With changes in the energy sector occurring rapidly, Australia needs to step up our pre-processing and electrochemical manufacturing to make the most out of our world-class resources
Innovation and technological change is, predictably, getting faster – but has not been anticipated by much of the traditional commodity sectors, including energy. Almost all models for future energy demand have been linear, whereas non-linear, exponential growth has always been the most probable outcome in the successful adoption of any technology.
Compounding factors for this new, aggressive rate of change in the energy sector include accelerating technological developments, social demands and newly evolving business models – all of which significantly change how energy is generated, traded, transported and used.
The rate of this change in the renewables and clean-tech space has, almost universally, been consistently understated.
The Future Smart Pathway model delivers strong projections about how quickly batteries will be taken up and, as a consequence, the demand that will be placed on the mining industry to deliver the resources required to manufacture them. Our Future Smart Pathway has recently been adopted by an international consortium involved in the development of these downstream value-add opportunities.
Resource demand is obviously great news for Australia because we’re great miners. We’re global experts at making big rocks into small rocks and loading them onto ships – especially iron ore.
As the iron ore we dig up is usually above 65 per cent iron, shipping ‘waste rock’ with the iron isn’t too much of a waste. Compare that to something like bauxite, which we tend to refine or smelt on-shore so that we ship alumina or aluminium, not bauxite. To do otherwise would be wasteful because we would be exporting mostly just rocks.
This is even more important with mines producing ore with a low-concentration, high value resource like lithium. Despite some local concentrating, 97 per cent of the lithium product we actually export is not lithium – but ‘waste products’ that are removed by overseas processing. This loses value from the Australian economy.
A challenge for the upstream end of the industry is to develop downstream capability locally. Because of the new energy value chain underpinned by lithium, improved downstream capability is also expected to drive down the domestic cost of energy.
To take best advantage of our resources, Australia needs to step up our pre-processing and electro-chemical manufacturing – in a way we traditionally have not done, as was described in the ‘Lithium Valley’ report released in July 2018.
Batteries will be so fundamental for the global economy in the 21st century that Australia can’t help but profit from our battery-related resources.
Given batteries are such a big opportunity, it would be nothing but careless not to look to value-add downstream. With the resources we have, it is critical Australia acts to ensure that businesses operating in the value chain in Australia spend more time collaborating rather than competing. And that’s because with rapidly accelerating demand, no current miner in the sector is big enough to capitalise on the value chain opportunity alone.
While our largest resource companies are perhaps big enough to consider a deeper plumbing of the value chain, these companies can be very focused on the core activity of mining, and less likely to go further downstream than necessary to produce a saleable resource as a miner. I believe this would lead to a lost opportunity for Australia.
However, the smaller players are actually trying to do a lot of different things beyond our usual expectation of miners. The great example is with Lithium Australia, who own the VSPC (Very Small Particle Company) factory in Brisbane, a battery cathode power plant. Lithium Australia is actually looking to do new approaches downstream, that ironically a bigger miner might not have chosen to do.
‘Given batteries are such a big opportunity, it would be nothing but careless not to look to value-add downstream.’
And I think that’s typical of the disruptive approach of 21st century businesses: looking at a more diverse, more integrated solution to markets.
Now on one side of the ledger you’d say, ‘make sure that you get your core commercial activities right, so that you’re making money from this stuff.’ But the other side is ‘make sure that you’ve got your eye on where the real opportunity can be.’
And so with what Lithium Australia is doing in Brisbane, through their 100 per cent ownership of VSPC factory, they are looking to swim downstream and add value.
Historically, value-adding is something Australia has done fairly poorly.
The challenge is always to understand the market potential. And this is perhaps in some ways self-evident as we see projections from the usual large consultancies that give some pretty good numbers on what they think growth looks like. But as the market for battery resources emerges, it is clear most projections are significantly underestimating what this real growth opportunity looks like.
As I said in the opening sentence – innovation and technological change is getting faster. Hardly anyone uses a flip phone today – we’re on smartphones already. And the copper network is now less about the purpose of its creation – phone calls – and mostly about using copper for internet service delivery, although even this is approaching end-of-life.
Technologies, when they change, generally change out – a new entrant also forces an exit. And the same applies to energy generation technologies. Coal is still a key energy source for electricity in the world today, with 38.4 per cent of the world’s 24 973 TWh annual generation of electricity coming from coal. But the evidence is clear: global coal consumption has peaked, and we should expect to scale back coal consumption quickly, within the next few decades, because the growth of the replacement is extraordinarily rapid.
And it’s going to get even faster because the arrival of batteries will make it easier to do so.
Resource pricing is obviously critical to the whole of Australia’s resources sector, because we do see price spikes (and valleys) from time to time. Fortunately they don’t usually last long, and our materials remain affordable. But if something is unaffordable through huge pricing, there’s a consequence of lack of availability, and then it’s likely the technologists will respond by finding a different material to do the job.
While Australia is well endowed with all the requisite resources to make a battery, one of the challenges for the industry will be to ensure that our battery materials don’t get prohibitively expensive – otherwise technologists may deploy a different chemistry that eliminates that material too and simply swap them out.
How do we prepare businesses and industry? We need to help businesses understand the true possibilities and potential depth of this market. We should also reflect on the data that’s emerged over the past 12 months to show that this change really is happening – and it’s happening quickly.
Through 2018, we saw big global announcements of new battery plant capacity –more than 400 GWh of new battery factory output to be ready by 2022, more than tripling in four years. We’ve also seen massive investments by car companies globally into batteries for electric cars, with more than $US250 billion of investments to 2023.
And all of that is brilliant news those delivering us the resources, and even better news for those that are ready to invest and value add downstream.
This is all a clear message to those currently involved in the old sources – they should get ready to adapt. But it’s also a critical message about an extraordinary opportunity for those that can deliver the resources.
A version of this article was originally published by the Queensland Exploration Council via the QUREX Gateway publication.