Europe's Energy Mix: Views of an "Energy Intensive User"
"We are energy agnostic," insisted Mr. Sylvain Lhote, Vice President European Government Affairs, Alcoa, at Gas Week 2013 in Brussels, Belgium.
"We use a lot of energy in Spain—2-3% of the power consumed in Spain is done by our plants—but we use 70% renewable energy sources, and as they are secure and reliable, we are fine with this," he explained.
His second point, he said, was that Alcoa had been working since the mid 1990s, as an aluminum corporation from the US, on climate change. "We haven't waited for the debate to grow; we have been one of the very few American companies backing 'cap and trade' in the US congress."
Mr. Lhote explained that Alcoa's approach was based on consistency, regardless of the continent in question. He reported: "What we have done well as an industry is, since 1997, a 50% reduction of our emissions, so we are doing the job we can do; we could do better, faster, but at least we're delivering.
"The challenge we face in Europe," he continued, "is the explosion of energy cost."
He said that when Alcoa produced a ton of aluminum in Europe in the late 1990s it cost around $125 more per ton of extra energy costs, compared to the company's competitors. "We could have solved this," he recalled, "with better markets, efficiency programs. Now those costs have spiraled by 55%. Today, we pay nearly $200 more per ton of aluminum produced, just because of the energy cost differential."
The challenge for the aluminum industry, said Mr. Lhote, was that it was not possible to pass those costs to the consumer. "Our price is fixed globally by the London Metal Exchange (LME), and today a ton of aluminum is traded below $2,000. So we have more than 10% extra cost compared to our international competitors and basically you see many European aluminum production plants below the red line."
He said this had resulted in a degradation of the industry in Europe, a phenomenon that some considered "collateral damage," according to him. "They say 'you are the old economy. We don't need you anymore in Europe, thank you, bye bye.'
"This is utterly wrong," insisted Mr. Lhote. "The aluminum industry in Europe is an industrial ecosystem. Whatever solutions you're considering—solar, wind, cold storage, an aqua pipe enabling deep drilling for shale gas, network interconnections—all these technologies rely on, in one way or another, aluminum."
The paradox, he said, was that Europe was importing more and more aluminum. "Today, only one-third of the total aluminum consumption equivalent emissions are covered by ETS in Europe. Sixty-five percent of the carbon associated with our production comes from the ETS area—there's something wrong," he said.
"The question in designing our energy, climate and industrial policy is 'how do we keep the added value in our region to deliver more growth, more jobs, more R&D, more innovations for the European economy and not let it go bit-by-bit. We need to get it right."