When Oceania Glass recently closed its doors for the last time, its chief executive said: “There was no media coverage, no public acknowledgment – most Australians remain unaware that an entire industry has disappeared from their own backyard.”
After 50 years we’ve lost another critical manufacturing capability: architectural float glass. This should come as no surprise, as ABS data reveals that the manufacturing share of GDP has fallen to a record low of 5.1 per cent, down from 15 per cent in the mid-1970s. The pace of deindustrialisation has left us increasingly reliant on imports for essentials such as fuel, fertilisers and industrial materials.
Our energy and industry policies don’t align with national security imperatives. In a climate of geopolitical instability we’ve embarked on an energy transition that’s almost totally dependent on imported renewables infrastructure. As instability increases, our dependence on global supply chains exposes the country to significant risks. Unless we can ensure our energy security, the hollowing out of manufacturing industry will continue.
We’ve seen the closure of Incitec Pivot, a major fertiliser producer, and Qenos, a major plastics producer. Whyalla steelworks is in administration and Tomago Aluminium is facing an uncertain future. Major employers, such as BlueScope and Orica, continue to raise concerns about the impact high energy costs are having on their operations.
BlueScope’s Mark Vassella points out that US energy prices are about a third less for gas and half that of electricity. The “drill, baby, drill” policies will widen these differentials as our energy costs keep rising. Orica’s Sanjeev Gandhi recently expressed widely held concern about the impact of extremely high gas prices on manufacturing. He said Orica would seek more overseas investments, “if we don’t get our act together in terms of competitive gas prices”.
The high cost of electricity, as well as the pressures of international competition and price volatility, are weighing heavily on the aluminium industry. The Tomago smelter has been unable to strike an acceptable agreement for its next electricity contract, which leaves its future uncertain. It’s a worrying time, not just for the thousand workers directly employed, but for thousands in the Hunter community whose jobs are linked to the smelter’s viability.
Tomago is an industrial and strategic asset. It’s the country’s largest energy consumer, taking a constant 10 per cent of NSW’s electricity supply because its operations depend on a reliable supply of power 24/7. As well, it’s the largest “interruptible” load when the grid needs to be stabilised. This has become a more challenging exercise with the greater penetration of renewables. The competitiveness of Tomago is driven by the contracted price of delivered electricity.
The impasse over its contract is now being considered by the government. Whatever the outcomes, they will have a bearing on other energy-intensive industries. While Future Made in Australia is a laudable project, it will be on shifting sands if the hollowing-out of manufacturing is not addressed. It’s as if these concerns have not registered with Energy Minister Chris Bowen. He’s overseeing an energy transition that’s driven by Labor’s policies and targets. It’s enshrined in legislation, even though the modelling on which the targets are based was jettisoned before the election.
It’s why no one can guarantee that electricity prices will fall. Energy security doesn’t figure in the minister’s considerations as he sells his plans for an energy system based on intermittent, weather-dependent renewables.
Time is fast running out because the certainty that’s been provided by coal-fired power is coming to an end. It’s still not clear how this lost capacity will be replaced, as Labor remains conflicted about gas and is intent on retaining a decades-old ban on nuclear energy.
It’s reasonable to question why we are exporting energy security to other countries at our expense. Australia contributes just 1.1 per cent of global emissions, yet we export about six times more coal than we burn at home and four times more gas than used domestically. According to recent ACCC advice, industrial demand for gas will remain constant. Industrial users have no technical or commercially available alternatives, so shifting away from gas will depend on technological advancements.
Demonising fossil fuels and wishful thinking won’t overcome these realities. Mandating a gas reservation scheme would reduce the price of electricity and ease forecast supply shortages. Lifting the nuclear ban would enable an objective assessment of next-generation technologies and test market responses. Already many countries are looking to small modular nuclear reactors to supply the energy needs of future growth industries, such as data centres.
The message from industry leaders is clear: the focus of Labor’s renewable energy transition needs to move away from the pursuit of unachievable targets to ensuring manufacturing can rely on affordable, reliable baseload power into the future. This would give meaning to the principle that energy security is national security.
Jennie George is a former ACTU president and ex-Labor MP for Throsby.
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