In light of rising energy prices, questionable security and ever-changing policies, some manufacturers are turning to renewables to ensure reliable production, writes Stephanie Stefanovic.
As energy prices continue to soar, manufacturers are increasingly being pushed out of Australia. The Federal government seems to believe reducing wholesale gas prices is the answer, with Prime Minister Malcolm Turnbull pushing for more local gas supply and less exports. However, many manufacturers are skeptical, and some have decided to take matters into their own hands.
In the last few years, manufacturers have been leaving South Australia in droves. Toyota, Holden, United Dairy Power and Coca Cola Amatil are just some examples of South Australian manufacturers that have called it quits in recent years.
While there are many factors that contribute to the closure of a plant, there is no doubt that high energy costs and lack of reliable supply have been push factors for SA manufacturers. Now there are fears that NSW manufacturers could suffer the same fate, with wholesale electricity prices set to increase significantly from this July.
However, it appears that Australian manufacturers are already feeling the pinch. This includes the nation’s biggest manufacturing sector – meat processing.
Affordable and reliable energy supply is crucial for the meat processing sector, according to Robert Barker, policy manager at the Australian Meat Industry Council (AMIC). Gas in particular acts as an important source of energy to maintain the baseload, and for direct input in plant operation.
Results from an AMIC survey have shown that energy costs were up an average of 30 per cent in 2016 when compared to 2010. In fact, some of the larger meat processors reported additional energy costs of $20 million in the past 12 to 24 months.
“Energy is at that critical stage, not only in terms of cost but also continuity of supply,” said Barker.
“Urgent action is required and serious consideration should be given to taking export exposed meat processing plants off the grid.”
The Turnbull government, however, believes the answer to industry’s problems is a reduction in the cost of wholesale electricity and gas prices. As such, the government has demanded that the Australian Energy Market Commission (AEMC) and Australian Competition and Consumer Commission (ACCC) investigate rising prices, and Turnbull has proposed a restriction on Australia’s gas exports so providers can distribute more gas locally.
According to Turnbull, this could reduce wholesale gas prices from approximately $20/gigajoule (GJ) to $10/GJ. This is despite the fact that there is documented evidence showing renewable alternatives could provide industrial heat at an even lesser cost.
The Australian Renewable Energy Agency (ARENA) released a report last year that showed biogas, geothermal and solar thermal alternatives could provide industrial heat at the equivalent of $5/GJ.
The cost of solar PV and wind energy has also significantly decreased in recent years, and both are now well below the cost of new gas plants, and even the cost of existing gas plants at current prices.
While it depends how much gas is needed for the industrial process in question, renewables are often a cheaper option than traditional gas, as shown in ARENA’s analyses.
According to the agency, solar thermal technologies to generate heat are viable for temperatures up to 150°C, and are worth consideration at up to 250°C. Using solar thermal for temperatures above this however, is more difficult to justify.
The economics of biomass or biogas is even more compelling, particularly for industries such as paper, agriculture, food, beverage, and wood that get their biomass for free as a result of their manufacturing processes. Geothermal is also a compelling option, even at prices of $5/GJ.
The attractiveness of these opportunities will grow as gas prices increase and renewable technologies mature, according to ARENA.
In fact, energy solutions company Schneider Electric is already seeing interest in this area.
“We are seeing tremendous demand from clients to source a mix of green energy at a competitive rate,” said Steve Wilhite, Schneider’s senior vice president of energy and sustainability services, commenting on the company’s purchase of Renewable Choice Energy.
“As clean energy reaches price parity with traditional energy, companies are taking aggressive steps to integrate renewables.”
One company going to significant lengths to integrate renewables in its production is Kingspan Insulation, which has recently opened Australia’s first Green Star-rated manufacturing plant in Somerton, Melbourne.
The 14,000 square metre facility was designed using sustainably sourced building materials, a 750kW solar system, a rainwater harvesting system and energy renewing ventilators that provide double the minimum fresh air requirement. The facility also utilises Kingspan technology, including a smart lighting system and high performance insulation.
Most importantly, Kingspan aims to power this facility entirely through renewable energy.
According to Kingspan CEO Gene Murtagh, Net Zero Energy manufacturing is a high priority for the company, which intends to meet the energy needs of its 100-plus factories around the world through renewable energy by 2020. It currently meets 60 per cent of its energy requirements.
“From a commercial perspective, the Net Zero Energy target is important for energy security and mitigating the future risks in rising energy costs,” said Scott Gibson, Managing Director, Asia-Pacific for Kingspan Insulation.
“Kingspan, as with all responsible manufacturers, wants to see a future where the carbon emissions from manufacturing worldwide are drastically reduced. We have over 100 manufacturing sites worldwide so we can have an impact, and as a company we believe in it passionately.”
Queensland-based zinc metals producer, Sun Metals, is another company that is taking energy into its own hands. In a response to Queensland’s rising electricity prices, Sun Metals made the decision to build a 100MW solar PV plant to supply its refinery located near Townsville, Queensland. The $155 million solar project also forms a key part of the company’s plans to expand the output of its refinery by 25 per cent.
“Large-scale solar is fast becoming one of the most cost-effective sources of energy generation in Australia,” said Jack Curtis, First Solar’s regional manager for Asia Pacific.
“This project represents the viability of the commercial and industrial solar market in Australia and the growing trend of major energy consumers owning and operating renewable energy assets.”
Curtis added that with more than a dozen large-scale solar projects to be built in Australia this year, it is clearly a tipping point for large-scale solar.
Sun Metals is also a proponent of rule changes to the electricity market, particularly those that could encourage battery storage and reduce the pricing power of fossil fuel generators.