Verdict
Yes. With access to abundant solar and wind resources, mineral wealth and new technologies, Australia is uniquely positioned to be a magnet for clean energy growth industries of the 21st century, such as clean fuels and low-emissions metals, which can spur regional economic growth and support tens of thousands of jobs. But capturing this opportunity will require serious planning and significant investment.
Analysis
What does it mean to be a clean energy superpower?
Energy is the lifeblood of any modern economy.
And at a time in which almost 200 countries around the world have agreed to strive towards ‘net zero emissions’ by 20501, access to abundant, clean energy will prove to be a major economic advantage.
Australia has this advantage, boasting the most plentiful combination of solar and wind energy resources of any country in the developed world2.
Our ability to produce internationally competitive clean energy can prove a magnet for energy-intensive industries, and support an industrial and manufacturing renaissance in Australia.
We also have the opportunity to export energy, and these energy-intensive commodities, to other countries which don’t enjoy the same clean energy advantage.
It is this concept that led to the coining of the term ‘renewable energy superpower’ in 20153.
There are two leading opportunities for clean manufacturing industries in Australia: green fuels, derived from renewable hydrogen; and green metals, in which we use renewable energy, rather than fossil fuels, to make commodities like iron and aluminium.
Renewable hydrogen
Renewable hydrogen, or ‘green’ hydrogen is a gas made from passing renewable electricity through water (H2O) to separate the hydrogen (H2) from the oxygen (O). Countries with access to competitively priced renewable electricity will be especially well placed to produce it efficiently.
Hydrogen is already widely used today in a wide range of chemical processes (particularly in the production of ammonia for fertilisers), with around 100 million tonnes consumed globally each year4. However, almost all of this production is currently derived from fossil-based gas, otherwise known as methane (CH4). Methane is one of the world’s most potent greenhouse gases5.
Phasing out fossil fuel-based hydrogen and replacing it with renewable based hydrogen is a major market opportunity for Australia. The opportunity is not limited to existing markets; renewable hydrogen could also be instrumental in a range of new emerging markets for the decarbonisation of liquid fuels used in heavy transport, from jet fuel to shipping fuels. Aviation and shipping will find it harder to electrify than many other industries6, and so access to clean liquid fuels, derived from hydrogen, such as ammonia, methanol and synthetic kerosene (jet fuel) – will be critical to their decarbonisation plans.
Another big opportunity for hydrogen is to replace the coal (carbon) currently used in the steelmaking process7. This could make a huge difference to global emissions, with steelmaking currently responsible for at least 7 per cent of the world’s greenhouse gas emissions8.
Green iron
Australia’s ability to produce competitively priced renewable hydrogen opens the door to our other big strategic manufacturing opportunity: green iron.
Australia is the world’s largest producer of iron ore9, with massive reserves in the Pilbara region of Western Australia, large deposits in South Australia, and sizeable reserves in Queensland and New South Wales.
The overwhelming majority of iron ore extracted in Australia today is exported to overseas markets, predominantly China, Korea and Japani, where it is used in the production of steel and steel products.
Access to internationally competitive renewable hydrogen in Australia, would make Australia the economically rational place to ‘reduce’ the iron ore into iron metal (due to the relatively high costs of hydrogen compression for transportation)10. This iron metal could then be shipped to key steelmaking regions for final processing. This structure could greatly benefit our current iron ore customer markets, by reducing their demand for clean electricity for the processing of iron ore into iron metal – and thereby accelerating the decarbonisation of global steelmaking.
An Australian green iron industry could also deliver a massive economic benefit to Australia. The Institute for Energy Economics and Financial Analysis estimates it could generate $295 billion annually, tripling the value of current iron ore exports and creating thousands of jobs11.
Low-cost renewables, combined with our mineral wealth, opens up a range of other opportunities
Green iron and renewable hydrogen are just two leading examples of Australia’s potential superpower industries. There are a range of other energy intensive industries that Australia would be particularly well-suited to expand in the decades ahead, if we can provide efficient access to Australia’s abundant renewable energy resources. These include alumina, aluminium and critical minerals.
Australia is already the world’s largest exporter of alumina, and the seventh largest producer of aluminium12, both of which are highly energy-intensive processes. Access to internationally competitive clean power will be strategically important for Australia’s ability to not just maintain, but to grow these manufacturing sectors into the future.
Australia also has plentiful reserves of a range of critical minerals, including lithium, cobalt and rare earths, many of which will be critical to the global energy transition13. Minerals processing is energy intensive, and with access to internationally competitive clean energy, Australia would be well placed to not just extract these minerals, but to undertake value-added processing onshore14. This would be a major opportunity for Australia to lead in low-carbon manufacturing and export energy-intensive products to the world.
Realising our superpower opportunity
Scaling up these new clean growth industries in Australia will require – first and foremost – efficient access to, and development of our abundant renewable energy resources in strategic locations to support these new industries.
The establishment of large-scale processing and manufacturing facilities will also require careful planning and co-ordination of strategic industrial zones, substantial public and private investment, and supporting policies to stimulate investment.
This investment will be rewarded through the diversification and growth of our economy in the decades ahead – particularly in regional areas – and the creation of new skilled jobs and long-term careers in value-added manufacturing.
References
i – Iron Ore in Australia | The Observatory of Economic Complexity
1 – 198 countries are ‘parties’ to the UN Framework Convention on Climate Change, which adopted the Paris Agreement at the UN’s Conference of the Parties in 2015.
2 – Garnaut, R., Speech to the Jobs & Skills Summit, 1 September 2022
3 – A message from Beyond Zero Emissions Chair Eytan Lenko | Media releases
4 – Hydrogen – IEA
5 – Methane emissions are driving climate change. Here’s how to reduce them.
6 – The steep descent to net-zero aviation – International Council on Clean Transportation
7 – https://www.csiro.au/en/research/environmental-impacts/fuels/hydrogen/Hydrogen-for-iron-making
8 – Steel Emissions Reporting Guidance_final
9 – Top 10 Iron Ore-producing Countries (Updated 2024) | Nasdaq
10 – International Energy Agency, Energy Technology Perspectives 2023, page 278.
11 – Institute for Energy Economics and Financial Analysis (IEEFA) (2024) Can Australia keep pace with the evolving green iron market? Available at: https://ieefa.org/resources/can-australia-keep-pace-evolving-green-iron-market
12 – Microsoft Word – 240712 Aluminium Response Green Metals
13 – Department of Industry, Science and Resources (2023) Critical Minerals Strategy 2023–2030. Available at: https://www.industry.gov.au/publications/critical-minerals-strategy-2023-2030
14 – Institute for Energy Economics and Financial Analysis (IEEFA) (2024) Can Australia keep pace with the evolving green iron market? Available at: https://ieefa.org/resources/can-australia-keep-pace-evolving-green-iron-market
