Must Read: The Canary in the Bauxite Mine! The Tomago Deal Explains What’s Wrong With Our Electricity Market I recently debated a pro-wind/solar advocate about the $2.5 billion Tomago Aluminium support package. Three important questions came out of it. 1. Who pays when wind and solar don’t deliver what was forecast? Large wind and solar generators are generally semi-scheduled, unlike coal generators, which are generally scheduled. The rules recognise that wind and solar output can vary because of energy-source availability. If wind is forecast to deliver 500 MW but only 300 MW is available, the missing 200 MW has to come from somewhere. Coal can't necessarily ramp up that quickly. The NEM dispatches every five minutes, so faster gas, hydro, batteries or other available generation may have to fill the gap. The wind farm isn't simply billed for the replacement energy. I was told by the wind/solar advocate that “Causer Pays” does this. It doesn’t. Causer Pays allocated regulation FCAS costs, not the cost of replacing the missing energy. So the cost of dealing with intermittency doesn't simply stay with the generator creating the shortfall. 2. So why doesn't Tomago just contract the spare coal capacity? This was the next question put to me by the wind/solar advocate. There are some pretty obvious incentives here. Tomago is heavily unionised and, in my opinion, has every reason to work with the current Labor government's (NSW & Fed) push away from coal, particularly when that government is putting billions of dollars behind keeping the smelter operating. Then there's the money. Governments are providing around $2.5 billion over ten years to support Tomago under its new electricity arrangements. @EnergyWrapAU calculates that at roughly $32/MWh for the ten years. That's an enormous incentive. If government support effectively makes a renewable-heavy electricity arrangement substantially cheaper for Tomago, why wouldn't they take it? So simply saying “there's spare coal capacity” misses the point. Ask what the market rules and government policy are incentivising Tomago to buy. We keep comparing the headline price of coal, wind and solar while ignoring firming, balancing, subsidies and who actually carries the cost when generation doesn't arrive. Follow the incentives and the outcome starts making sense. 3. Then why was NSW prepared to spend up to $450m to keep Eraring open? Because NSW is trying to avoid another Hazelwood or Liddell, huge amounts of baseload generation disappearing before cheap, reliable replacement is ready. Wind/solar plus the firming, storage and transmission required to back them up clearly much m. AEMO forecast a reliability gap if Eraring closed in 2025, so NSW offered up to $450m of underwriting to keep its 2,880 MW available. Origin ultimately didn't need the underwriting and is now keeping Eraring open commercially until 2029. Now look at the rough comparison: Tomago Aluminium (direct subsidy): ~$2.5bn / ~500 MW / 10 years ~$500,000/MW/year Eraring (underwriting only): up to ~$450m / 2,880 MW / 2 years ~$78,000/MW/year Demo'd Liddell (stated cost to keep open): ~$900m / ~1,000 MW / 10 years ~$90,000/MW/year Demo'd Hazelwood (stated cost to keep open): ~$400m / ~1,600 MW / 10 years ~$25,000/MW/year They aren't directly equivalent programs, but the contrast is extraordinary. We're prepared to spend billions supporting one 500 MW industrial load while simultaneously engineering the retirement of thousands of megawatts of dispatchable generation. That tells you everything about the incentives we've created.