Construction wages barrier to developing lithium battery industry

A dearth of capital, construction wages one-third higher than rival countries, and a lack of university-educated specialists are among barriers to Australia developing the world’s first serious mine-to-lithium battery industry outside China
25th June 2021
Resources Rising Stars

A dearth of capital, construction wages one-third higher than rival countries, and a lack of university-educated specialists are among barriers to Australia developing the world’s first serious mine-to-lithium battery industry outside China, according to a government report (reports The Australian Financial Review).

Calling on policy makers to step up and help develop the export industry – which is becoming vital for the decarbonisation of global transport and energy systems – the report’s author said Canberra should allow battery makers to access the Australian Renewable Energy Agency and the Clean Energy Finance Corporation.

If successful, Australia would reverse decades of being content with simply shipping raw materials to the world’s factories and re-importing higher-priced finished products, helping expand the economy by $7.4 billion by 2030 and creating almost 35,000 jobs.

Even if it just sticks to mining raw battery materials – it already supplies around half the world’s lithium needs – an explosion in global demand will increase the size of the industry in Australia from $1.3 billion and 6000 jobs to $4.1 billion and 18,700 jobs.

The findings – to be released on Thursday in a report prepared by Accenture for the Industry Department’s Future Battery Industries Co-operative Research Centre – are a wake-up call for governments, businesses and investors as the world’s economies rapidly transition to electric vehicles and mass battery energy storage.

The report suggests that while Australia might already be too late to compete effectively against emerging European, Asian and US rivals making lithium batteries for carmakers such as Tesla, it still has a unique edge in manufacturing energy storage systems for grids, remote needs and rooftop solar.

Stedman Ellis, CEO of the Future Battery Industries CRC, which brings together industry, researchers and governments, believes many arguing about the role of renewable energy miss the vast economic opportunity thrown up by the lithium revolution.

Global demand for lithium batteries is forecast to leap nine- to 10-fold over the next decade, a faster pace of growth than solar PVs over the last ten years, sending sales of batteries to between $US133 billion ($176 billion) and $US151 billion by 2030. The surge in value comes despite an 88 per cent drop in unit prices as the technology matures enough to become cost competitive against internal combustion engines.

“From where we sit, we see a horse running really fast in this race and we ought to have a bet on this horse as we seek to renew our economy and diversify investment,” Mr Ellis told The Australian Financial Review.

Mr Ellis said a key to Australia’s success would be integrating its supply chains with other countries and companies, with a focus on making the country as attractive to investors as possible.

“The scale and speed Accenture is reporting in terms of the battery market shows there’s investment going to go in around the world to satisfy that demand for battery packs.”

With other high-cost countries such as Finland, Germany, the UK, Canada and the US shaping up as Australia’s main competitors, the Accenture report shows local manufacturers would be well-placed on wage costs to feed the global market.

But they will struggle, according to Accenture, with Australia’s high project construction costs.

“Construction workers in Australia earn over 30 per cent more than their best-paid peers among benchmark countries, primarily due to the small Australian labour force and high activity in the construction sector,” Accenture’s analysts said in the report.

“There is also significant volatility in the pipeline of construction projects, with construction booms influencing demand for construction workers and creating further wage inflation.”

Other weaknesses, according to the report, include “limited” battery-related R&D for commercial use, a reluctance among financiers to invest outside mining, and poor training. “Australian universities are not yet focused on fostering the future battery workforce.”

“This is urgent,” Toby Brennan, director within Accenture’s strategy practice, said. “The shape of this industry globally is going to be determined by the next five years of investments.”

Mr Brennan noted how Australia developed some of the world’s best R&D on solar PVs but now manufactures almost none. “We missed that opportunity,” he said.

He said one option for improving access to capital would be to include lithium projects in the mandates of the Australian Renewable Energy Agency and the Clean Energy Finance Corporation – two key government funding vehicles for clean and renewable energy.

The Future Battery Industries Cooperative Research Centre was established in 2019 amid growing concern among Australia and its closest security allies over China’s control of critical and rare earth minerals.

The report finds that while many countries are racing to bolster supply lines following the Trump-era trade tensions and COVID-10 disruptions, none have Australia’s access to raw materials.

“The most immediate opportunities are for Australia to expand into the refining of battery materials – where substantial investments are already being made – and then production of active materials, both segments where co-location with raw materials can generate cost advantages,” the report states.

“Over time, Australia could also develop its own battery manufacturing industry, specialising in energy storage systems for domestic and regional markets. Opportunities in battery integration and reuse and recycling will also emerge as demand increases.”

 

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