680 MW Project with Terraces to Power Aluminum Smelter
The use of the energy from the Tasersiaq Lake site for aluminum smelting has been extensively studied. Alcoa Aluminum entered into an agreement with the Government of Greenland with the intent of building a power station at Tasersiaq Lake and an Aluminum smelter to be located at Maniitsoq. AECOM Tecsult prepared two detailed prefeasibility reports for power stations, one for the Tasersiaq, 7e, Greenland Hydropower Site, [2] and a second for the Tarsartuup Tasersua, 6g, Greenland Hydropower Site. [17]
Together they were designed to provide a minimum base power of 680 MW to the aluminum smelter year-round. The 2009 study determined that the Tasersiaq Lake site could reliably provide a minimum of 500 MW using the melt water from the lake’s natural catchment. So, it was necessary to develop the Tarsartuup Tasersua 6g site to provide the additional 180 MW needed by the aluminum smelter.
The original project was abandoned in 2016 when Alcoa Aluminum withdrew. It isn’t clear what precisely led to the project failure. However, there were reports that Alcoa sought a greater cost sharing from the Government of Greenland. There was also considerable effort to reduce the project cost, including re-estimating using lower labor rates, longer work shifts, and the use of lower cost Chinese labor. An examination of aluminum prices from the period from 2006 through 2016 also tells an important part of the story. [18] In the period from 2006 through 2008, when the project was launched, aluminum prices averaged in the range of $2,700 per metric tonne. In late 2015 and 2016 prices had dropped to an average of about $1,600 per metric tonne. It is likely that there was insufficient justification for the project, considering the project cost and aluminum price at that time.
A system of graded terraces can be used to collect melt water from areas beyond the Tasersiaq Lake natural catchment. Adding a terrace network, along with an expansion of the water storage and power generation facilities at Tasersiaq Lake can increase the power generating capacity of that site to 680 MW. The size of the terrace network needed to collect sufficient water for this expansion is much smaller than that needed for the 2,250 MW project described elsewhere in this website. A network of 15 channels each with an average length of 20 km will be sufficient to collect the additional required melt water. This makes the overall length of the required channels less than 2 percent that of the network of channels needed for the 2,250 MW project. So, the estimated construction cost of this network is estimated at $10 million.
Table 1 shows the original estimate for the 500 MW Tasersiaq Lake project, in 2023 dollars. It also applies multipliers to that estimate to derive costs for a 680 MW project. By using this approach, the development of the Tarsartuup Tasersua, 6g site is not needed. This results in a significant reduction in the cost of the 680 MW power generation project. As shown in Table 1 below, the original combined project cost estimate, in 2023$, was $2,493 million. The Tasersiaq Lake alone with graded terraces has an estimated cost of $1,610 million, a reduction of approx. $883 million.
Table 1: Estimated Construction Cost for Tasersiaq Lake Site 7e with Graded Terraces sufficient to provide 680 MW to aluminum smelter year-round
| Tasersiaq Site 7e Cost Est. | AECOM 500 MW in 2023$ | Adjusted Cost for Project with Terraces that Gen. 680 MW in 2023$ | Size Mult. for size incr. to 680 MW |
| Harbor site dev | $0.53 MM | $0.53 MM | 1 |
| Port Fac | $5.75 MM | $5.75 MM | 1 |
| Roads Const | $60.03 MM | $60.03 MM | 1 |
| Civil works Powerhouse etc. | |||
| Powerhouse & access | $6.16 MM | $8.63 MM | 1.4 |
| Transformer | $2.19 MM | $3.07 MM | 1.4 |
| Tailrace | $14.55 MM | $14.55 MM | 1 |
| Surge chamber | $1.55 MM | $1.55 MM | 1 |
| Cable & escape tunnel | $5,02 MM | $5.02 MM | 1 |
| Transformer concrete | $2.64 MM | $3.70 MM | 1.4 |
| Powerhouse I concrete | $5.73 MM | $8.02 MM | 1.4 |
| Powerhouse II concrete | $3.29 MM | $4.60 MM | 1.4 |
| Cable & escape concrete | $1.39 MM | $1.39 MM | 1 |
| Crane install | $0.06 MM | $0.08 MM | 1.4 |
| Roofing | $0.61 MM | $0.85 MM | 1.4 |
| Structural steel | $1.93 MM | $2.71 MM | 1.4 |
| Penstock steel lining | $5.75 MM | $5.75 MM | 1 |
| Tunnel plugs | $4.97 MM | $4.97 MM | 1 |
| Civil works power tunnel | $106.8 MM | $106.8 MM | 1 |
| Access & addit | $15.44 MM | $15.44 MM | 1 |
| Intake Excavation | $6.30 MM | $6.30 MM | 1 |
| Dam & spillway | $36.83 MM | $66.30 MM | 1.8 |
| Electrical works | $49.89 MM | $69.84 MM | 1.4 |
| Mech + Elect turbines & gates | $166.8 MM | $233.5 MM | 1.4 |
| Archectural works | $7.81 MM | $10.93 MM | 1.4 |
| Total direct costs | $512.0 MM | $640.4 MM | |
| Total Indirect Costs | $516.3 MM | $681.5 MM | 1.32 |
| Contingency | $102.8 MM | $132.2 MM | |
| Power Line | $146.3 MM | $146.3 MM | 1 |
| Terrace Network Costs | $10.0 MM | ||
| Total Cost 500 MW Tasersiaq Site 7e with power line | $1,277 MM | ||
| Tarsartuup Tasersua Site 6g Cost Estimate 180 MW | $1,216 MM | ||
| Tasersiaq Site 7e plus Tarsartuup Tasersua 6g combined cost for 680 MW | $2,492 MM | ||
| Total Cost 680 MW Tasersiaq Site 7e with Terraces and Transmission Line | $1,610 MM |
Table 2 below shows the Levelized Cost of Electricity for the case where both site 7e and 6g are developed and for the case where only site 7e is used and is expanded with terraces, as calculated by the NREL LCOE calculator. [19]
Table 2. Levelized Cost of Electricity (LCOE) for Aluminum Smelter Project
| Inputs to NREL LCOE Calculator [28] | 7e Tasersiaq Lake with Terraces to get 680 MW | Combined 7e Tasersiaq Lake and 6g Tarsartuup Tasersua Dev. to get 680 MW |
| Project Period (years) | 40 | 40 |
| Discount Rate (%) | 5 | 5 |
| Capital Cost ($/kW) | 2368 | 3666 |
| Capacity Factor (%) | 95 | 95 |
| Fixed O&M Cost ($/kW-yr) | 27 | 26 |
| Simple Levelized Cost of Renewable Energy ($/kWh) | .020 $/kWh | .029 $/kWh |
The most advanced production aluminum smelters, currently in operation, consume approx. 12,300 kWh of electricity per tonne of aluminum produced. At that rate of usage, the 680 MW hydro project could support an aluminum smelter that produces approx. 460,000 tonnes/ yr. For the combined 7e and 6g project LCOE rate of $ .029 per kWh this yields an energy cost of $357 per tonne. For the 7e alone with terraces LCOE rate of $ .020 per kWh this yields an energy cost of $246 per tonne, for a savings of $111 per tonne.
Table 3. Is a financial analysis of the combined 460,000 tonne/yr. aluminum smelter and 680MW hydroelectric plant using graded terraces.
| Table 3. Financial Analysis of Combined 460,000 tonne/yr. Aluminum Smelter and 680MW Hydro Power Station | |
| Project Size | |
| Hydroelectric Power Capacity (MW) | 680 |
| Aluminum Smelter output (tonnes/yr) [Note 1] | 460,000 |
| Estimated Internal Rate of Return (IRR) based on assumptions listed below [Note 2] | 16.99% |
| Estimated Average Return on average Capital Employed (ARoaCE) based on assumptions listed below [Note 3] | 15.18% |
| Prior 3 yr. Estimated Direct Costs of Production | |
| Alumina cost ($/tonne aluminum) [Note 4] | $692 |
| Carbon including Anodes ($/tonne alum.) [Note 5] | $391 |
| Electricity cost ($/kWh) [Note 6] | 0.0031 |
| Electricity used (kWh/tonne) [Note 7] | 12,300 |
| Prod. Cost of Elect. ($/tonne aluminum) [Note 8] | $38 |
| Other smelter costs ($/tonne aluminum) [Note 9] | $524 |
| Total direct costs of prod. ($/tonne) | $1,645 |
| Prior 3 yr Mean Aluminum Price | |
| Aluminum price ($/tonne) [Note 10] | $2,712 |
| Gross Margin ($/tonne) | $1,067 |
| Estimated Capital Expenditures | |
| Aluminum Smelter capex ($/tonne) [Note 11] | $4,400 |
| Aluminum Smelter capex ($) | $2,024,343,414 |
| Hydroelectric Plant capex ($) [Note 12] | $1,610,332,673 |
| Total est. capital expenditures | $3,634,676,087 |
| Total capex per tonne aluminum per yr | $7,900/tonne |
| Project Funding | |
| Equity funds (% of capex) | 50.0% |
| Total Equity investment | $1,817,338,044 |
| Borrowed funds (% of capex) | 50.0% |
| Total Borrowed amount ($) | $1,817,338,044 |
| Loans Nominal Interest Rate(%/yr) | 4.93% |
| After-tax Nom. Interest Rate(%/yr) | 3.70% |
| Estimated Inflation Rate(%/yr) | 2.50% |
| Loans Real Interest Rate (%/yr) [Note 13] | 1.20% |
| Year 1 Borrowed Amount ($) | $454,334,510 |
| 40 yr term real loan cost ($/yr) [Note 14] | $14,368,348 |
| Year 2 Borrowed Amount ($) | $468,702,859 |
| 39 yr term real loan cost ($/yr) | $15,119,468 |
| Year 3 Borrowed Amount ($) | $483,822,328 |
| 38 yr term real loan cost ($/yr) | $15,929,904 |
| Year 4 Borrowed Amount ($) | $499,752,232 |
| 37 yr term real loan cost ($/yr) | $16,806,066 |
| Estimated Cash Flows | |
| Year 1 [Note 15] | -$468,702,859 |
| Year 2 | -$483,822,328 |
| Year 3 | -$499,752,232 |
| Year 4 | -$516,558,299 |
| Year 5 through Year 40 yearly | $428,619,679 |
Notes:
1. Assumes combined hydro plant and smelter have a 95% utilization rate. Assumes smelter requires 12,300 kWh/tonne of smelter aluminum per most modern Norsk Hydro and Rio Tinto plants. [20] [21]
2. Internal rate of return (IRR) see definition in reference [22]
3. Average Return on average Capital Employed (ARoaCE) see definition in reference [23]
4. 1.93 tonnes of alumina required per tonne of aluminum produced. World actual mean cost of alumina over most recent 3 yr period with inflation adjustment to 2024$ [24]
5. Mean carbon cost per tonne aluminum, over most recent 3yrs based on relative percentages of total production cost for alumina and carbon as reported by Alcoa in 2024$ [25] [26] [27]
6. Based on direct operation and maintenance expenses of hydro plant. Does not include capex costs of hydro plant. They are accounted for under Hydroelectric Plant capex costs below.
7. Assumes that smelter requires 12,300 kWh/tonne of smelter aluminum. [20] [21]
8. Direct production cost of electricity per tonne of aluminum. See cost & jobs section of this webpage for details.
9. Mean Other operating costs per tonne aluminum, over most recent 3yrs based on relative percentages of total production cost for alumina and other costs as reported by Alcoa in 2024$ [25] [26] [27]
10. 3 yr mean inflation adjusted aluminum price in 2024$ [28].
11. Wood Mackenzie estimate $3720 – 4960/tonne inflation adjusted in 2024$ [29].
12. Includes cost of power line from hydro plant to site of aluminum smelter.
13. The real interest rate for borrowed funds is the nominal interest rate adjusted for the reduction in taxes attributable to loan interest and minus the expected average inflation rate. Rates are taken from the following source. [30]
14. Total borrowed funds borrowed in 4 yearly increments in years 1 through 4. Repayment assumed to be in equal monthly payments payable in years 1 through 40.
15. Estimated cash flows account for loan payments but do not account for taxes, depreciation, or amortization.
Citations and Links
2. Tasersiaq, 7e, Greenland Hydropower, AECOM Tecsult Inc. Prefeasibility report 05-18015 Dec. 2009, Data and reports (hydropower.gl)
17. Tarsartuup Tasersua, 6g, Greenland Hydropower, AECOM Tecsult Inc. Prefeasibility report 05-18015 December 2009, Data and reports (hydropower.gl)
18. Aluminum – Monthly Price – Commodity Prices – Price Charts, Data, and News – IndexMundi
19. National Renewable Energy Laboratory, US Department of Energy, Levelized Cost of Energy Calculator Levelized Cost of Energy Calculator | Energy Analysis | NREL
20. The world’s most energy-efficient aluminium production technology (hydro.com)
21. AP_Factsheet_AP60-APXe.pdf (ap-technology.com)
22. Internal Rate of Return (IRR): See How Your Investment Performs (tipalti.com)
23. Return on Average Capital Employed (ROACE) Definition & Formula (investopedia.com)
24. Business Analytiq Aluminum oxide (Alumina) price index – businessanalytiq
25. ALCOA Investor Presentation Nov. 2022 PowerPoint Presentation (q4cdn.com)
26. ALCOA Investor Presentation Nov 2023 PowerPoint Presentation (q4cdn.com)
27. ALCOA Investor Presentation May 2024 PowerPoint Presentation (q4cdn.com)
28. Investing.com Aluminium Price Today – Investing.com
29. Edgardo Gelsomino. Research Director Aluminum, Wood Mackenzie Nov. 2018 Investment In New Aluminium Capacity Needed To Avoid Supply Crunch | Wood Mackenzie
30. Leonard N. Stern School of Business, New York University, 2024 Cost of Equity and Capital (US) Cost of Capital (nyu.edu)
Tasersiaq Lake Greenland Hydroelectric Project Concept 