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Australia’s resources opportunity in a new energy economy

The Technology Investment Roadmap’s mission is to identify and incentivise the development and deployment of technologies that reduce emissions or sequester hard-to-abate emissions. 

The global deployment of zero emissions electricity and hydrogen, low emissions materials and energy storage solutions will depend on large-scale production of low emissions technologies such as batteries, electrolysers, fuel cells, solar panels, electric vehicles, electric motors and wind turbines. 

These, in turn, will require the expansion of mining and processing to provide the materials from which they will be built.

This chapter is a complement to the main theme of the roadmap, to give consideration to the resources that are required to support the global transition to a new energy economy. It identifies the increased demand for metals and minerals required to produce low emissions technologies, and considers the opportunities for Australia therein.

Australia has large reserves of relevant metals and minerals, including:

  • lithium
  • nickel
  • copper
  • uranium
  • cobalt
  • manganese
  • vanadium
  • rare earths
  • graphite
  • bauxite.[60]

We also have a world-leading mining-equipment technology and services (METS) sector and are close to the growing Indo-Pacific market. This means Australia is well positioned to expand our resources and energy commodity export market as demand surges.

By carefully managing environmental and social impacts, Australia can build on existing industries and create new ones.

These industries will develop alongside Australia’s existing energy and resource industries such as coal and liquefied natural gas (LNG), which are major contributors to our economy. Coal and gas will continue to have an important role in the world’s energy mix for years to come.[61]

In June 2021, the Australian Government released Australia’s Global Resources Statement, a milestone of its Global Resources Strategy. The Global Resources Statement promotes Australia’s vision to further strengthen our resources and energy sectors by diversifying our export markets.

The government is also ensuring the competitiveness of our critical minerals exports and downstream processing capabilities through:

  • the Critical Minerals Facilitation Office
  • the Modern Manufacturing Strategy.

Future demand for minerals and low emissions fuels

The International Energy Agency (IEA) has conducted modelling of emissions reductions using two key scenarios. The Stated Policies Scenario sets out the outcome of existing policy frameworks and today’s announced policy intentions, whereas the Sustainable Development Scenario focuses on what would be required in a trajectory consistent with meeting the Paris Agreement goals.

The IEA predicted that under the Stated Policies Scenario, mineral requirements for low emissions technologies will double by 2040, and could almost quadruple in the same time period under the Sustainable Development Scenario (Figure 19).[62]

The IEA also projects increasing demand for low emissions fuels, including hydrogen, and uranium for nuclear electricity.[63]

Australia's export potential

Figure 19: Total mineral demand to manufacture low emissions technology under IEA’s Stated Policies and Sustainable Development Scenarios

Bar graph showing mineral demand for various low emissions technologies from 2020 to 2040. Text version provided immediately after image

A bar graph showing increased mineral demand caused by increased use of low emissions technologies under both the stated policies and sustainable development scenarios.

By 2040, demand for minerals for low emissions technologies is expected to increase to approximately 15 Mt per year under the stated policies scenario. It is expected to increase to over 27 Mt per year under the sustainable development scenario.

Through Australia’s Global Resources Strategy, the government is working to expand and strengthen our resources export markets. This includes seeking new trading opportunities with partners in our region though existing bilateral relationships, as well as forging new connections. Australia’s new energy technologies and minerals resources will be key to facilitating the global energy transition. We are a reliable, responsible and ready player to support our partners to achieve their emissions reduction targets.

The Office of the Chief Economist of the Department of Industry, Science, Energy and Resources has analysed Australia’s competitiveness in the evolving global market and our potential export revenues under the scenarios of gradual and rapid transition to low emissions technologies.[64]

The analysis shows that Australia is well positioned to supply a significant share of the global demand for minerals, metals and fuels, including:

  • lithium
  • nickel
  • copper
  • uranium
  • clean hydrogen

Minerals and metals

Lithium

Lithium-ion batteries for electric vehicles and stationary storage may see demand for lithium increase 11‑fold over the next 30 years.[65]

Australia is the world’s largest lithium producer and has the world’s second-largest lithium reserves. Chile and China are the next largest exporters, and Australia’s lithium exports are larger than the sum of both.[66] Combined with cheap energy and large scale project expertise, our lithium reserves give Australia a competitive advantage in quickly scaling up lithium production.[67]

Under a scenario of gradual transition to low emissions technologies, Australia could grow its estimated annual revenue from lithium exports by more than 12-fold on 2020 levels to $14 billion by 2050. Under a rapid transition scenario, annual revenue could grow more than 17-fold to $19 billion by 2050.[68] This would amount to 62% of a $31 billion global export industry. Australia’s annual revenue could grow further to as much as $34 billion by 2050 if current high commodity spot prices are maintained and Australia further refines all the lithium it produces.[69]

Nickel

Nickel’s increasing global demand is mainly due to its use in the production of lithium-ion batteries. Demand for nickel is projected to increase fivefold over the next 30 years.[70]

Australia is the world’s sixth largest producer of nickel and has the world’s second-largest nickel reserves. Indonesia, the Philippines and Russia are the three largest exporters of nickel.[71] Given the limited nickel reserves around the world, Australia is well placed to capture a larger share of the global market.

Australia’s annual nickel export revenue is projected to increase threefold to $12 billion under a scenario of gradual transition to low emissions technologies, or fivefold to $22 billion by 2050 under a rapid transition scenario.[72] The latter would make up 15% of a $150 billion global export industry. If current high spot prices were to persist over the outlook, Australia’s annual revenue could grow to as much as $31 billion by 2050.[73]

Copper

Copper’s conductivity makes it essential for the wires and components in:

  • electricity networks
  • stationary storage
  • electric vehicles
  • solar and wind power generation.

Australia has the world’s second‑largest copper reserves.[74] Australia is currently the third‑largest exporter of copper, after Chile and Peru.[75]

The already wide scale of copper use across infrastructure and technology, means that any growth in copper demand stemming from low emissions technologies is not expected to be as large as that for other materials. Additionally, due to high recycling rates, increases in the demand for mined copper is likely to be moderate.

Australia is expected to remain globally competitive, with higher export volumes compensating for lower export prices. Under both gradual and rapid transition scenarios, Australia could grow its estimated annual revenue from mined copper exports to around $8 billion by 2050.[76] This would amount to 10% of an $80 billion global export industry. If current high spot prices were to persist over the outlook, Australia’s annual revenue would grow to $19 billion by 2050.[77]

Other minerals and metals

Australia will continue to be a major exporter of iron ore, alumina and aluminium. Demand for aluminium will grow due to the need for lightweight material in electric vehicles and the support structures for solar panels.[78]

Australia is currently the world’s largest exporter of iron ore, with Brazil and South Africa being the next largest.[79]

Large quantities of steel will be required for construction of low emissions facilities. As an example, it has been estimated that steel represents up to 80% of all the material mass used to construct a wind turbine.[80] The largest global steel exporters are China, Russia, and Japan.[81]

Australia could also see strong growth in the export of rare earth elements like cobalt, graphite and vanadium.[82]

Fuels

The IEA predicts that natural gas, coal and oil will be an important part of the world’s fuel mix for many years.[83] In particular, global natural gas demand is projected to increase in the coming years.[84]

Australia is an established global supplier of LNG and coal.[85] Many of our gas producers and exporters are exploring solutions to reduce emissions across their supply chains. This means Australia is well positioned to remain a supplier of choice for natural gas.

Meanwhile, growing demand for low emissions fuels creates the potential for our resources sector to diversify our exports by supplying clean hydrogen and uranium.

Australian Industry Energy Transitions Initiative

Supported by a $2 million Australian Renewable Energy Agency (ARENA) grant, and convened by ClimateWorks Australia and Climate-KIC Australia, the Australian Industry Energy Transitions Initiative is made up of 16 major industrial and finance companies. They include:

  • Australian Gas Infrastructure Group
  • BHP
  • BlueScope Steel
  • BP Australia
  • Fortescue Metals Group
  • RioTinto
  • Wesfarmers Chemicals Energy and Fertilisers
  • Woodside. 

Its goal is to reduce supply chain emissions in some of our most important, but hardest to abate, industrial sectors, including: liquefied natural gas, chemicals, steel, aluminium, and other metals like copper, nickel and lithium.

The companies are identifying how their sectors can transition to net-zero emissions. The group’s early research shows that existing or emerging technologies can address almost all of the emissions in these industries’ supply chains.

By sharing knowledge and collaborating on action, this initiative will help Australia’s heavy industries be global leaders in the shift to a net-zero economy.

Uranium

All uranium produced in Australia is exported. It used as fuel for nuclear power plants.

Nuclear power can help zero-emissions electrification by complementing high levels of solar and wind generation.

The IEA estimates that nuclear power generation will need to double over the next 30 years to achieve net zero emissions. Attainment of this target will be determined by policy decisions among countries currently considering nuclear energy programs, as well as by potential improvements in nuclear power technology. Increased demand for uranium will likely be driven by the deployment of small modular reactors. Nuclear plants need a relatively small amount of uranium to run, so the world’s known uranium reserves can fulfil the anticipated demand.[86]

Australia has the largest reserves of uranium, with around one-third of the world's uranium reserves, and is the third‑largest producer, after Kazakhstan and Canada.[87] We also have multiple mines under review or in development. This means Australia can expand its market share and export value. Our annual revenue from uranium exports is expected to increase from $0.8 billion now to just under $900 million by 2050 under a gradual transition scenario, or $1.3 billion by 2050 under a rapid transition scenario.[88] The latter is 13% of a $10 billion global uranium mining industry.

Clean hydrogen

Clean hydrogen and clean ammonia can reduce emissions when energy needs can’t easily be met by electricity.

Australia is well placed to become a hydrogen superpower. In a recent analysis, Wood MacKenzie estimated Australia’s hydrogen export industry to be between $70 billion and $130 billion (US$50–US$90 billion) by 2050.[89]

Value-adding opportunities

Most minerals have a complex value chain. They go through several stages of processing and conversion between the mine site and the point they are used.

Each step significantly increases the value of the product. For example, it is estimated that in 2025 the global lithium mining production will be worth $26 billion, compared with the refining and processing industry worth $63 billion and battery pack assembly industry estimated to be worth $1.7 trillion (Figure 20). [90]

Figure 20: Projected value of lithium battery value chain 

Diagram showing the stages of the lithium battery value chain and Australia’s projected share of the global industry in 2025. Text version provided immediately after image

There are 5 stages of lithium battery production outlined. Australia’s projected share of the global value at each stage in 2025 is:

  • Stage 1 (Mine and concentrate): Australia has 38% of a $26 billion industry
  • Stage 2 (Refine and process): Australia has 4% of a $63 billion industry
  • Stage 3 (Electrochemical production): Australia has 0% of a $385 billion industry
  • Stage 4 (Battery cell production): Australia has 0% of a $550 billion industry
  • Stage 5 (Battery pack assembly): Australia has 0% of a $1.7 trillion industry

Global mineral processing and refining operations are generally heavily concentrated and vulnerable to disruption. With increasing concern about the risks of geographic concentration of supply chains, Australia offers security and reliability for customers looking to diversify their supply.

Australia’s Critical Minerals Strategy highlights our potential to lead the world in critical mineral exploration, extraction, production and processing.[91]

According to the Future Charge report from Accenture, development of more onshore materials processing and upstream battery production has the potential to create over 34,000 jobs and contribute $7.4 billion annually to Australia’s economy in 2030.[92]

In light of these strategic advantages and opportunities for our economy, resources technology and critical minerals processing has been identified as a National Manufacturing Priority under Australia’s Modern Manufacturing Strategy.

The $1.3 billion Modern Manufacturing Initiative, a centrepiece of the strategy, will support the scaling up of local downstream processing and value adding of critical minerals, as well as commercialising and manufacturing cutting‑edge technologies that drive productivity and sustainability of the resources sector.

Sovereign manufacturing capability in Australia

Australia produces many of the minerals needed for batteries, including cobalt, manganese and lithium. Combined with our outstanding manufacturing capabilities, this means Australia is well-placed to meet the world’s increasing demand for battery storage.

Based in Perth, Lithium Australia wants to ethically and sustainably supply the global lithium battery industry. The company uses proprietary technologies to more efficiently extract lithium. It also produces cathode materials for batteries and is developing a way to recycle all the metals from old lithium-ion batteries. 

On the other side of the country, NSW’s Energy Renaissance designs and manufactures lithium-ion batteries optimised for hot climates. The company’s tough, flexible ‘superStorage’ platform uses a proprietary battery management system for better efficiency, safety and security. All products are made at the ‘Renaissance One’ advanced manufacturing hub near Newcastle.

Footnotes

  1. Department of Industry, Science, Energy and Resources 2021, Global Resources Statement, accessed 5 August 2021
  2. International Energy Agency 2020, World Energy Outlook 2020, accessed 5 August 2021
  3. International Energy Agency 2021, The role of critical minerals in the energy transition, accessed 5 August 2021
  4. International Energy Agency 2021, World Energy Outlook 2021, accessed 21 October 2021
  5. Analysis assumes rapid uptake of low emissions technologies, consistent with an average temperature rise limited to 2°C in the IEA’s 2020 World Energy Outlook Sustainable Development Scenario
  6. Bloomberg New Energy Finance 2021
  7. United States Geological Survey 2021, Mineral Commodity Summaries 2021, accessed 9 August 2021
  8. United States Geological Survey 2020, Mineral Commodity Summaries 2020, accessed 5 August 2021
  9. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis. Figures are in real 2020 dollar terms.
  10. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis. Figures are in real 2020 dollar terms.
  11. Bloomberg New Energy Finance 2021
  12. United States Geological Survey 2020, Mineral Commodity Summaries 2020, accessed 5 August 2021
  13. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis.
  14. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis. Figures are in real 2020 dollar terms.
  15. Geoscience Australia 2021, Australia’s Identified Mineral Resources 2020, accessed 15 October 2021
  16. Department of Industry, Science, Energy and Resources 2021, Resources and Energy Quarterly, June 2021, accessed 9 August 2021
  17. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis.
  18. Department of Industry, Science, Energy and Resources 2021, Office of the Chief Economist analysis. Figures are in real 2020 dollar terms.
  19. Department of Industry, Science, Energy and Resources 2021, Resources and Energy Quarterly, June 2021, accessed 9 August 2021
  20. Department of Industry, Science, Energy and Resources 2021, Resources and Energy Quarterly, June 2021, accessed 9 August 2021
  21. POSCO 2016, Steel Solutions in Wind Power, accessed 1 September 2021
  22. World Steel Association 2021, 2021 World Steel in Figures, accessed 9 August 2021
  23. Department of Industry, Science, Energy and Resources 2021, Outlook for Selected Critical Minerals in Australia, accessed 9 August 2021
  24. International Energy Agency 2021, World Energy Outlook 2021, accessed 21 October 2021
  25. International Energy Agency 2021, World Energy Outlook 2021, accessed 21 October 2021
  26. Department of Industry, Science, Energy and Resources 2021, Global Resources Statement, accessed 5 August 2021
  27. International Energy Agency 2021, World Energy Outlook 2021, accessed 21 October 2021
  28. Nuclear Energy Agency and International Atomic Energy Agency 2020,Uranium 2020: Resources, Production and Demand, accessed 9 August 2021
  29. International Energy Agency 2021, Net Zero by 2050, accessed 9 August 2021
  30. Wood MacKenzie 2021, Green pivot: Can Australia master the hydrogen trade
  31. Future Battery Industries CRC 2020, Li-ion battery cathode manufacture in Australia – a scene setting report, accessed 6 September 2021
  32. Department of Industry, Science, Energy and Resources 2019, Australia’s Critical Minerals Strategy, accessed 9 August 2021
  33. Accenture 2021, Future Charge – Building Australia’s Battery Industries, accessed 9 August 2021