KARMOEY, Norway/LONDON (Reuters) - In the cavernous chamber of Norsk Hydro’s aluminum smelter on the Norwegian island of Karmoey, the magnetic forces are so strong they make heavy iron wrenches float out of the hands of workers.
The company is piloting a technology that tames the effects of that powerful magnetic field, which is a consequence of the electrolysis process to make aluminum and leaches away energy.
Norsk Hydro told Reuters it was using mathematical models to mitigate the effect of the magnetism and other energy waste. The pilot project can cut the amount of energy used in production by 15% compared to the industry average, the company said, but declined to disclose further details, citing commercial sensitivity.
The technique is one of the drives that Hydro is banking on to make good on its ambitious pledge to become carbon neutral from next year - meaning it can balance out its emissions with carbon savings elsewhere.
The Norwegian company is looking to gain a competitive advantage at a time when the aluminum industry, along with other industrial polluters, is under increasing pressure to reduce CO2 emissions, from investors as well as governments formulating carbon taxes.
“If aluminum is to be a material for a low-carbon future ... we have to defend it by having as low emissions and as small a footprint as we can,” new CEO Hilde Merete Aasheim told Reuters in an interview at Norsk Hydro’s Oslo HQ.
“This is where the Karmoey project will play a part, developing technological elements that can be used in other plants to bring down energy consumption.”
Norsk Hydro said its pilot produced aluminum using between 11.8 and 12.3 kilowatt hours of energy per kilogram of aluminum. It said the 11.8 figure was a record low for the industry which it said averaged 14.1.
The plans have cost billions of Norwegian crowns, however, and there is a long way to go before they are likely to have a major impact across Norsk Hydro’s business.
The pilot project at Karmoey alone required an investment of 4.3 billion crowns ($490.69 million) - a sum roughly equal to the company’s net income last year - although about a third of that is being shouldered by state green investor Enova.
The scheme is still at an early stage, with a capacity of 75,000 tonnes of aluminum per year, a fraction of Norsk Hydro’s annual production of about 2 million tonnes.
The company said hitting carbon-neutrality also depended on other measures such as increased recycling.
The tech drive has come at a time when Norsk Hydro has been under some financial and reputational strain. It is reliant on Brazil, home to its largest alumina refinery, where a spill of untreated water into a river last year has forced the company to halve the plant’s capacity, has dragged on its share price and tarnished its green credentials.
Norsk Hydro is also not alone in pursuing new technology to reduce emissions during production, and its competitors say they too are making headway with rival techniques.
Alcoa and Rio Tinto, for example, set up a joint venture called Elysis www.elysis.com/en last year. The project's aim is to achieve carbon-free aluminum production. It is developing a smelting process that emits oxygen instead of greenhouse gases, using a ceramic anode instead of a carbon anode during electrolysis.
Rio Tinto CEO Jean-Sebastien Jacques told shareholders in April the technology worked in principle but needed to be tested on a commercial scale.
While Norsk Hydro is among the top 10 aluminum producers in the world, it is dwarfed by Chinese companies such as China Hongqiao Group and Russia’s Rusal. Rio Tinto and Alcoa are also bigger players.
Despite the intensifying competition, Norsk Hydro is the aluminum industry leader when assessed across a range of environmental, social and governance (ESG) issues, according to Sustainalytics, which provides data for investors on ESG risk.
Much of this, though, is down to the company being based in Norway, where hydroelectricity - favored by most firms as the cheapest way to produce aluminum - is abundant.
A Reuters analysis, using Refinitiv data, of the investor base of the world’s biggest aluminum companies shows Norsk Hydro has 48 mutual fund investors with a focus on investing sustainably, more than any of its peers.
For an interactive version of the graphic, click here tmsnrt.rs/2D3ZknC
Typically, energy accounts for a third of the cost of producing aluminum, so cutting energy input makes economic as well as environmental sense.
Simon Webber, fund manager of the Schroder ISF Global Climate Change Equity fund, a Norsk Hydro shareholder, said the race was on.
“The production of aluminum is still incredibly carbon-intensive, so it’s going to need to be rationed in some way,” he said. “The most-efficient producer, or lowest-emission producer, which is Norsk Hydro, will be very well placed for that.”
There is, however, some contention over Norsk Hydro’s pledge to be carbon-neutral from next year, which was made by the outgoing CEO and falls on Aasheim to honor.
Some environmental campaigners dismiss the pledge as a marketing tool because of the method the company uses to measure its net emissions. It will not just include its own emissions, but also emissions avoided by the greater use of aluminum in cars to make them lighter and use less fuel.
The problem is, it would be better for the environment if everyone drove less.
“Every company looks to claim their products are a solution,” said Nate Aden, a senior fellow at the World Resources Institute, which helped to develop the Greenhouse Gas Protocol for counting emissions. “It’s a marketing exercise,” he added about Norsk Hydro’s measuring methods.
Kirsten Margrethe Hovi, Hydro’s carbon accounting chief, said its definition of carbon-neutrality was transparent, as “the balance between direct and indirect emissions from our own operations, and the savings of applying our metal in the use phase”.
She added it was an internal tool the firm used to implement its strategy and evaluate the climate impact of investments.
“It does not rule out decisions that increase our overall emissions, but we then must do more and mitigating actions elsewhere to stay on track.”
(The story was refiled to clarify that measurements in paragraph 8 are per kg of aluminum)
($1 = 8.7632 Norwegian crowns)
Additional reporting by Gwladys Fouche in Karmoey and Terje Solsvik in Oslo; Editing by Pravin Char