How major national assets (like Tomago aluminium) can remain viable while de-carbonising
The SFV/PPA model works by using a special financial vehicle to handle money and risk so Tomago can buy clean, reliable power at stable prices—making the business sustainable and giving Australia a proven way to decarbonise other big industries.
🏭⚡ What’s the challenge?
Big factories like Tomago Aluminium need massive amounts of electricity every second.
They also need the price of that electricity to be stable, or else their costs jump around and they can lose money.
At the same time, Australia wants factories like Tomago to use clean energy instead of fossil fuels.
🌞💨 What’s the SFV/PPA model?
Think of the system as a team plan where different players each do a job:
1️⃣ PPA – Power Purchase Agreement
This is a long-term contract where Tomago agrees to buy electricity from new renewable energy projects (wind, solar, etc.).
It’s like agreeing to buy school lunches at a fixed price for 10 years — no surprises.
2️⃣ SFV – Special Financial Vehicle
This is like a big money organiser or a bank account with superpowers.
The SFV:
- collects money from investors and government support
- pays for new renewable energy projects
- pays for “firming” (like batteries or pumped hydro)
- manages risk so Tomago doesn’t have to
- smooths out price spikes in the electricity market
The SFV sits in the middle, balancing everything so the whole plan works.
The SFV is like a trusted treasurer who makes sure everyone gets paid, the money is used wisely, and nobody gets a nasty surprise bill.
3️⃣ Firming
Because wind and solar don’t work all the time, the SFV pays for “firming” resources:
- batteries
- pumped hydro
- gas peakers (short-term backup)
- demand response
This makes renewable power as reliable as coal, but without the pollution.
🧩 How the whole system works together
Step 1: Investors and government put money into the SFV
Step 2: The SFV builds or contracts renewable power + firming
Step 3: Tomago signs PPAs to buy this clean power at stable prices
Step 4: The SFV takes on the financial risk instead of Tomago
Step 5: Tomago gets cheap, clean, reliable electricity 24/7
🏆 Why this keeps Tomago commercially strong
✔ Stable electricity prices
Because the SFV manages risk and the PPAs lock in costs, Tomago avoids big jumps in electricity prices.
✔ Reliable power
Firming ensures Tomago never loses power — extremely important for aluminium smelters.
✔ Big emissions cuts
Most power now comes from renewables, supporting national climate goals.
🇦🇺 Why this helps decarbonise other big industries
Other huge power users (steel, cement, hydrogen, data centres) can copy the same model:
- The SFV collects money and spreads out risk
- PPAs provide stable, cheap clean energy
- Firming guarantees 24/7 reliability
- Industry gets clean power without going broke
It becomes a repeatable national blueprint.
Policy Problem
Australia must decarbonise heavy industry while safeguarding jobs, regional economies and national energy security.
The Tomago model addresses all three policy pillars simultaneously.
How the SFV/PPA Model Solves It
1. Market Creation
The PPA creates guaranteed demand for renewable electricity, enabling large-scale private investment.
2. Efficient Risk Allocation
The SFV:
- Centralises financial risk
- Reduces exposure for industry
- Uses long-term cost smoothing
- Aligns public and private capital
- Mobilises investment that would not occur otherwise
This is a de-risking mechanism, not a subsidy model.
3. Firming and Reliability
Firming assets overseen by the SFV guarantee continuous supply for industries like aluminium smelting that cannot tolerate interruptions.
This ensures energy security during the renewable transition.
4. National Replicability
The model can be immediately adapted for:
- Port Kembla steel
- Gladstone aluminium
- Kwinana refineries
- Emerging hydrogen clusters
- Data centre precincts
It is a scalable blueprint for industrial decarbonisation consistent with Australia’s 2050 net-zero commitments.
5. Economic and Social Benefits
Aligns with international trade requirements such as CBAM (EU carbon border tax)
Protects thousands of regional jobs
Stimulates clean energy investment
Supports grid stability
Maintains Australia’s manufacturing capability