Can Australia Become a Renewable Energy Superpower?

June saw the release of a new strategy for Australia’s critical minerals sector. The development and supply chain security of critical minerals essential for the production of emerging energy technologies are quickly becoming the new arena for geostrategic rivalry. Australia sees itself as having a major role to play in this contest, both as a country seeking to reap the economic rewards from these minerals, and also in the more complex efforts to prevent market dependence on China for both these raw materials and the manufacture of final products – something that could now be considered an energy security risk.

Australia has the sixth largest deposits of critical minerals, but due to its highly developed mining sector it is currently the third largest producer. China, however, is the overwhelmingly dominant actor in the sector, holding around 50 percent of known global deposits of critical minerals. China also builds over 90 percent of the magnets made with critical minerals that are used in electric vehicles, as well as manufacturing around 60 percent of both onshore and offshore wind turbines, and around 80 percent of solar panels. If clean energy is the new oil, then Beijing is in an absolute commanding position for the world’s future energy requirements.

Australia’s new strategy to counteract this dominance presents two broad objectives it hopes to achieve by 2030. The first is the continued development of the mining of critical minerals, but with the addition of expanding into the processing of raw materials to be used in the manufacturing of green and emerging technologies. There is a recognition that Australia needs to leverage its abundance of raw materials into more value-added component parts for its own economic rewards, but also to limit some of China’s dominance of the entire supply chain from mining through to manufacturing.

The second pillar of the strategy is coordination and cooperation with like-minded countries to build supply-chain resilience within the critical minerals sector. This is being called “friendshoring.” Rather than letting comparative advantages and market efficiency decide how the critical minerals industry develops, there is instead a belief that supply chains need to be built around trusted partners. Given China’s habit of using economic coercion as a diplomatic tool, countries like Australia and its close partners in the United States, Japan, and South Korea need to find ways to prevent this from being a possibility.

The current Labor Party government is keener than its predecessor to advertise Australia’s potential as a renewable energy superpower. Projects like the proposed Sun Cable linking a solar farm in Australia’s Northern Territory to Singapore are potentially viable, but given the distance Australia is from even its closest neighbors the prospect of Australia being a large exporter of renewable energy is unrealistic. Even putting geography aside, for most countries the strategic autonomy of onshore power generation is one of renewable energy’s great assets (alongside the reduction in carbon emissions).

For Australia to be a genuine renewable energy superpower it will need to become a major player in the development of current and emerging renewable technology. It will need to be capable of turning its abundance of natural resources into shelf-ready products itself. While mining remains Australia’s forté, Australia’s critical minerals strategy should be less focused on the things the country already does well, and instead focused on developing the advanced manufacturing economy that Australia currently lacks. This will require having a greater ambition for its critical minerals industry than just being a source of material for its friends in Japan, South Korea, and the United States.

This goes to the heart of one of the great and perplexing failures of Australia’s overall national strategy. Australia is an incredibly weird economy, especially for an incredibly wealthy one. According to the Observatory of Economic Complexity, Australia ranks fourth in the field of scientific research and 13th in the submission of new technological patents, but 82nd in overall sophistication of its exports. The country has a very strange inability to translate its genuine know-how into new advanced industries.

If Australia is serious about taking advantage of the shift toward renewable energy it needs to understand why it lacks this ability, and develop a serious strategy to overcome the problem.