Australia should be leading the energy transition. But is it missing out? Russell

Australia's abundance of minerals and renewable energy, stability of government, and proximity to Asia's growing markets makes it a country that is well-positioned to benefit from the energy transition.

The mood was a bit downbeat this week at the International Mining and Resources Conference in Sydney, which brought together the entire mining and resource sector.

Speaker after speaker highlighted the opportunities available, but there was always a warning that Australia risks missing the boat by losing out to competitors when it comes down to leading the energy transformation and the minerals required to make the shift from fossil fuels into cleaner power.

Australia is a leading producer of manganese, copper, nickel and aluminium.

The country is the second largest shipper of coal, and the third biggest shipper of liquefied gas in the world. This shows that the majority of its export revenue is dependent on fossil fuels, which is at risk, as the energy transformation accelerates.

The mining industry is committed to a future of clean energy and wants Australia to remain a leading supplier of key minerals.

There is also a growing risk that Australia will be left behind as other countries, who have access to cheaper energy and capital, as well easier government regulations, begin to gain the upper hand.

Iron ore is a good example.

Iron ore is used to make about half of the world's steel by China, which imports about two thirds of its raw material from Australia.

Steel production is carbon-intensive and accounts for about 8% global emissions due to its dependence on coal as a primary energy source.

Decarbonising the steel is therefore a key plank in the energy transition, and Australia should lead the world.

It is possible to use green energy sources such as wind and solar to produce hydrogen to convert iron ore into hot briquetted steel.

Iron ore will need a lot of cheap electricity to make this happen.

Dino Otranto is the chief executive officer of Fortescue Group - Australia's largest iron ore mining company - and he told IMARC in a speech on Tuesday that without cheap electricity, nothing would be possible.

Otranto stated that Australia's energy prices are competitive globally, and it can "fully transform our commodities into products the rest of the world wants", he said.

ELECTRICITY DILEMMA

The issue is in the delivery of cheap electricity. The issue of cost is always at the forefront when miners speak about building partnerships and increasing collaboration with companies.

Why would a company build solar plants for billions of dollars, then sell the electricity at such low prices to the mining industry, in order to make money selling cleaner products to China or other Asian buyers?

No company would. This means that it will be hard to get renewable energy in Australia at a price low enough to compete with countries like the Middle East which provide power at low cost to iron ore miners, such as Brazil's Vale.

The state of Tasmania, for example, has used hydropower to power its aluminium, zinc, and manganese smelters.

The government is currently more cash-strapped and less willing to impose costs on taxpayers who complain about the cost of living. This means that Australia's capital to become a green superpower may have to come from the private sector.

The mining industry is more sceptical about the role that governments can play in reducing the time and complexity required for approvals. While the politicians at IMARC said they were already doing this, it was a unanimous statement.

The mining industry faces a major challenge in converting vision into reality and doing so at a scale which keeps Australia at forefront of the energy transformation.

These are the opinions of the columnist, who is also an author. Clarence Fernandez edited this article

(source: Reuters)