslettene, Kvitfjell/Raudfjell and Øyfjellet wind projects.

– This plant relies on its own wind power agreements. When suppliers can go bankrupt and cancel agreements, Løfsnæs says, it’s bad to be a major consumer of electricity in northern Norway as well.

What will happen to Alcoa’s PPAs if a supplier goes bankrupt?

The question is, if we lose an agreement, it is probably in our best interest to replace it. But you don’t know if you’ll get the same conditions, says Løfsnæs.

What is the biggest problem is that you can have a system in which a power agreement worth billions of dollars can evaporate. He says uncertainty is the worst.

– More and more difficult

The Alcoa plant at Lista in southern Norway buys much of its electric power in a long-term agreement with Statkraft that runs until the end of 2023. After that, new power agreements are needed.

Løfsnæs concerns over Listaverket’s future after the government’s proposal to cut CO₂ compensation to industry by Nearly three billion in 2023. The scheme supports the industry to avoid its relocation to other parts of the world because climate policy in Europe makes electricity more expensive (“carbon leak”).

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– We have a plant in southern Norway that may be shutting down due to the tightening of CO2 compensation, he says.

“Maybe we’ll survive if we get a good power deal in the future, but it’s very hard to imagine that could happen,” adds Løfsnæs.

It should not weaken the will to invest

Norwea hasn’t said “no” to the rental tax and the natural resource tax, but Haga believes the tax structure should change.

– Existing power plants must not go bankrupt or receive a utility that means they cannot run further. And then we must not weaken the desire to invest in the future. Going green requires more power, Haga says.

Haga asks the Norwegian Parliament to ensure that the proposal for a land rent tax on wind energy is properly investigated.

– It is amazing that you get such far-reaching proposals that will be implemented from January 1 without studies and consultations with industry or municipalities, and without hearings, says Haga.

It is a process that can at best be said to be worthy of criticism, she adds.

Read on E24 +

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