Australia has an abundance of natural resources, a thriving mining industry and well-developed port infrastructure. If it wasn’t for the high price of electricity and labor, the country could become a global manufacturing leader. However, renewable energy and smart technologies could provide the missing link for Australia to materialise its industrial potential.
Manufacturing operations require four key inputs: raw materials, capital investments, skilled labor and energy. Australia produces metals such as iron, aluminum, zinc and copper, and its iron ore mines are among the largest in the world. Capital is accessible and comes with low interest rates, while Australian banks are internationally recognised for their safety. In addition, the country has a well developed road, port and railroad infrastructure to simplify logistics. The stage is set for Australia to become a global manufacturing hub, after two obstacles are overcome: high electricity rates and labor costs.
In terms of installed solar power capacity, Australia occupies the 9th place globally, but there is still a long way to go. Fossil fuels continue to dominate the energy landscape, while renewable resources only account for 17% of generation as of 2017, and solar power accounts for less than 4%.
Solar power continues to decrease in cost, constantly breaking its own records in terms of installed cost per kilowatt and generation cost per kilowatt-hour. Throughout the world, solar farms are being built for less than 1 USD per watt and energy contracts are being signed for less than 30 USD per megawatt-hour. It does not look like solar innovation will slow down anytime soon, and Australia is in an enviable position to take advantage of it – the solar irradiation received by the country is 10,000 times larger than its total energy consumption! This sunshine can potentially be used for manufacturers’ energy usage.
Although conventional photovoltaic systems have the limitation of being a non-dispatchable energy source, there are many ways to compensate for this without relying on fossil fuels:
Just like renewable generation is a trend in the energy industry, automation and artificial intelligence are shaping global manufacturing. Basically, automation and AI convert labor costs from wages to a combination of capital investments and energy expenses. With this combination, any country with low interest rates and abundant energy can compete in global manufacturing, even if wages are high. In fact, automation-intensive manufacturing boosts the job market for engineering and business professionals.