The Tomago aluminium smelter near Newcastle is on "the verge of disaster" after it was hit with an energy curtailment notice by energy supplier AGL on Friday afternoon.
As the state's power grid comes under increased pressure due to extreme heat, the smelter – the largest energy consumer in the state – has been asked to reduce its consumption for almost four hours from 3.45pm on Friday, a process that chief executive Matt Howell has warned will force workers to operate in "extreme heat", potentially causing a "catastrophic" outcome.
Mr Howell said that the Australian Energy Market Operator (AEMO) had confirmed it needed the smelter, which consumes 12 per cent of the state's energy, to bring down its energy consumption for a maximum of three hours.
AEMO has already warned that forecast demand from 5pm to 6pm will exceed supply by 189 megawatts.
The agency has called for a "market response" and said it would intervene "as required".
The market operator said in a separate statement that it had advised generators of "potential electricity supply shortfalls" in NSW and ACT during the afternoon peak from about 3.30pm until 5.30pm.
But Mr Howell said AGL has signalled a curtailment of 3 hours and 45 minutes – one hour and 15 minutes for each of the smelter's potliners – above what AEMO asked for.
The curtailment began at 3.45pm, as scheduled.
"You would have to ask AGL why they are doing that," he said.
The longer time period is significant because of the heat that the smelter operates at. The longer operations are cut off, the more likely damage becomes.
A similar situation unfolded in the Victorian city of Portland in Victoria in December, where a power outage forced molten aluminium in more than 200 smelting pots to cool and solidify.
"Every minute causes significant cell instability … once you turn it off there's a risk it wont come back on," Mr Howell said.
In a statement, a spokeswoman for AGL said if power to the smelter was not curtailed, "schools, homes and other small businesses will suffer a loss of power at the peak periods of demand this afternoon".
"AGL has certain contractual rights in relation to interruption of the supply of electricity to the Tomago Smelter," she said.
"To maintain the stability of the electricity system, AGL has agreed with AEMO that it will exercise these contractual rights.
"AGL's contractual rights have been long agreed with Tomago to support the security of supply to NSW in conditions such as those today.
"They are not intended to cause damage to the facility, provided Tomago's procedures are followed.
"This procedure has been implemented previously without adverse effect in similar circumstances to those that exist today."
However Mr Howell said it was a "disgrace" that the smelter was being forced to cut its operations.
"This is a direct consequence of insufficient generation in the market," he said.
"We should have the cheapest, most reliable energy in the world and yet it's the most expensive and least reliable.
"It's a disgraceful situation that needs to be fixed."
The Australian Workers Union has accused energy supplier AGL of "bastardry", and called for Prime Minister Malcolm Turnbull to "pick up the phone" and intervene.
"AGL has its hand hovering above a button that could batter the Tomago aluminium smelter and put a wrecking ball through the regional economy," the union's National Secretary Daniel Walton
"Our information is that power could be cut this afternoon for a period of four hours. If that happens, the results could be catastrophic.
"Workers will have to pull out all stops in sweltering heat to save the plant's equipment. They may not be successful.
"Tomago is in a precarious economic position and it cannot afford for AGL to cut power. For AGL to do so would be an unimaginable act of bastardy."
Meanwhile NSW opposition leader Luke Foley has called on the Berejiklian government to explain why the Liddell Power Station in Muswellbrook is running at only half capacity.
Mr Foley today said "whistle blowers" had told him that just two of the four units at Liddell Power Station were operational.
The reports were confirmed with the Australian Energy Market Operator.
"The Premier's top priority over the coming days is to ensure the reliable supply of electricity," he said.
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