The heavy industry heartlands of regional Australia remain dependent on a waning system, as the world moves forward with urgent and necessary decarbonisation. In the Pilbara in WA’s north-west, 45 per cent of direct employment relies on the local iron ore industry. And in Gladstone, Queensland, 11 per cent of the workforce owe their livelihood to alumina, aluminium, LNG and chemicals, according to a 2021 report by the Australian Industry Energy Transitions Initiative, a collaboration between Climate-KIC Australia and ClimateWorks.
But, with most nations (including, now, Australia) committed to net zero greenhouse emissions, the future of the regions lies in adapting to the inevitable and seizing opportunities in the green economy.
Australia’s biggest trading partners, the US, Japan, South Korea and China (worth $246 of $382 billion in Aus exports), have all set goals of net zero by 2050 or 2060. Also reducing global appetite for coal, gas and carbon intensive exports, in July the European Commission announced the world’s first carbon border tax.
The risk these regions face is job losses and stranded assets, warns Jason Nielsen, Director of Strategic Projects at Climate-KIC Australia. But, he says, with coordinated action, we can not only avoid job losses, but also reap the rewards awaiting early movers in the new economy.
Decarbonisation processes do not come without significant risks. In 2017, the Hazelwood coal-fired power station in the Latrobe Valley closed abruptly. An analysis by the Australian National University suggests the ramifications of the Hazlewood closure created widespread community social impacts and depression of the local economy, reaching far beyond the unemployed workers to vulnerable groups including low income households, women and indigenous communities. Two years later, only 306 out of 850 redundant workers who had participated in the Worker Transition Service were in full time employment, and it’s only this week that plans have been announced to convert the site to a new battery plant. While the announcement this week that the site is to be redeveloped as a large new battery plant will come as a welcome relief to the community, the long-term effects of an unmanaged transition are not trivial.
However, with timely, well-managed action, regions can maintain their position as energy and commodity export powerhouses. By harnessing Australia’s fantastic, renewable resources – solar, wind and the ability to produce green hydrogen they can drive local decarbonisation and add low carbon value to our products. They can capture economic opportunities in exporting green energy to the global marketplace, Nielsen says.
Four million square kilometres within Australia were recently assessed with both abundant solar radiation and strong onshore winds, notes an Australian Institute paper, Getting Off Coal. Importantly, combining two energy sources at different times of the day, could counter a common issue: reliability of supply and the high cost of energy storage.
Hydrogen in particular is shaping up to be a major enabler for decarbonisation. “All around the world, governments and companies are scrambling to take a leading position on it,” Nielsen says. Analysis by the Australian Industry Energy Transitions Initiative, which Nielsen leads, suggests opportunities exist in Gladstone, Queensland for the production of refined alumina using green hydrogen and green electricity. Unfortunately, the Australian government is not supporting the higher relative costs of green hydrogen nor setting mandates for others to use it. “Which means that the markets are not really forming in Australia,” he says.
Timing is critical to realising Australia’s natural advantages. More governments are putting financial might behind the transformation to clean energy. And with the recent Glasgow Climate Summit (COP26) ramping up the pressure for more climate action, sooner, the race is on to realise the rewards of being an early mover in some of these emerging sectors and hedge against the risks of remaining too long in declining industries.
“In the absence of strong federal leadership in the transition, industry has been filling the gap,” Nielsen says. But in the communities where the transition will be most acutely felt, government is needed to set policy to manage transition costs.
Nielsen sees the solution as balancing fossil fuel divestment risks with emerging hydrogen opportunities. He says, “It will require new technological solutions, investments in infrastructure and research and development to develop new solutions. It will require policy change. There’s enormous need for coordination and mediation.”
Such complex collaboration needs a systems approach, pulling together the different stakeholders. This includes policymakers, technology, industry, finance, research organisations, consumers and local communities. Indigenous and heritage decisions relate to it as well, he says. This is where organisations like Climate-KIC Australia can play a key role, bringing stakeholders together to simultaneously achieve a co-ordinated response to the simultaneous shifts needed to transition.
Analysis by the Australian Industry ETI identifies the formation of clustered, ‘green energy’ industrial precincts as a priority solution. Co-developed with decarbonised energy systems, alongside demand, investment, ports, industry knowledge and skills, these offer an opportunity to empower the regions and enable key industries to thrive. Many industrial regions can also capitalise on existing resources like port capacity, infrastructure such as gas networks, suitably zoned land and a skilled workforce. Technologies exist, ready to be deployed and expanded, in green energy, electrification and other fuel-switching and emissions abatement measure
The Initiative has determined several industrial regions with potential for such large scale, low cost, renewable energy hubs. These include the Pilbara and Kwinana in Western Australia, Whyalla in South Australia, Portland in Victoria, Port Kembla and Hunter Valley in New South Wales and Gladstone in Queensland.
Given the high cost of conversion, the economic transition needs to be handled in a sustainable way, Nielsen says. This is particularly true for the hard to abate sectors.
Early analysis by the Australian Industry ETI suggests Australian industry can capitalise by working together to address supply chain emissions.
Nielsen has been working with critical industrial supply chains – iron and steel, aluminium and other metals, chemicals and LNG across fourteen industry and business partners including BHP, Bluescope Steel, Woodside, BP, Australian Super, Fortescue Chemicals and National Australia Bank to develop a path to net zero by 2050. This has been a valuable opportunity for large heavy industries to come together with finance and energy organisations to share learning and identify what needs to be done to decarbonise, he says. Shared demonstration projects are another key opportunity for collaboration.
It’s a process that’s already underway in the resource dependent community of Rybnik (in the province of Silesia in Poland). Located in the largest coal-producing region of the European Union, about 10 per cent of the Silesian population are employed through the mining industry.
Through the Rybnik360 project, EIT Climate-KIC (Climate-KIC Australia’s sister organisation in Europe), engaged deeply with all sectors of the local community to form a strong understanding of the assets and opportunities, potential feedback loops and synergies available to be leveraged.
It meant that they were able to co-create a portfolio of strategic solutions, specific to the needs of the inhabitants of Rybnik, that are interconnected and strengthen and support one another.
The core pillars that will be key enablers of a just transition in Rybnik are future literacy, futures of work and policy innovation.
According to a statement by the Mayor, published in Interia Zielona, “Changing mentality is the most difficult process.”
This is the part of a series of thought pieces where we unpack our work at Climate-KIC Australia and our systems innovation approach.