Rio counts cost of energy goal

RIO Tinto says the federal government's renewable energy target (RET) will cost the company up to $800 million over its first decade, in part because Canberra has linked compensation arrangements to its delayed emissions trading scheme.

The Senate is to vote soon on amendments to the target, which requires 20 per cent of energy to come from renewable sources by 2020.

While this will boost green investment, it will also push up electricity prices, raising costs for power-guzzling industries such as aluminium smelting and cement making. Rio owns three of the country's six aluminium smelters.

To protect these industries, the government says trade-exposed sectors will receive a 90 per cent exemption from RET costs.

But in a submission to a Senate committee, the managing director of Rio Tinto Australia, David Peever, denied the legislation provided this level of protection.

Instead, he echoed concerns of other aluminium producers, saying the RET amendments link assistance for big power users to the carbon pollution reduction scheme (CPRS).

In April the government postponed the ill-fated CPRS until at least 2013 and Rio said this meant it would only receive a 55 per cent exemption from the RET costs.

In "conservative"estimates,Mr Peever said Rio would face $500 million to $800 million in costs over the first 10 years of the scheme, and called for the RET legislation to be separated from the CPRS.

These costs would affect spending and employment at Rio's three smelters, in the Hunter Valley, at Gladstone and in the Tamar Valley, the submission said.

Australian Aluminium Council executive director Miles Prosser said that as it stands, the RET would cost the industry $700 million to $1.4 billion over its first decade.

A Senate committee is inquiring into the amendments, which are designed to tackle a slump in the price of renewable energy certificates.

The opposition is expected to pass the bill, which effectively extends the Howard government's mandatory renewable energy target.

A spokeswoman for Climate Change Minister Penny Wong said industry lobby groups were asking for compensation for costs that they already pay under the Howard government scheme.

"If this was granted, it would equate to a 90 per cent discount on a scheme they have not received assistance for in the past, she said. "The government does not believe it is reasonable to grant a discount for costs that the industry already pay."