Australia’s government is determined to leverage the country’s abundant renewable energy resources, wide open spaces and generous minerals endowment to become a renewables superpower.
Local experts say there are many similarities between that country and SA, and local economic strategies should follow a similar path.
The Australian economy is often described as dig-and-ship, in reference to the large-scale export of minerals with no beneficiation. To become a renewables superpower entails changing that by establishing new industries to process the minerals before export to deliver products that can take advantage of premiums paid for green products.
Such premiums are a reality in Europe with its carbon price and carbon border adjustment mechanism. The automotive industry already sees a demand for green steel and in other countries, including China, policy interventions can stimulate the demand for green products.
The Australian economy also relies on large fossil fuel exports. It is the world’s second-largest exporter of liquefied natural gas (LNG), which puts pressure on the growing domestic demand needed to balance variable renewable energy.
The Superpower Institute, a not-for-profit organisation dedicated to helping Australia seize the economic opportunities of the post-carbon world, says: “Just as Australia has benefited from supplying coal and gas to the world, we can now leverage our position to supply low-cost green energy via processed products with embodied green energy, such as green iron, green fertilisers and green fuels.”
It claims this could result in a reduction of up to 10% in global emissions and produce exports of six to eight times higher value than the country’s annual exports of fossil fuels.
The institute separates the superpower opportunity from the transformation of the existing electricity grid to one capable of delivering reliable and affordable zero-carbon energy to homes and businesses.
“In contrast, the superpower opportunity for Australia is about building new industries, often well away from the existing electricity grid. Energy will be produced near the location of resource deposits such as iron ore and bauxite and often in the northern half of Australia where the solar and wind resources are best.”
Many of these processes can be switched on and off, and don’t need 24/7 electricity, which may be a challenge when relying on renewable energy only.
Raw minerals
The independent think-tank Beyond Zero Emissions Australia points out that Australia has some of the largest reserves of the raw minerals needed for clean tech, which includes iron ore, nickel vanadium, lithium, cobalt, silver, copper and bauxite (aluminium) but process or refine virtually none of these.
It estimates Australia could generate $215bn of value from its raw mineral reserves across the five clean technologies by expanding throughout the supply chains into refining, processing and manufacturing — “mine and make” instead of “dig and ship.”
The five technologies targeted are wind, solar, batteries heat pumps and commercial electric vehicles.
It maintains Australia has the potential to grow a new green export mix worth $333bn a year by 2050, almost triple the value of fossil fuel exports in 2020/21.
This could be done by leveraging not only its mineral endowment but also low-cost renewable energy resources to produce zero emission materials and equipment.
It calls for the establishment of Renewable Energy Industrial Precincts (REIPs) — “clusters of energy intensive manufacturing facilities in one general location, powered by 100% renewable energy, and connected to each other using modern energy management tools.”
Where the country lacks the expertise for large-scale manufacturing, for example to produce ultra low-cost solar, it should partner with world-leaders in the field.
To make this vision a reality, the Australian federal government announced an economic plan called Future Made in Australia in April last year.
In the 2024/25 budget $22.7bn was committed over the next 10 years in key areas, including skilling and training for the new economy, renewable energy, investment support, using natural resources and critical minerals and industrial innovation and technology.
In November, the Future Made in Australia Bill was passed in parliament to implement the plan.
Efficient Group chief economist Dawie Roodt says SA has no choice but to move in the same direction. “It is a market imperative. We won’t get any investment unless we decarbonise our economy.”
But Roodt cautions that the world economy is struggling and banking on earning a green premium on locally manufactured products may be risky.
He also points out that US president-elect Donald Trump may change market dynamics with his pro-fossil fuels approach and scepticism about decarbonisation.
SA’s Ferro Alloys Producers Association (Fapa) chair Nellis Bester says beneficiation of SA’s minerals using green energy makes sense. “Use wind and solar and smelt locally. We are currently underutilising our minerals.”
He says SA has some of the best solar resources in the world, minerals used in the production of solar panels and smelters that process some of the minerals.
The country, however, exports raw and semiprocessed minerals and imports solar panels. “We must complete the cycle.”
He points out that electricity is much more expensive in SA than in Australia and even renewable energy is not that much cheaper than Eskom tariffs.
To follow the lead of Australia, local industry will need more support from the government, including regarding electricity cost, he says.
For large investment there must further be more certainty about the availability and cost of electricity as well as regulatory matters, for example carbon tax, he says.
• Disclaimer: Slabbert was a guest of the Australian department of foreign affairs and trade on a media trip looking at energy transition and climate change
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