More than luck: making the most of our lithium endowment

Coming to the stage for the last session of any summit is a hard task, and after a packed day of speeches and panels at the National Manufacturing Summit, the job of Jim Stanford, director of the Centre for Future Work at the Australia Institute, was no easier. His task? Wake Australia up to the potential of lithium.

Taking Donald Horne’s well-worn descriptor of Australia as “the lucky country”, Stanford reminded the audience that Horne had meant it negatively, that Australia was prosperous because of its luck, not because of any enterprise. Stanford implored the audience to turn around this trend in Australia’s history. With lithium in abundance, and the market for its applications expanding, Stanford encouraged those listening to not rely once again on luck.

“We are not remotely making the most of our lucky endowment.”

Stanford pointed to Australia’s history of producing raw materials such as wool, lumber, coal, and, more recently, gas, and then exporting these resources, only to buy them back in the form of added value products, such as clothing, cars, and electronics.

“We generally extract those goods and sell them to somebody else that does something useful with them. We hope to live off the proceeds of that extraction, hoping that we’re generating enough money to pay the bills for all the value-added stuff that we import,” said Stanford.

While this leads to short-term prosperity, the booms and busts of Australia’s history point to the unsustainability of this strategy in the long term. With lithium the latest in this line of raw materials Australia has produced and then sent around the world, Stanford encouraged a clear-eyed approach to the development of this resource.

In 2017, the total worth of lithium sales stood at $35 billion, with 20 per cent yearly growth.

Lithium is now used for batteries for home appliances, vehicles, and increasingly, utility energy storage. With the growing awareness of the environmental benefits of electrification of transportation, as well as the increasing amount of renewable energy generation, Stanford forecast that the market for lithium batteries will continue to expand. With the mineral deposits in Australia being of high quality, Stanford sees great potential for the development of a local lithium battery industry.

Today, however, Australia has only focussed on the extraction of lithium from underground. To demonstrate the futility of only being focussed on the first stage of the lithium value chain, Stanford highlighted that at US$750 ($1,100) per tonne, Australia is only extracting a minuscule fragment of the potential value of the ore.

The next stage for the product is its refined state of lithium carbonate, where prices increase by 10 times. One tonne of lithium carbonate can then produce one megawatt hour’s worth of batteries, equivalent to 14 medium-sized batteries that power electric vehicles. These batteries are worth around US$100,000 ($148,000). To take the next step, and calculate how much the cars are worth, the value increases by another factor of 10. This adds up to over a million dollars’ worth of vehicles based on one tonne of lithium. The raw lithium, as Stanford noted, “looked pretty good at $750 a ton, but it’s virtually invisible in the whole value chain”.

With more lithium mines opening up, and more methods of extracting lithium becoming viable, Stanford implored Australian industry to look beyond extraction.

“Exporting raw lithium is a chump’s game and we’re already seeing an oversupply of raw lithium.”

While Australia does not yet have a major lithium battery industry, Stanford argued that there is no need to lose hope. With the beginnings of lithium hydroxide refineries in Western Australia, and battery manufacturing projects starting to get off the ground in the Northern Territory and Queensland, the foundations are starting to be laid. Linking these developments to electric vehicle manufacturing in Victoria, and utility battery production in South Australia, Stanford remained positive.

“There are some hopeful signs out there – green shoots if you like – but you can’t assume that that’s going to translate into a well-rounded, fully beneficial industry.”

To coalesce these disparate initial points into an integrated industry, Stanford argued that Australia should take greater advantage of its circumstances. First, with the high transport costs involved in the movement of large batteries, energy providers will be interested in local solutions. Second, with the rapid uptake of rooftop solar and its variable energy generation patterns, there is a growing market for utility battery storage. Finally, the bones of Australia’s automotive manufacturing industry remain, and could be transitioned to produce electric vehicles.

However, with this in mind Stanford noted that hurdles still remain, with the biggest being the complacency of national policy makers.

“They’ve forgotten how to build world-class industries” said Stanford. “They’ve coasted for too long on the easy money from extracting resources. We need to get our hands dirty with government, business, labour, and universities, to think about how we can make this happen.”

Outlining 10 suggestions for the development of a lithium battery industry in Australia, Stanford highlighted that there is much that policy makers can do, including mandating first-stage processing of lithium occur domestically, creating a national taskforce for battery manufacturing, making capital available for innovation and investment, requiring domestic content in the public procurement of vehicles and utility storage, and supporting the teaching of skills related to lithium battery manufacturing.

In sum, noted Stanford, “Australia can be a sustainable manufacturing superpower. Making the most of this incredible endowment of lithium and the potential of this industry could be a gigantic step to become an electric superpower.”

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