A new report from professional services company EY outlines the potential for Australia to become a clean energy superpower, but it won’t happen without targeted action, writes Dr Steve Hatfield-Dodds.
New research from the EY Net Zero Centre kicks the tyres on the idea that global action on climate change creates prospects for Australia to emerge as a renewable energy superpower. In the report, “Seizing Australia’s Energy Superpower Opportunities”, it reveals the potential for Australia is significant – and it’s ours to lose.
EY’s modelling of the energy superpower dividend shows it would lift the value of Australian economic activity by $65 billion a year – or $1800 per person – in 2050 if we get it right. This is a 2.3 per cent GDP gain and a 1.5 per cent lift in wages. EY considers these numbers conservative, and real-world benefits would likely be larger.
However, dollars are only one aspect of the prize.
Heavy industry has a central role in the global shift to a low-emissions, high-income world. Rising incomes and living standards, particularly in Asia, will see demand for minerals, metals and other heavy industry outputs double by 2050. But this needs to happen while greenhouse gas emissions fall 70 per cent or more during the same timeframe.
Australia is well positioned to capitalise on this growing global demand for clean sources of minerals, metals and other energy intensive commodities. The report identifies three specific areas where Australia has an advantage, underpinned by cost-competitive renewable energy at scale and abundant minerals and natural resources:
- Clean low-emissions heavy industry, including producing green iron (initially using gas and then hydrogen) as an input to electric arc furnace (EAF) steelmaking. Green iron is a global game changer for clean steel, allowing zero-emissions EAF to scale up by providing an alternative to using scrap metal as an input.
- Lithium, copper, nickel, cobalt and other critical “new economy” minerals, including initial processing opportunities. The report argues Australia can also leverage increasing attention to friendly supply chains.
- Hydrogen for use within Australia, including as an input to other exports. Examples include metal production, chemicals such as ammonia, and fertiliser. EY’s view is that the physics of hydrogen will tilt markets towards local use. While Australia can be competitive in hydrogen-based energy exports, EY considers the scale of these markets will be limited on the demand side for at least the medium term.
However, Australia’s potential advantage is not automatic or absolute. While the shift to net zero could create new strengths, existing weaknesses and watchpoints remain, including labour costs and project approvals processes.
Australia has no room for complacency, and effort is required on three fronts to fully capture this opportunity.
First, Australia needs to rise to the challenge of delivering near-zero emissions electricity as a crucial step in the wider energy transition. This is complex, especially managing the risk of unanticipated coal retirements while adding the firming and storage required for a system based on variable renewables. But the challenges are well understood, and policies are evolving rapidly.
Second, major new facilities will require competitively priced, world-class infrastructure. Planning, resourcing and pricing new infrastructure is always challenging given their monopoly characteristics.
Third, substantial innovation is needed to reduce non-energy emissions and incubate commercially attractive new technologies. Policy and business leaders will need to lean more heavily on innovation than has been necessary in the past. Well targeted research and development is the price of entry, particularly where international efforts do not meet our distinctive needs.
Fully capturing the transformative clean energy superpower opportunity will require Australia to get technologies out of the lab and demonstrated in the real world. Partnerships and risk sharing between government and business will also be crucial.
Australia has been conflicted about climate change. We recognise the nation is more exposed to climate change impacts and risks than most high-income nations. However, Australia’s old-economy advantages in fossil fuel exports have at times constrained our willingness to take decisive action.
However, those days should be behind us. Australia can make a distinct contribution to meeting global needs, creating new jobs and income streams from clean energy-intensive products while supporting the transition to net-zero emissions. We can do well while doing good.
Dr Steve Hatfield-Dodds is an associate principal at EY Port Jackson Partners and research leader at EY Net Zero Centre. He is an honorary professor of public policy at the Australian National University, and an honorary associate at Oxford Net Zero and the Environmental Change Institute at Oxford University.