The clean energy incentives in US President Joe Biden’s Inflation Reduction Act will be “devastating” for Australia’s global hydrogen superpower ambitions, warns a major renewable energy investor.
Quinbrook Infrastructure Partners Australia reckons the nation should instead concentrate on becoming a green energy miner as the US turns to “friend-shoring” – favouring allies in its supply chains for critical materials – to cut out China.
The fund’s co-founder and managing partner, David Scaysbrook, canvassed the IRA’s “very far-reaching implications” both domestically in the US “and geopolitically for the alliance between Australia and the United States” in a briefing on Tuesday.
“I think it will represent and does represent a material new export opportunity for this country that is analogous to the green new ‘superpower,’ but possibly not for the same reasons that we might have thought six months ago,” Quinbrook’s co-founder and managing partner David Scaysbrook said.
Plans for Australia to become a hydrogen superpower have been championed by the former Coalition government and leading business figures including iron ore miner Andrew Forrest, who has doubled down on efforts to become a large, global supplier of green hydrogen and an electrolyser manufacturer.
But as the US deploys $500 billion in concessional loans to US business via the IRA, dubbed the Green New Deal, Mr Scaysbrook said the US will cut Australia’s lunch by subsidising hydrogen fuel at a rate of about $US5 per kilogram – a far more generous subsidy than anything on offer in Australia.
It is hoped hydrogen will be one day used as a replacement gas and oil, and some heavy industrial processes.
“The [Inflation Reduction Act] has some bad news for Australia in that context.”
“And that is the degree to which the hydrogen supply chain will be subsidised in the United States which will make it very, very difficult for Australia to compete with US exports of green ammonia, for example,” Mr Scaysbrook said.
“On a global basis, at every step of the supply chain from the renewable power to the onshore manufacture of electrolysers through to the manufacturing of the actual hydrogen product and the degree to which that is subsidised – something north of $USD5 a kilo is just the end product subsidy – will be devastating from a competitive perspective.”
He expects Australian hydrogen producers could supply the domestic market – and possibly Japan and South Korea – but the fund manager was not bullish.
However, Australia’s prime position as a trusted US ally means the resource rich nation will reap rewards from the IRA in another way, he said. The US is looking to plough cash via loans into critical minerals mining and processing, where resource rich Australia has a distinct advantage.
“The reason we say that is because the United States is now hell-bent on creating alternative supply chains, all the way through the fundamental critical minerals and raw material.”
China produces more than 80 per cent of the world’s separated rare earth oxides and that market share has concerned governments in Washington, Canberra, Europe and Tokyo because rare earths demand is expected to soar in the decades ahead, thanks to their vital role in the manufacturing of decarbonisation infrastructure like wind turbines and electric vehicles.
He said capital from the US government under the IRA will flow to Australia via US companies or joint ventures as demand picks up for materials for green industry products like poly silicon wafers and semiconductors.
“The amount of capital and support for industry available to US corporates and even their Australian partners goes beyond anything Australia could even contemplate.
“The Act is so widespread and that is going to create a significant new industrial demand for rare earths critical minerals, raw materials: a lot of which we have here in Australia,” he said.
Mr Scaysbrook, head of the $3 billion clean energy fund which is backed by Australian Super, praised the critical minerals agreements with the US government under the former coalition and the new Labor governments, but he urged politicians and business to think twice before seeking to become a major processor.
He warned Australia will need to face up to the fact that critical mineral processing is a dirty business which may degrade the environment.
“Onshore processing of critical minerals is fantastic from a job creation perspective. It’s fantastic from an onshore value-add economic stimulus point of view, but some of the these processes do have significant environmental impact.”
“And the question is, do we have the stomach for that?”
Australian rare earth mineral miner Lynas will be required by Malaysian authorities to stop importing material that contains naturally occurring radioactive material and is processed at its plant at Kuantan on Malaysia’s east coast by July 1, 2023.
The company says it is on target to have a new $575 million cracking and leaching plant to refine rare earths mined in Western Australia up and running in Kalgoorlie by that deadline.
Lynas’ licence to operate in the South East Asian nation is up for renewal in March.
Source: afr
