Australia is rapidly moving from carbon fuelled power generation to a renewable energy system. Renewable energy accounted for 32.5 per cent of Australia’s total electricity generation in 2021, an increase of almost 5 per cent compared to 2020. In the past five years, the proportion of Australia’s electricity that comes from renewables has almost doubled, increasing from 16.9 per cent in 2017 to 32.5 per cent in 2021.
Last year’s renewables growth was led by small-scale solar, which added 3.3 GW of new capacity to record its fifth-straight record-breaking year. The large-scale sector also had a bumper year in 2021, adding 2,955 MW across 27 projects, which included Australia’s three largest solar farms and two of the country’s three largest wind farms.
A further 68 large-scale projects were under construction or financially committed at the end of 2021, representing more than 9 GW of new capacity. However, the pipeline of new large-scale renewable energy projects slowed considerably in 2021, with the volume of new capacity committed falling from 3,001 MW in 2020 to 2,116 MW in 2021.
At this rate, it is unlikely that Australia will achieve the more ambitious climate targets announced by Prime Minister Anthony Albanese in June 2022. Albanese pledged to cut carbon emissions by 43 per cent from 2005 levels by 2030, up from the previous government’s target of between 26 per cent and 28 per cent. The new target brings Australia more in line with other developed economies’ Paris climate accord commitments. For instance, Canada is aiming for a reduction of 40 per cent by 2030 from 2005 levels, while the United States has a target of up to 52 per cent.
To put this into perspective, when Australia manufactured and erected the existing power grid, it took between 40 and 50 years. With Albanese pledging to cut carbon emissions by 43 per cent from 2005 levels by 2030, we have just eight years to manufactured and erect the assets required for the shift to renewables. It is an enormous project that must be completed in a very short space of time.
It will necessitate the manufacture of thousands of wind towers and transmission towers, as well as thousands of kilometres of transmission lines. All this will require millions of tonnes of steel, and a highly skilled workforce.
So then, with these more ambitious climate targets on the table, why is the renewable energy pipeline of work seemingly shrinking, when it should be expanding?
It is a result of continued practical and political uncertainty for local manufacturers.
Practical and political uncertainty
The transition to a clean energy future will require an enormous amount of additional generation and storage capacity. Wind power is lowest cost form of large-scale renewable energy available to the market.
The problem is, in Australia, there are only two companies that manufacture wind towers: Keppel Price Engineering in Victoria, and Crisp Bros. & Hayward in Tasmania. By comparison, the wind market in the United States has grown substantially over the years into an increasingly complex supply chain. There are now more than 500 US manufacturing facilities specialising in wind components such as blades, towers, and generators, as well as assembly, across the country.
Australia’s two local manufacturers price wind towers on a per project or a per section basis. This pricing model is required because they have a relatively small capacity (of less than eight sections per week), there are no long-term supply agreements with minimum demand requirements in place, there are design variations between OEMs, and the fluctuating exchange rate effects the cost of steel and shipping. All these factors impact the competitiveness of locally supplied wind towers.
The main competition for Australian manufacturers are overseas suppliers from Vietnam, China and Indonesia. These suppliers operate large facilities with enormous capacity of up to 100 sections per week, have long-term supply contracts that facilitate improved production efficiencies and stability of supply, and some are exempt from import tariffs. Low cost labour, buying power and relative economies of scale are all in favour of imported product.
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.
These quality and safety issues will only be exacerbated by increased global demand. 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 huge opportunity for local manufacturers and regional areas
Wind tower manufacturing offers a host of opportunities for local manufacturers. Fabrication facilities set up for onshore wind can transition to offshore wind with additional investment, increasing the lifespan and opportunities for the fabrication facility. Fabrication facilities designed for wind towers are multi-purpose—they can also be used to manufacture pumped hydro pipes, piling (for ports and bridges) and other large-scale heavy round manufacturing.
Wind tower manufacturing requires a large numbers of employees. For example, a facility manufacturing eight wind tower sections per week could employ up to 120 full-time employees. Greater than 50 per cent of this workforce could be unskilled and trained on the job or via the TAFE training system. This means that there are training and employment opportunities for apprentices, trainees and Indigenous Australians. Wind tower manufacturing also generates demand for higher skilled roles (in areas such as engineers, quality assurance, and non-destructive testing), and a logistics network for movement of tower sections and raw materials into the facility.
There are also downstream benefits for local suppliers of welding consumables, electrical components, safety equipment, painting consumables, internal components like platforms and handrails, hire equipment and facility maintenance.
Importantly, wind tower manufacturing requires a large area, making it suitable for regional locations. As such, establishment of a wind tower manufacturing facility would generate immediate employment, economic and related benefits in regional communities.
For the public, locally manufactured wind towers meet all Australian Standards across all components, from fabrication and electrical components, through to coatings. This means that both quality and public safety are assured.
While our governments can wish, and hope, and make public pledges about Australia’s transition to renewable energy, we simply do not have the sovereign manufacturing capability to make this a reality.
There is an answer though.
Industry and government support
To overcome the established overseas supply chains and generate investment into fabrication capability, local manufacturers need certainty of demand. This demand must stem from government, project investors and developers, and OEMs.
Our governments must support macro demand generation. For example, the Victorian Government’s Victorian Renewable Energy Target (VRET) legislation has helped to support the domestic manufacturing industry. In addition, local content policy must be legislated. Given the huge scale of potential demand, local content need not be 100 per cent—VRET required 64 per cent local content and 93 per cent locally milled steel. With this local demand a reality, improved production efficiencies and stability of supply can improve competitiveness.
Weld Australia has been calling on the Federal Government for the last five years to mandate that all steelwork in Australia—both local and imported—is manufactured and erected according to Australian Standards. The Federal Government must act now to create a sovereign wind tower manufacturing industry, create jobs in regional areas and ensure public safety.
Significant investment is also required.
The way forward
Firstly, the Federal Government needs to commit to, and encourage the development of, a sovereign manufacturing capability. The Federal Government must legislate local content policy. This will create a capacity mechanism that generates a clear, long-term signal for investment by private equity and local manufacturers. The Federal Government must also mandate that all wind towers are constructed, erected and inspected according to Australian Standards.
Secondly, with a clear commitment from government in place, Australia will need to invest in its steelmaking facilities. There are literally billions of tonnes of steel required. According to Australian Energy Market Operator’s (AEMO) 2022 Integrated System Plan, demand for steel from the electricity sector (NEM-wide) is likely to increase by approximately 50% from 2021 to 2027. These demands equate to 8% of Australia’s annual crude steel production, most of which is needed for wind turbine towers.
Both the Whyalla and Port Kembla steelworks will need to be upgraded to deal with the volume of steel required. However, without a commitment from the Federal Government on local content requirements, it is unlikely that either BlueScope or GFG Alliance would be willing to investment the significant sums of money required—and with good reason.
Next on the list: Australia will need to establish at least one, if not several, manufacturing hubs for wind towers, as well as transmission towers. Both industry and government will need to invest in these hubs significantly. Local manufacturers will need to invest in their own capacity and capability, from technology, plant and machinery through to employees.
Lastly, we will need welders. We will need to invest heavily in welder training, as well as welder recruitment and retention programs.
Weld Australia is already liaising with key players in the manufacturing and energy industries. We are working with state governments across the country with a view to holding a series of roundtables to discuss the regulatory, logistics and engineering aspects required to fulfil the Federal Government’s ambitious renewable energy plan. We need a national strategy and a national cabinet comprised of the Ministers responsible for energy, industry and skills and training to devise a long-term plan.
The Federal Government and state governments can wish their renewable energy policies into existence, but without a massive investment in fabrication and steelmaking facilities, and skills and training in each state, it will not be achievable.
The Federal Government must commit to building sovereign manufacturing capability for renewable energy—in the same way that it has for shipbuilding. It must mandate local content, as well as adherence to Australian Standards. Only with this commitment in place will industry have the confidence to invest. Unless industry and governments come together now to formulate a plan of attack, when the time comes to manufacture the assets needed for a clean energy transition, there will be no fabrication facilities, no skilled workforce, and no regulatory frameworks in place. There will be no sovereign manufacturing capability.