Clean tech manufacturing in Aus: "How can we make stuff here?"

As part of Climate Action Week Sydney's official opening day sessions, I was lucky to lead a discussion with Dr Katherine Woodthorpe AO FTSE FAICD , Tim Buckley , and Christiaan Jordaan on clean tech manufacturing in Australia: “How can we make stuff here?” 

Australia is not known as a manufacturing nation but there are good reasons why this needs to change, at least in the context of the energy transition: to accelerate our path to net zero and beyond, seize 100s of $billions in economic opportunity, boost employment opportunities & build a workforce fit for the future, and ensure energy security against a backdrop of geopolitical instability. So, what are the levers we can use to boost clean tech manufacturing in Australia?

Setting the scene: Sicona Battery Technologies case study

The Australian battery technology startup recently announced it would be building its first commercial production facility in the US. Why the US and not Australia?

• Beyond customer interest, CEO Christiaan noted their move was “sped up by the #InflationReductionAct (IRA) and associated legislation like the #BipartisanInfrastructureLaw, massive funding programs…to build a local battery component supply chain” 
• Beyond that, the US offered “ready to build land owned by local communities, its lot easier to transact, with connections to gas, etc, all you need” 
• Katherine added that in Australia, one of the “biggest input costs - energy - is one of the reasons manufacturers are going offshore at the moment”
• Christiaan observed that so far it appears that it is much easier to do business in the US: “They want your business, they shepherd you through. In Australia it’s just like, find your own way. If we want more opportunities in Australia you need to think like [them]”. He is hopeful Sicona can set up manufacturing in Australia when the environment is more conducive 

Industrial policy to support manufacturing 

This was a timely topic on the eve of the Federal Budget! Will the budget allocate the $100B Climate Energy Finance and other organisations want for clean energy? 

A quick “No” was the answer from Tim but he shared some excellent thoughts on what he’d like to see: 

• “$10B over 10 years”, as suggested by the Clean Energy Council might be more reasonable but it needs to be front-loaded. He calls for a “$20B downpayment” tomorrow with half of it being budget support like the #IRA and the other half for capital support”, not dissimilar to the financial support offered by the US Department of Energy 
• Tim is also hopeful that the Future Fund might get an allocation: “if Treasurer Jim Chalmers launches say a $20B mandate…there will be no budget hit but it will would be a huge way of trying to encourage Australian ownership in industrial activity onshore”
• He stresses we need “patient strategic public equity to support patient strategic public debt”      
• Tim’s optimistic budget wishlist includes “a price on carbon, which won’t happen” (“we need a price signal...how are we going to provide green steel or aluminium without it?”) along with a potential Asian Carbon Border Adjustment Mechanism with Korea and Japan to counter Europe's CBAM and “race Europe to the top and seize hundreds of billions in export opportunity”  
• On the demand side, Tim notes there is an opportunity to encourage the pooling of local demand to create customer certainty for locally manufactured goods. One example is in heavy haulage mining equipment: “If BHP , Rio Tinto , Fortescue pooled all their purchases of heavy haulage mining equipment together [instead of purchasing expensive, subsidised diesel imports], we could actually underwrite a whole ecosystem for those machines to be built right here in Australia…it could build an entire battery and EV manufacturing ecosystem from a standing start”

Other tools at our disposal to boost local manufacturing: 

1.Investment in innovation/manufacturing hubs 

Could a network innovation/manufacturing hubs with shared resources among industry players be a game-changer for manufacturing?

Christiaan believes they can offer an attractive “one-stop shop” using the battery value chain as an example: 

Lithium chemicals can be produced here by companies like Novalith > we can do that in the same precinct as cathode materials which uses nickel, manganese all of which we have here in Australia in abundance > we can bring a cathode producer e.g. from Korean to come here > that will then create the incentive for cell manufacturers to say "oh cathodes are the biggest cost and its being made in Australia and there is a production tax credit or incentive” and come here > before you know it you have everything under one roof which saves on transport costs, emissions, etc 

2.Investment in R&D

• Katherine shared dismal but unsurprising statistics hot-off-the-press: In Australia “R&D spend is 1.68% of GDP” while the OECD average is 2.7% and well below Germany, South Korea etc which are at ~3%+. In particular, R&D investment in ‘energy’ just 0.2%! 
• She iterates the biggest challenge many young companies face: “chasm from prototype to something that you can manufacture at scale” 
• While the focus of R&D, commercialisation and investment has been in select areas to date e.g. solar PV, Katherine highlights “there will always be a mosaic of things that need to plug together” including battery technologies, perhaps pumped hydro and solar concentrating thermal 

3.Investment in labour force 

• Katherine emphasised that globally, there is not an abundance of workers with the right skillset for the clean energy transition today, “which we can just give visas to”, highlighting the need to invest in those skillsets here
• She suggests we need to “micro-credential” workers who might not have 100% of the right skillset today but can be up-skilled, targeting workforce hubs like the Hunter or La Trobe valleys
• One state in the US has invested over US$1B in training for advanced manufacturing aligned with potential employers and is offered to any resident in the state for FREE. Christiaan asks why we couldn’t do something similar here?   

We were only able to scratch the surface in our 30 minutes, but the discussion could have gone much further, covering the role of industry, private capital, etc.