Australia must have specific, enforceable local content requirements and the right investments, says Weld Australia.
Weld Australia welcomes Prime Minister Anthony Albanese’s recent announcement of the Future Made in Australia Act, but urges the federal government to ensure that specific, enforceable local content requirements are formally incorporated, and the right investments are made. Only then will the federal government strengthen local manufacturing, drive real economic growth, and create the next generation of prosperity and opportunity.
The Future Made in Australia Act presents a critical opportunity to bolster local economic participation in the renewable energy transition.
Weld Australia congratulates Prime Minister Albanese on his announcement of the Future Made in Australia Act. It has real potential to ensure Australia has affordable, reliable clean energy, a strong manufacturing industry, skilled workers, secure jobs and modern infrastructure. It could see Australia become a renewable energy superpower.
However, it is essential that specific, enforceable local content requirements are formally incorporated into the Future Made in Australia Act.
Australian businesses have long advocated for specific, measurable local content requirements in government contracts. However, tangible examples of local content procurement policies are yet to materialise in Australia.
The federal government’s Buy Australian Plan and the Australian Industry Participation scheme were bold steps aimed at harnessing the government’s purchasing power to boost local industries. Yet, these schemes are failing to hit the mark.
Besieged by vague specifications, a lack of enforcement, and loopholes that allow for non-compliance, the initiatives have struggled to provide local businesses with a fair shot at government contracts. Current requirements are fragmented across state jurisdictions and
often fail to lead to new production capacity. Without action, the Future Made in Australia Act will be just as toothless.
The federal government must work with the state and territory governments to implement a coordinated, nation-wide approach to local content requirements to maximise impact and enable new production capacity. The government must be specific when it comes to the use of Australian materials and components, and registers of business providers and their level of domestic versus foreign ownership.
Weld Australia strongly recommends that a significantly favourable merit weighting be given to tenderers who guarantee local content of Australian fabricated steel as follows:
Onshore Wind Towers >60 per cent
Offshore Wind Towers >40 per cent
Solar Farms > 60 per cent
Monopole Transmission Towers > 60 per cent
Lattice Transmission Towers > 60 per cent
This weighting should be applied on a sliding scale as per the table below.
The need for specific, measurable local content requirements
While the expansion of the Scheme and billions in private investment are obviously welcome, it is essential that local content requirements are incorporated into Capacity Investment Scheme tenders. This will fortify domestic clean energy supply chains, boost investor confidence, and cultivate a skilled workforce for the energy transition, positioning Australia as a global renewable energy leader.
Australian businesses have long advocated for specific, measurable local content requirements in government contracts.
Value for money and whole-of-life considerations
Value for money for taxpayers is a primary objective in Australian government procurement, necessitating a thorough assessment of both financial and non-financial costs and benefits in each proposal. However, the current interpretation of ‘value for money’ often emphasises cost over broader economic benefits, neglecting crucial factors such as whole-of-life considerations, particularly in large infrastructure projects.
Local procurement offers various advantages, including reduced inventory management, shorter lead times, and enhanced after-sales support, ultimately contributing to lower whole-of-life costs. Moreover, sustaining local industries ensures the availability of skilled workers for ongoing maintenance, while on-site inspection expenses can be minimised by employing local personnel. Additionally, utilising locally fabricated steel can optimise transportation logistics and delivery schedules, facilitated by a network of distribution centers across Australia.
Compliance with Australian standards
Compliance with Australian Standards ensures quality, safety, and reliability, vital for successful project execution. Notably, adherence to these standards contributes to economic, social, and environmental benefits, underscoring the importance of considering such criteria comprehensively in value for money assessments.
The main competition for Australian wind tower manufacturers are overseas suppliers from Vietnam, China and Indonesia. The issue is that the quality of imported wind towers is appalling. They do not adhere to Australian Standards. Local fabricators comply to internationally recognised Australian Standards and are certified by the relevant Australian authority. In this way, Government and private clients can ensure the quality and safety of projects. Imported steelwork, which does not meet these requirements, is often of inferior quality and may not meet the Australian safety requirements.
Global demand
These quality and safety issues will only be exacerbated by increased global demand in the race to net zero. The whole world is looking to transition to renewable energy. Countries like Scotland, New Zealand and Sweden are all investing in wind power. Not only will increased global demand likely reduce the quality of wind towers manufactured overseas, it will also increase scarcity of supply. There are already global supply chain issues—imagine how these will be magnified.
Local manufacturers like Keppel Prince Engineering and Crisp Bros. & Hayward cannot win jobs on their doorstep when governments and multi-national companies place a premium on price over and above quality and safety.
A commitment to sovereign manufacturing capability
The Australian Government’s recent $1 billion investment in the Solar Sunshot program must be replicated in hydrogen and wind tower manufacturing. The domestic demand for wind towers over coming decades is huge. Based on AEMO scenarios, the market could range from $20 billion anywhere up to $80 billion.
Globally, wind tower manufacturing is concentrated in China and experienced the largest cost increase of all renewable energy technologies due to global supply-chain issues arising from COVID—estimated by the CSIRO to be a 35 per cent increase.
A local heavy manufacturing industry, backed by government investment, would deliver speed to market, and reduce Australia’s exposure to supply chain risk. Australia currently has reduced capacity in wind tower manufacturing because government contracts have long been offshored. However, major steel manufacturers such as BlueScope have expressed interest in wind tower manufacturing, as have Weld Australia’s members.
Specific, enforceable local content requires and the right investment in heavy manufacturing will fortify domestic clean energy supply chains, boost investor confidence, and cultivate a skilled workforce for the energy transition, positioning Australia as a global renewable energy superpower.
