Jul 13 2023

Renewable Energy Supply Chains & the new Critical Minerals Strategy

The recent Critical Minerals Strategy announced by the Albanese Government showed a clear link between the success of the sector locally and the country’s ability to reach its 2030 and 2050 emissions reduction targets, partly through the construction and commissioning of renewable technology. The two industries are uniquely similar. Both are looking to rapidly increase their volume of activity, both are central to Australia’s ability to remain competitive globally, and both must succeed to ensure Australia’s economy continues to prosper in decades to come. We take a look at the Government’s priorities for the sector.

As with most strategies, the objectives laid out are positive and aspirational. If implemented fully, they will largely create positive change in the sector.

The strategy’s objectives commence by addressing the biggest obstacle for projects to overcome – funding. Also committed to is support to de-risk projects. The approval of exploration and support for research and development are also identified as key to the future development of projects. The strategy aspirationally proposes end to end support for projects deemed strategically critical. While providing no firm details of what constitutes “strategically critical,” the strategy goes on to say “In a competitive global market, it is important that Australia’s efforts are targeted and proportionate for the greatest strategic and economic impact” – indicating that any assistance will likely have a limited scope.

The proposed assistance was welcomed by parts of the industry, with the Association of Mining and Exploration Companies commenting “…we need more efficient and effective regulatory approvals processes to enable mineral exploration and mining projects to be developed in a time-efficient and cost-effective manner.”

The strategy references international trade and the importance of trade to economic growth. As with export-led industrialization seen across Asia since the 1960s in countries like Malaysia, investment and international partnerships will be essential to Australia’s critical minerals future. The strategy correctly identifies that policy frameworks should be aligned with bilateral partners and multilateral forums to help accelerate and drive efficiency in trade and investment.

The strategy notes the Free Trade Agreement currently under negotiation with the EU as an upcoming reform which would provide benefit to the critical minerals sector if leveraged effectively. Additionally, measures in the United States’ Inflation Reduction Act are highlighted as opportunities for Australia as a key US trading partner. Further analysis of the Act was published by the AEC in April this year and is available here and here.

Interestingly, the strategy notes that it is looking for “International investment to support project development and downstream processing opportunities aligned with our national interest.” A conga line of manufacturers commenced leaving Australian shores decades ago, and no recent government policy has managed to stop the music. A watching brief should be kept on this section of the strategy.

The strategy also looks at how to streamline ESG performance, and lists the streamlining of environmental approvals by coordinating levels of government as a key priority. When this process is done well, communities can benefit from accelerated economic activity – new and better paying jobs, new customers for businesses and greater wealth for the local population.

However, this approach can often prove a fine tightrope for governments to walk. Efforts to streamline can quickly and easily be perceived as efforts to steamroll community opposition and ignore community feedback. History shows us that it is difficult to overestimate the lengths tight-knit communities will go to when they feel that their local amenity or right to quiet enjoyment is threatened, even if an improved economic position is the proposed outcome.

Positively, the strategy notes that Export Finance Australia uses globally recognized approaches to environmental and social risk management when assessing projects, specifically:

  • the OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence
  • the Equator Principles

The strategy identifies the need for enabling infrastructure to be present to facilitate investment. A recent report from the International Energy Agency (IEA) notes “The rapid deployment of clean energy technologies as part of energy transitions implies a significant increase in demand for minerals.” Given the economic imperative of a successful energy transition, the importance of the consideration of future economic activity in infrastructure development and approval processes cannot be understated. The strategy also suggests augmenting projects underway to address the focus areas of the strategy.

This approach helps to bring urgency to the implementation of the strategy. However, the strategy appears to be more aspirational than action-orientated, making these sorts of actions somewhat unattainable in the short to medium term.

Workforce requirements now and into the future are also assessed in the strategy. Data relied upon in the strategy suggests the battery and mineral value chains could support more than 60,000 direct jobs in Australia by 2030 if value-added processing is expanded in Australia. The strategy suggests both upskilling the local population and migration as options to ensure workforce availability. This is in addition to the 10,000 vacancies that currently exist in the mining sector and 25,000 in the manufacturing sector in Australia according to the ABS.

This strategy provides a point of reference for those looking to grow the critical minerals sector in Australia to support the energy transition (among other purposes). While it does provide some limited direction, there is also a lack of clarity present in some sections. For example, when addressing the need for enabling infrastructure to be present and the level of support to be provided to ensure projects are funded, de-risked and environmentally approved. The success of the energy transition will in part rely on the ability of this strategy to foster secure supply chains for renewable generation components. Both the success of the transition and Australia’s critical minerals industry will play a vital part in Australia’s economic future.

Related Analysis

Analysis

A peek at community attitudes and awareness towards the energy transition

Recent surveys from KPMG, SEC Newgate and the CSIRO have all provided good insights into the community’s attitude to the changes underway in the grid and the way we generate electricity. They also highlight the level of knowledge of what this involves as well as how overall views on the speed of the transition are being influenced by factors like cost-of-living pressures. We take a look at what they found.

May 16 2024
Analysis

Report assesses state of play for SMRs

A recent report by a pro-nuclear UK think tank has shone a light on the challenges needed to be overcome to accelerate the development and rollout of small modular reactors (SMRs) globally. While the sees SMRs playing an important role in helping countries decarbonise and impressive growth out to 2050, it is a little less optimistic than some projections and highlights the uncertainties and key hurdles that need to be dealt with. We take a closer look.

Apr 26 2024
Analysis

Queensland’s pumped hydro plans

In September 2022, then Queensland Premier Annastacia Palaszczuk announced plans to construct two new pumped hydro projects: Borumba Dam – a 2GW facility located in Imbil, 50km west of Noosa, and the Pioneer/Burdekin facility which plans to offer 5GW of storage, located 75km west of McKay. We take a look at pumped hydro and how it can support the energy transition.

Apr 11 2024
GET IN TOUCH
Do you have a question or comment for AEC?

Send an email with your question or comment, and include your name and a short message and we'll get back to you shortly.

Call Us
+61 (3) 9205 3100