The global energy crisis has opened the door for WA to do more than supply largely unprocessed raw materials.
IT probably came as a shock to most people in Western Australia to be told earlier this month that they’re living in an ‘energy paradise’.
Few would immediately concur with the findings of the latest report from energy advisory firm EnergyQuest, mainly because the cost of gas and electricity has not suddenly fallen, and some households are struggling to pay their bills.
When compared with the rest of the world, however, WA is more an energy champion thanks to abundant gas reserves, increasing production of wind- and solar-powered electricity, and no pipe or transmission lines to the energy-short eastern states.
Not being connected to the national gas and electricity distribution systems is perhaps the biggest single advantage of WA’s isolation; and it’s an advantage that could significantly change the nature of the state economy.
Rather than WA being seen as simply a supplier of largely unprocessed raw materials, a global energy crisis has opened a window of opportunity for greater value-added processing in the state, perhaps leading to the manufacture of finished goods (with battery production the biggest prize).
Until this year, and largely because of Russia’s war in Ukraine, battery production in WA was very much in the ‘you-must-be[1]dreaming’ category.
But the dream could become reality if the energy crisis continues, which seems likely, and if the fossil fuel industry is further suppressed, which is possible.
Two recent examples highlight the difference between the WA view of the energy landscape, complete with the cheapest gas in the Western world, and the way energy is seen in Europe, the centre of the crisis.
The energy-intensive business of metal smelting is dying in Europe, with three big zinc smelters mothballed during the past 12 months despite a high price for the metal, strong demand in traditional markets and growing demand in renewable energy systems.
Aluminium, another metal with a significant use in energy transition, is also fading out in Europe, with Norway-based Norsk Hydro preparing to close a smelter in Slovakia because of high electricity costs.
Other metals used in renewable energy such as nickel, cobalt and manganese, are facing the same problem: insufficient power to produce the metal needed at a reasonable cost if there is to be an energy transition.
While Europe is forced to phase out metal smelting, WA is working towards becoming a metal production and processing centre, with lithium the obvious leader but iron ore upgrading back on the agenda 20 years after BHP tried to produce hot briquetted iron (HBI) at Port Hedland.
The latest HBI plan (‘Posco hydrogen plans moulding into shape’, Business News, September 2) has been proposed by South Korea’s biggest steel maker, working with Gina Rinehart’s company, Hancock Prospecting.
For the state government, what’s happening in energy is what might be called a marketing free kick if it wants to attract business investment, especially for industries being driven out of regions with high energy costs.
The challenge for government will be to demonstrate that the current energy-cost advantage is not a short-term phenomena and power costs can be kept lower for longer.
Past attempts to entice industries that add value to WA’s raw material exports have failed because of uncertainty about the sustainability of reliable, low-cost supplies of gas or electricity, which means investors have been wary of moving here.
A first step in attracting more manufacturers is an assurance the gas will keep flowing.
That means clearing the way for new sources of supply, especially the long-delayed Browse gas field, which will be needed after the Scarborough gas field is depleted.
Right now, thanks to botched planning in the eastern states and Europe, there is a perfect opportunity for the WA government to promote the state’s energy credentials and attract industries heading for the exit in high-cost regions.
Super shift
IT might be time to lock up your superannuation because Jim Chalmers thinks he has a better use for your savings.
The federal treasurer is eyeing off super funds as a source of cash for major infrastructure projects.
On one hand, it makes perfect sense to invest the savings of Australian workers in Australian railways, highways, ports and bridges.
But fund trustees will need to look closely at what’s being proposed because their primary duty is to invest for the benefit of members and not everybody else in the community.
That’s what governments are supposed to do.
