Electricity for Aluminum in the Era of Expensive Energy: The Economic Principles

Gordon, R.L. (1983). Electricity for Aluminum in the Era of Expensive Energy: The Economic Principles. IIASA Collaborative Paper. IIASA, Laxenburg, Austria: CP-83-032

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Abstract

Cheap electricity has long been the basis for locating aluminum smelters. However, a limited number of sources of cheap electric power are available around the world. Such sources consist of the best hydroelectric sites and possibly sites near gas field and low grade lignite and subbituminous coal deposits -- unfavorably located to compete on world markets. A few additional aluminum smelters might be located at the remaining sites of this low cost power. However, critical limits exist to extensive relocation of industry near cheap energy or even the persistence of cheap electricity. Electricity is difficult but not impossible to transmit over long distances and a time may come, where it becomes profitable to integrate the low cost facility into a national or international generating system (grid). Moreover, given the limited number of available sites, only a limited number of plants seeking low cost energy can be accommodated. Moreover, cheap energy is not the only consideration in plant location and high nonenergy costs may eat up any energy cost savings. The long run prospect is that the margin aluminum smelting will be based on nuclear generated electricity. However, there may well remain unexploited low cost sources and excess capacity so that it will pay to locate several more smelters near cheap energy.

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