On Thursday the Productivity Commission released its annual Trade and Assistance Review. In it, the Commission suggests the federal government’s ambitious plans for a domestic battery manufacturing industry would not represent value for money.
Instead, they suggest Australia should continue relying on the US and the EU and import these goods. Given the experiences of the world and Australia over the past decade, we respectfully disagree.
The federal government has shown leadership in the development of the Critical Minerals Strategy, National Battery Strategy, and their vision for Australia’s energy transition. Since last year’s election, the Prime Minister, the Minister for Industry and Innovation Ed Husic and the Minister for Resources Madeleine King have all made statements in support of growing a domestic battery industry, inclusive of manufacturing.
But it hasn’t just been words. These commitments have been backed by significant committed funds and the policy and sector leadership necessary to build a local industry that will deliver jobs, economic growth and environmental dividends.
Approximately one third of the $15 billion National Reconstruction Fund – legislated in March – will be available to companies operating in the battery sector, across areas such as value adding in resources, innovation in low emissions technology and support for clean energy component manufacturing.
The bottom line is that the government has shown they are willing to put their money where their mouth is to ensure a greater share of Australia’s raw materials, such as lithium, are processed domestically.
The commission’s review prosecutes an oft-repeated argument that given other countries like China, Japan and Korea, have far more established and competitive manufacturing industries, or that since the US and the EU are providing massive subsidies, Australia shouldn’t pursue domestic manufacturing capabilities for batteries.
However, with a global focus on decarbonisation, clean energy, and electrified transport; and the fact that Australia is the world’s number one producer of lithium, we have a once-in-a-century opportunity to change the game.
Many other nations are looking to establish sovereign capability, and supply chain security of critical minerals to achieve decarbonisation. Australia should also seek to establish these capabilities in what is a rapidly changing geopolitical landscape. Ambitions to mine critical minerals and make batteries here are legitimate and would provide significant economic benefit.
The future markets and economic opportunities for batteries are extraordinary in their potential. Focusing just on current usage, such as EV batteries, ignores the likely prospect that over the coming years various scales of batteries will form an essential component of just about every power network in the world.
However, it will take genuine collaboration, and joint financing, by industry and government to deliver on the potential we have.
The domestic manufacture of large batteries – for example, for industrial or household energy storage purposes and special purpose vehicles – is possible. But, it is a little while away yet.
First, Australia must establish a value and supply chain. Initially, serving cell manufacturers abroad, then to be the crucial enabler to make Australian-made batteries a commercial possibility.
We hope the forthcoming National Battery Strategy will recognise the best place to start to create a battery industry in this country is through adding value to the minerals we mine – making cathode active materials, the powder-like substance used to make various types of lithium-ion batteries, including for use in electric vehicles.
Unlike the Commission, we view the recent industry policy changes in Europe and the US as a multi-billion dollar opportunity to grow an Australian battery value chain and provide critical inputs to American battery cell manufacturers, whilst supporting development of a smaller, but no less important, Australian industry.
The global energy transition underway is diverse, and of a scale that is difficult to comprehend. Investment by governments, alongside private capital, to establish the various battery and hydrogen value chains is necessary.
Without this we will not be able to fully capitalise on all the benefits that this transition can offer.
The issue we face is not a technical one. The hurdle to a battery value chain in Australia is access to adequate and competitive capital. Australia’s remarkable development and investment in its renewable energy space has shown
what is possible. We now need that same level of commitment and capital invested into storage and distribution methods over the next 10 years.
Australia must move with urgency to establish a value chain, starting with cathode active materials and their precursors. Continuing to rely on the US and the EU for battery manufacturing risks seeing our capacity to achieve our decarbonisation targets and capture global market share, eroded.
The dream of a powerful, profitable, and internationally competitive Australian battery industry that improves the minerals we dig up, rather than just selling them, can become a reality. But we need to work and invest together, otherwise our sovereign capability, capacity to decarbonise and future economic growth will all be put at risk.
Simon Linge is CEO of Lithium Australia Limited (ASX:LIT) – an Australian listed company focussed on producing more sustainable precursor materials for LFP batteries and the recovery of critical minerals from recycled batteries and mining tailings.
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It does baffle someone, that the productivity commission would not entertain the demographic projections for china, nor its belligerence in withholding certain commodities recently when factoring whether Australia should do more on the manufacturing and value add side of battery production. When you include the carbon footprint of exporting then reimporting goods after refinement, it would seem a no brainer to retain that VA capacity here.