Jean-Sebastien Jacques is meeting with federal and state ministers about future of smelter that's 'on thin ice'

Mr Jacques will meet with NSW Government representatives next week as Australian smelters face an "existential threat" from high power demand and costs, the global push for zero emissions and an uncertain Australian energy future.

The meeting is only weeks after Rio Tinto pledged $1.5 billion over the next five years to neutralise its greenhouse gas emissions and become a net zero emitter by 2050, raising even more concerns about the future of its high-emissions smelters.

Mr Jacques is understood to have already met with Federal Energy Minister Angus Taylor, who has not denied reports the Federal Government is considering spending $300 million to extend the life of Liddell coal-fired power station until 2026.

The Liddell extension proposal, contrary to owner AGL's plan to close the facility in 2023, is in part because of Tomago Aluminium's need for a constant electricity supply, representing about 10 per cent of the state's power generation.

But respected Grattan Institute energy analyst Tony Wood warned against governments pouring public money into a "bottomless pit" as they scramble to address urgent climate and energy demands.

NSW Environment Minister Matt Kean did not respond to questions about the possibility of government support for the smelter, which employs 950 staff and nearly 200 contractors, and contributes $1.5 billion annually to the Australian economy, and $800 million locally each year.

In a short statement on Thursday he said "I want to do everything I can to ensure Tomago keeps open and we keep these critical jobs in the Hunter."

"That means delivering cheap reliable electricity which is entirely what I'm focused on, now and into the future."

Tomago Aluminium chief executive Matt Howell did not respond to a Newcastle Herald call, but in 2019 he backed Mr Jacques's "on thin ice" assessment of the impact of high power prices on the smelter.

Mr Wood said the aluminium industry's claims of being uncompetitive because of high power prices "are likely to be at least partly true" even if other issues such as ageing plants and competition from plants with access to very cheap hydro power "also adds to the existential threat".

But he warned that direct government subsidies to keep the smelter open, that are not balanced by commercial benefits, "should not be countenanced by governments".

"Governments regularly fail such tests because the short-term, adverse political consequences are seen as too great," Mr Wood said.

The ability of smelters to reduce power demand when the energy system is under stress - leading Mr Howell to describe Tomago as the state's "battery" - meant commercial arrangements in the form of lower average prices or direct payments at times of peak demand "do make economic sense", Mr Wood said.

He acknowledged failing to provide some form of subsidy was a "significant commercial threat that can be easily turned into a major political headache for governments".

Mr Wood described the future scenarios facing Tomago Aluminium and Liddell power station as a "witches' brew" that is complicated by the prospect of emerging technologies allowing aluminium to be produced from zero-emissions electricity in Australia.

"Governments may be tempted to provide some support for such technologies through initiatives like the Federal Government's yet-to-be-announced Technology Roadmap," Mr Wood said.

"There is a policy rationale for such support. However, that rationale must be balanced by a clear assessment of the prospect and the timeframe for commercial viability.

"The risk if governments get this wrong is that public funding is poured into a bottomless pit."

In 2019 Hunter Joint Organisation, representing the Hunter's 11 councils, told a NSW parliamentary inquiry the region had "particular issues" that required NSW and Federal Government responses.

The HJO recommended the Australian Renewable Energy Agency (ARENA) call for a "bespoke expression of interest" to deliver energy security to the Hunter's aluminium industry after Liddell's closure, by developing pumped hydro and other firming energy or peaking supply.

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