Manufacturing and energy industry leaders—from union representatives, developers and business owners, through to academics, economists and government ministers—gathered in Canberra in early August at the 2023 National Manufacturing Summit.
Australia’s manufacturing industry is calling on the Federal Government to take action now and implement a radical national strategy to make Australia’s renewable energy revolution a reality.
The message was clear: if Australia is to meet its net zero targets by 2050, our Federal Government must enact transformative national policy that delivers secure supply chains and a diverse renewables and clean energy economy, all of which can be sustained by the manufacturing industry.
Australia must take inspiration from the United States, and their Inflation Reduction Act (IRA), which allocated upwards of US$500 billion in new spending and tax breaks that aim to boost clean energy.
The Imperative We are now at the stage where even the most obtuse observer must realise that global warming is real and is coming at us much faster than we imagined it could.
Last year, Australia experienced record floods, with countless people losing their homes. This year, we’re expecting a record bushfire season, with the Northern Hemisphere already experiencing some of its hottest temperatures on record.
The climate crisis makes manufacturing the renewable energy revolution an imperative.
In fact, the Australian Government has already legislated emissions reductions targets of 43% (on 2005 levels) by 2030 and net zero by 2050.
Importantly, these targets will necessitate the construction of new infrastructure on a massive scale. Australia’s existing renewable energy generation of 64GW is forecast to grow to over 218GW by 2050.
This will comprise 90GW of wind, 39GW of solar, 18.7GW of water, and 35.9GW of battery storage. For example, it is expected that over 11,000 wind towers will need to be produced, each requiring 500 tonnes of plate steel (for onshore wind towers) or 750 tonnes (for offshore wind towers).
The annual production of plate steel in Australia is currently 400kt. To connect all this new generation to consumers, AEMO estimates that more than 10,000km of new transmission lines and 25,000 transmission towers (at 30 to 60 tonnes of steel per tower) will need to be constructed around the country.
Australia’s renewable energy industry will need a raft of additional resources to deliver on these ambitious projects, including: manufacturing and fabrication capacity, raw materials (particularly steel), and contracting and contractor resources.
Plus, new technologies will need to be developed and deployed. 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.
The Federal Government and state governments can wish their renewable energy policies into existence, but without a massive investment in local manufacturing, it will not be achievable.
The US Model The Inflation Reduction Act (IRA) came into effect in August 2022 in the United States, with the central goal of reindustrialising and decarbonising the US.
It is estimated that the IRA’s provisions will facilitate a 43% reduction in US carbon emissions by 2030. The United States, through the IRA, has taken shown tremendous leadership, enacting a plan to tackle the challenges of the renewable energy revolution; a plan with manufacturing at its heart; and a plan that is already delivering unprecedented growth in the sector.
A combination of tax credits, loans and subsidies, the IRA is driving private sector investment in clean electricity and electric vehicle manufacturing. The IRA is an investment in—not a cost to—the US economy.
When announced, the IRA was expected to amount to US$391 billion on energy and climate change provisions. However, independent research estimates that this may rise to $1.2 trillion.
This is estimated to pave the way for some $3 trillion of private capital investment in renewable technology and manufacturing—an investment without which the US economy and society could suffer catastrophic and irreversible damage.
The IRA has already had remarkable beneficial impacts: in its first six months in operation, over 100,000 new clean energy jobs have been created across 90 projects, investment in clean tech and semiconductor manufacturing has doubled, and real spending on manufacturing has also more than doubled.
The International Context It is little wonder that these bold government-led investment plans have already been echoed in China, Europe, Canada, India, Japan and South Korea.
It is estimated that the Chinese government has invested between eight and ten times more than the US and Europe combined into energy transition technology and development of renewable technology manufacturing capacity.
For example, thanks to its fast start and sustained, powerful industrial strategies, China has already secured a dominant position in all downstream segments of EV manufacturing.
The European Union recently announced the Green Deal Industrial Plan, which provides a framework for green technology and critical mineral supply.
In addition, in July 2023, approval was confirmed for the European Chips Act, which will support an estimated €43 billion of investment between now and 2030 in measures such as next-generation technologies, and certification procedures for energy-efficient chips.
To achieve national decarbonisation goals, the Japanese government has formulated the Green Development Strategy through Achieving Carbon Neutrality in 2050.
The South Korean government is set to embrace the economic opportunities of decarbonisation through its landmark Korean New Deal.
In a landmark March 2023 federal budget, the Canadian government unveiled C$80 billion worth of fiscal programs to accelerate clean energy investments and developments. The (Lack of) Australian Response Meanwhile, Australia is still considering its response.
In Australia, the task of responding to the IRA seems to have created such an insurmountable challenge that we have ground to a halt. A policy of fiscal conservatism driven by Treasury is obstructing any type of progress.
We are defeated before the first shot is fired. Australia has many advantages in the global race for sustainable manufacturing, including an unmatched endowment of primary renewable energy sources, and ample deposits of critical minerals that are essential to production of renewable energy equipment.
However, the painful legacy of decades of policy neglect for domestic manufacturing has left Australia’s industrial base in poor shape to seize the opportunities being opened up by the global energy transition. Australia must stop debating the fiscal policy and act.
We must become a valued partner within international renewable energy supply chains. We must overcome our traditional ‘dig and ship’ mentality and leverage our critical minerals supply to manufacture complex, value-added renewable energy products onshore.
If Australia is to ever achieve net zero, we must have our own version of the IRA, tailored to our local conditions. Australia simply has no choice. The alternative is unthinkable.
We have half the net debt as a percentage of GDP as the US, so why are we even hesitating? Adjusted for the scale of the Australian economy, the Australian Government must commit $300 billion—approximately $12 billion a year to 2050—to a program similar in size and scale to the IRA.
This sum is equivalent to current carbon subsidies, inconsequential when compared with the anticipated mining royalties from rare earth minerals, and less than the $368 billion we plan to spend on nuclear submarines.
With an IRA-type program that combines subsidies and incentives, commercially viable procurement procedures and a sensible national strategy, the manufacturing industry will be able to respond and carry its share of the load. Industry will be able to invest in its own facilities and create more high-quality jobs.
We will not be able to manufacture everything we need but we will be able to deliver enough to provide a buffer to gaps in the global supply chain and ensure reasonable pricing.
Australia must embrace the golden opportunity that the renewable energy revolution presents. We must become a clean energy manufacturing powerhouse, that exports value-added products to world.
In this way, Australia will create thousands of new jobs, reduce our risks to volatile international markets, reduce the cost of living for Australian families, and play an essential role in global decarbonisation. It is already too late.
Australia must act now. We must act bravely and fund our renewable energy revolution properly. Australia’s governments must have the courage to act now.
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