The Federal Government last week announced a $1 billion investment in Australian solar manufacturing in the historic fossil fuel heartland of the Hunter Valley, the Solar Sunshot program.
Its establishment at the Liddell coal power plant site is symbolic.
The play is designed to boost a regional economy formerly dependent on fossil fuels, and help pivot the region and future workforce into the zero-emissions industries of the future, presenting a stark alternative to the Coalition’s “vision” of a nuclear reactor for every former coal generator site.
Sunshot funding will underpin subsidies, grants and other support for the domestic production of solar panels, leveraging the brilliant skills of Australian technology leaders at UNSW and ANU – who have developed the most efficient solar panels in the world – to expand domestic capacity and catalye onshore value-added manufacturing.
Critically, this represents a plan to start rebuilding our sovereign manufacturing capabilities, placing Australia higher up the renewable energy supply chain and bolstering our energy security and economic resilience.
The funding program is a downpayment on the entire Australian solar supply chain, from polysilicon to wafers to cells, module assembly and the related components including solar glass and inverters, as well as advanced deployment technologies and emerging solar innovations.
This initiative leverages NSW Energy Minister Penny Sharpe’s $275m net zero manufacturing grants, showing the power of Federal and State governments collaborating to partner with industry –as in the case of Sunshot, where AGL is also on board the new venture – and collectively create Australian industries of the future.
Australia currently imports 99% of its 5GW pa of solar modules mostly from China, with Tindo Solar in Adelaide the sole Australian manufacturer of modules. 5B and SunDrive, which has signed an MoU with AGL for manufacturing at the Liddell site, are also racing to build out our domestic capacity.
This plan will likely establish ~1 gigawatt (GW) per year of domestic module manufacturing capacity, to give a 20% domestic share of the ~5GW pa of solar installs.
This would likely take the shape of both capital support and an advanced manufacturing production tax credit from the federal government for a decade.
These arrangements will ensure ongoing cost-competitiveness against offshore global majors often selling at zero margins, as is evident today following a 50% decline in module prices over the last year.
The Sunshot initiative is a first step. There is a lot more potential, as ARENA’s CEO Darren Miller calls for Australia to install up to 50GW of solar pa to turbocharge our domestic energy security after several years of rampant fossil fuel hyperinflation driving up power prices, and definitively secure our place as a global renewables superpower.
A potential second step involves the more ambitious $8bn Quinbrook Investment Partners idea considered by the ARENA-supported Australian PV Institute in its Silicon to Solar (S2S) roadmap to evaluate the construction of a world scale advanced green polysilicon manufacturing plant at Townsville, leveraging our massive potential competitive advantage of low-cost renewable energy.
This would have to be done in partnership with an established world-leading polysilicon firm to ensure we get access to the skills and technology for deployment in the local context.
It could be a path to a constructive Australia-China collaboration to enhance the recently restored goodwill, building bridges with our key trade partner, replacing the antagonistic approach of the previous Federal government.
We could also leverage our growing collaboration with India, manufacturing the equivalent of 10GW pa of green polysilicon for transformation into wafers and cells there, and then reimporting 1GW pa of the cells for solar module assembly here. This would build on the recent 5B-Waaree collaboration.
These would be tangible geopolitical steps towards building international collaboration in substance, rather than merely words.
Several prominent economists say we have no competitive advantage in solar manufacturing. But in green polysilicon we do, deploying our enormous potential for zero-emissions low-cost renewables.
We also need to widen our view to accommodate the new geopolitical realities, not the least being the growing US-China trade war.
Australia has world leading R&D capacities, with resulting potential for a strong solar technology bridge with China. Diversity of supply chains and domestic capacities was rammed home during covid as a key public good.
And investing in re-skilling our workforce and accelerating decarbonisation as we pivot away from our addiction to zero value-add fossil fuel exports is another strategic public value, even if it doesn’t fit the convenient theoretical construct of free energy markets – an entirely frayed concept post a couple of years of gas cartel gouging and ongoing massive public-purse support for the carbon economy.
Why have we continued to subsidise imported diesel for 6 decades, propping up tax haven based multinationals to dig-and-ship our coal?
And it’s worth remembering it was our public monies that built the coal power plants and coal railway lines now exploited by private vested interests, again demanding yet more coal subsidies to keep end of life coal clunkers chugging on. Free markets and competitive advantages in the energy sector mainly exist in economists’ minds.
The Albanese Government’s shot in the arm for Australia’s zero-emissions future must be considered in this context.
Sunshot follows $1.1bn federal financial support earlier this month to establish rare earths mining and refining by Arafura Rare Earths in the Northern Territory, and support for Liontown Resources to expand our world-leading lithium sector.
Sunshot and these related initiatives are important steps in a uniquely Australian response to the US Inflation Reduction Act – the US$1trillion “green new deal” that is turbocharging cleantech re-industrialisation in the US and attracting a tidal wave of hundreds of billions of dollars of private capital.
We often hear Australia can’t respond to the scale of that brilliant US$1 trillion ambition, or to developments like last month’s US$313bn of new public finance support from the South Korean government to build out their energy transformation efforts.
Climate Energy Finance sees it otherwise. Australia is #1 in the world in iron ore exports with more than 50% global share, and enormous potential to develop a globally dominant green iron export industry in partnership with our key North Asian customers.
And we’re #1 in the world in lithium spodumene exports in 2023, with a more than 50% global share. We need to see Australian ambition commensurate with, and leveraging our existing global resources leadership.
It’s time to leverage Australian corporate giants like BHP, Fortescue, Rio Tinto, Windlab, Pilbara Minerals and Mineral Resources to decarbonise our exports by powering mining, processing and manufacturing onshore with renewable energy.
This will progressively rebuild our domestic skills base and capacities – inclusive of local content requirements and first nations representation – after several decades of deindustrialisation inflicted on us by flawed economic rationalist models premised on free global trade.
The announcement also complements the Albanese government’s $2bn commitment of new financial support to boost investment into ASEAN, with a focus on clean energy and infrastructure. And the Safeguard Mechanism. The Net Zero Economic Authority.
The Capacity Investment Scheme. Vehicle Emissions Standards. The National Reconstruction Fund. And Rewiring the Nation. One step at a time, we are now moving Australia forward to embrace zero emissions industries of the future.
We estimate Australia needs $10bn pa over a decade of additional public capital and budget support to crowd-in $200-400bn of private capital and truly position Australia as a global power in renewable energy supply chains.
As Greg Combet said at the National Press Club this week, while private capital will do the heavy lifting, “with particularly large transformative projects Governments may need to consider being significant equity players, helping to de-risk projects, and adopting a long-term view before recovering capital.”
Thijs will enable us to play to our competitive advantages of world-leading sun and wind resources, and value-add our vast, global top 3 reserves of the critical minerals and strategic metals that power the clean technology underpinning global decarbonisation.
We look forward to more substantial investments into the zero-emissions economy of the future in Treasurer Jim Chalmers’ May 2024 Budget.
Finally, Australia is truly pivoting away from our over-reliance on fossil fuels and, with clear-eyed, forward thinking leadership, backing-in our momentous, once in a century opportunity to establish the nation as a global zero-emissions trade and investment leader.
