Clean Energy Council Chief Executive Kane Thornton discusses the role the economy will play in delivering the next wave of renewable projects and the energy transition.
We often talk about the many benefits renewables will bring to Australia.
Those include lower power prices, a secure and stable grid, community benefits and jobs, and of course the reduction in emissions that Australia, and the world, desperately needs.
But there is another potentially transformational element that isn’t discussed so often: the economy.
Australia has a long history of industrial activity, but many of those industries are facing stiff global competition or structural changes that put them at risk. The transition to renewables presents us with a rare opportunity to embrace a new age of clean manufacturing.
Since 2020, approximately $40 billion has been invested into new clean energy projects, with an enormous pipeline at the ready to ensure Australia has the new generation to replace ageing coal as it exits. Getting the energy transition right, delivering the next wave of new clean and least cost energy generation can also play a crucial role to bolster Australian manufacturing and supply chains.
Expansion opportunities
Green metals are one of Australia’s brightest prospects for economic expansion emerging from the global clean energy transition, and clean power and hydrogen will both play a role in realising these opportunities.
Metal production is one of the most energy and emissions-intensive industrial processes on the planet, with the basic metal industry accounting for 12 per cent of global industrial sector energy use.
With pressure mounting to develop low and zero-carbon supply chains, producers and customers are in the throes of developing long-term decarbonisation and investment strategies.
In a net zero world, the best locations for processing and refining metals will be in geographies that can pair access to mineral resources with abundant, low-cost, renewable energy. Fortunately, Australia is not only the world’s largest producer of iron ore and the world’s second-largest producer of both bauxite and alumina, but it also boasts world-class resources of solar and wind.
Clean power and hydrogen are also likely to be key ingredients in decarbonising the long-haul, heavy transport sectors – particularly aviation and shipping. Australia has a natural advantage to be a long-term low-cost producer of renewable fuels, and the development of this capability is an important strategic opportunity to increase our energy security by reducing our dependence on imports.
The Australian Government has acknowledged the potential in green hydrogen production in Australia by making a Hydrogen Production Tax Incentive a key part of its Future Made in Australia scheme (in addition to the $4 billion committed through its existing Hydrogen Headstart program). The incentive alone won’t address all the issues facing investors, but it would ensure that if a company makes green hydrogen in Australia, it will receive $2 for every kilogram of hydrogen produced for up to 10 years.
There is also a suite of other incentives underway which will support these emerging clean manufacturing opportunities, including a forthcoming dedicated auction round for Australian green hydrogen producers to supply European markets, supported by the Australian and German Governments. At the time of writing, the Australian Government was also unveiling new production credits for green metals, including aluminium made from reliable renewable power, which will turbo-charge the shift of Australia’s aluminium sector to renewables.
Rising competition
The challenge for Australia is to grab these opportunities with both hands while international competition ramps up. Various jurisdictions – including the USA, Canada, Europe and the Middle East – are investing heavily in their own clean hydrogen sectors.
Just as Australia needs to move quickly with its renewable energy generation and storage projects to ensure expertise, talent and investment dollars do not move elsewhere, the same is true of the economic opportunities.
Scaling-up any industry is a challenging task, especially with business and industry facing higher costs and complex and uncertain policy settings.
But the economic prize for Australia if we can make green hydrogen work is worth the effort.
It is worth remembering that while green hydrogen has a critical role to play in decarbonisation, it is a highly specialised one that should be focused on those energy needs that can’t be readily electrified.
Renewable generation (which already generates more than 40 per cent of Australia’s electricity) backed up by storage, is the lowest-cost and most reliable way to reform Australia’s energy grid, decrease energy costs for consumers, and cover for the phase-out of our retiring coal-fired power stations.
A clean economy
With a Federal Election coming this year – the date of which, at the time of writing, is not yet announced – it’s an important time for the energy transition.
We have seen in the past decade or so how important policy certainty is for investment. The legislated Renewable Energy Target delivered a boom in clean energy construction through to 2020. And once again, with a renewed suite of policies and government action supporting investment in generation, storage and transmission, investment is now recovering from the lows of 2023, while 2024 represented a solid year for new construction starts and investment.
It is essential that Australia continues to accelerate the clean energy transition for the jobs and benefits it will bring to communities, for lower energy prices, and for real and significant economic opportunities.
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