It took a while to figure out what this story had to do with aluminum … but it’s there
Los Angeles Times via Yahoo! News
In 1941, folk singer Woody Guthrie wrote a paean to the Columbia River’s Grand Coulee Dam, enthusing that power generated by the New Deal monument ‘is turning our darkness to dawn.’
But this summer, the Pacific Northwest’s mightiest river could leave California in the dark. A stubborn drought has reduced water levels behind the Columbia’s network of power-producing dams by a third, leaving less electricity available for export to the south.
And that prospect is making California’s power grid operators nervous.
California and the Pacific Northwest have a long history of mutual power dependence, dating to President Franklin D. Roosevelt’s creation of the Bonneville Power Administration in 1937.
Roosevelt created the BPA to operate the massive Bonneville and Grand Coulee dams, as well as other hydroelectric dams on the Columbia River and its tributaries. The president envisioned the BPA as a kind of Western version of the Tennessee Valley Authority, the government corporation that dammed rivers and delivered electricity and industry to the rural South during the Depression.
During the next seven decades, the BPA, a self-financing federal government agency, has marketed power from 31 dams and other sources. The agency has been an engine of growth in what had been rural areas of Oregon and Washington, providing below-market-price power to aircraft manufacturers, aluminum smelters, computer makers and farmers.
I gather this happened before, in 2000/2001. At the time, the BPA suggested shutting down the aluminum smelters for 2 years. That went over well … but in fact, it seems from my reading that some plants did close down.
From another article
Excluding alumina, electricity is the single largest costs of producing aluminum, and it is the cost that varies most significantly among smelters. The average price for power to the world’s aluminum industry is generally believed to be a little below $20 per MWhr. Current prevailing power prices in the Northwest place this region in the highest 10% of electricity prices facing smelters in the world. At these prevailing prices, smelters in the Pacific Northwest can operate competitively only if aluminum prices are very high. Thus, the key to restoring competitiveness for GNA’s smelters is to reduce their power cost.
Here’s a forecast paper: Forecasting Electricity Demand Of The Regionâ€™s Aluminum Plants
And a 2003 summary of what happened, with the tongue in cheek subtitle of How the Aluminum Industry Saved the West
Other links: Bonneville Power Administration
What seems to be different this time compared to 2000/2001 is that the world price for Aluminum is (much) higher. It is now about 25% higher than in 2000 and about 50% higher than the trough of 2002/2003. So there may not have to be plant closures, and perhaps the aluminum smelters will be able to afford higher (spot market) electricity rates.