Thousands of regional jobs hang in the balance with the expiry of a lucrative power subsidy between the Victorian Government and global aluminium producer Alcoa.
A subsidised power contract with the State Electricity Commission of Victoria, which is said to have cost taxpayers more than $100 million a year on some occasions, will expire at the end of today.
Enacted in the late 1980s, the subsidy was designed to provide electricity to both the Portland smelter and the now-defunct Point Henry smelter at a price linked to the world price of aluminium.
Its expiry threatens to undo the western Victorian community of Portland, where Alcoa is deeply entrenched in the regional economy.
Providing more than 2,000 indirect jobs — almost a quarter of Portland's total population — the company is the region's largest employer and biggest taxpayer.
Grattan Institute energy director Tony Wood said the company would face 'significant' challenges in moving to spot market priced power.
"The original deal, as often is the case with these subsidies, tried to kickstart an industry that was seen to create economic benefit for Victoria," he said.
"Unfortunately, the history of these sort of subsidies is they don't just create an injection of short-term funding which then can be stopped — they tend to be a permanent drip-line. And that's what has happened in this case."
The Portland smelter's foray into an already volatile power market is exacerbated by the expected closure of Australia's largest coal-fired power generator, Hazelwood.
The Victorian Government has ruled out offering financial incentives to electricity multinational ENGIE to stave off the threat, amid mounting speculation Hazelwood could permanently shut as early as March.
ENGIE insists it has not made a decision about the future of the coal-fired plant, which generates up to a quarter of Victoria's electricity.
Mr Wood said the future of the facility would trigger an impact on Alcoa.
"One of the inevitable consequences of withdrawing that much capacity from the market would be an upward movement in price," he said.
"That could be the straw that breaks the camel's back for the Portland smelter."
'They should see it coming'
The uncertainty lingering over the Portland smelter is symptomatic of the aluminium industry's global decline.
In the United States, eight smelters have either closed or curtailed since 2015, meaning only two smelters remain fully operational today — the lowest level of production since World War II.
Alcoa curtailed its Wenatchee Works in north-west Washington state last year, resulting in more than 400 redundancies.
Long-time journalist for the Wenatchee World newspaper, Christine Pratt, said decades-long uncertainty over the future of the smelter had prepared the regional community for the "inevitable".
"People had been predicting it as the price of aluminium on the world market continued to fall, [so] the state mobilised to try and get these workers involved in job retraining and other education."
She said it was imperative communities like Portland were prepared for the worst.
"They should see it coming, you know? Aluminium smelting is just not the strong industry that it once was," she said.
"The ongoing relationship with Alcoa over the decades has taught the city that it is economically hazardous to become dependent on a single employer."
Victoria's Treasurer Tim Pallas said the Government was doing "all it could" to support the community, and was working alongside Alcoa to ensure it remained in the region.
In a statement, Alcoa said it would continue to find and implement cost saving measures for its Portland smelter, but that its future would ultimately be decided by its ability to remain internationally competitive.
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