Senator David Van's additional comments

1.1While supporting a Future Made in Australia (FMIA) in concept, Senator David Van maintains that the FMIA in its present state requires significant refinement to elicit his support.

1.2To that end, he makes the following seven recommendations:

1.3Refinement of sector assessments for greater transparency, effectiveness and rigor

1.4Sector assessments must remain independent and provide clear, impartial advice to identify competitive sectors that will deliver against the National Interest Framework.

1.5Assessments must not predetermine “winners” nor prop up sectors that have no long-term viability without ongoing subsidies.

1.6Given historic failures in supporting sectors such as automobile manufacturing, proper regard must also be given to areas where Australia has a clear comparative advantage.

1.7Finally, sector assessments must be mandatory and apply equally to all areas that may require funding, as opposed to merely being required at the discretion of the Minister.

1.8Sector assessments must be tabled in Parliament within 30 days of being received by a Minister. They should also be accountable to the public via Senate Estimates.

1.9Clear identification of the opportunities and limits associated with transnational cooperation

1.10Given the dominance of the Chinese PV industry, Australia’s only chance to set up a competitive solar and battery industry is by partnering with Chinese companies.

1.11Concurrently, these opportunities must remain in areas where Australia has a clear comparative advantage in such as poly-silicon production or wafer processing as opposed to only module assembly, which is often the vision presented for solar manufacturing.

1.12Despite this, clear limits must be recognised in cooperating with overseas firms. Our national interest and security must be paramount with clear guidelines on foreign investment controls.

1.13Maintaining good relationships with other countries in the region is essential, as it will enable us to diversify our export market and further assist us in acquiring relevant manufacturing equipment at a competitive price.

1.14The Government must recognise the importance of retaining our lead on PV technology, by ensuring that relevant IP is protected and only exchanged based on terms supported in the NIF. Existing research developed by agencies such as ARENA is essential to developing the next generation of technologies and creating a competitive industry based on this research.

1.15Acknowledgment of the role of REIPs and batteries in efficiently decarbonising Australia relative to transmission.

1.16In areas such as the “rhombus of regret”, excess energy is being curtailed, resulting in significant waste of unexploited clean energy while creating sub-optimal economics for clean energy investors.

1.17Co-location of energy-intensive industries alongside renewable energy infrastructure in the form of Renewable Energy Industrial Precincts (REIPs), should be undertaken immediately to reverse curtailment of excess energy being produced in various Renewable Energy Zones (REZs), while limiting dependence on transmission lines.

1.18The Government should therefore incentivise the setting up of REIPs under FMIA, by mandating that companies co-locate with renewable energy generation.

1.19According to the Australian Conservation Foundation (ACF), effective co-location of renewable infrastructure can be achieved by integrating top-down and bottom-up approaches for the planning and development of REIPs nationwide.

1.20Top-down or whole of system modelling focuses on the optimal development of Australia’s electrical system at a national scale, but lacks a regional focus. Bottom-up modelling in contrast focuses on a specific region and is therefore more effective for utilising stakeholder input, but falls short on a larger scale.

1.21Optimally, the two modelling approaches would be combined to inform each other in a feedback loop, which would enable key players such as AEMO to develop future integrated systems plans which better reflect the energy needs of REIPs.

1.22Transmission meanwhile is a costly and outdated technology that must be relegated in favour of energy storage systems. Rather than attempting to solve Variable Renewable Energy (VRE) hosting capacity limits through the expenditure of billions of dollars in transmission assets, VRE generators should be incentivised to co-locate storage solutions to achieve a time phase shift from the uneconomic glut to deficit times of day.

1.23Australian battery manufacturing not only holds numerous export and security advantages considering growing international demand, but will enable us to secure our own supply, form more REIPs and decarbonise faster.

1.24Transmission infrastructure should only expand where other more economic solutions cannot be found. Given that existing transmission and distribution assets are currently underutilised according to the AER, care must be taken to utilise existing transmission efficiently. According to the ACF to that end, the Government must consider a form of planning mechanism which will ensure that green metals projects are co-located within REIPs that are integrated with REZs to limit transmission loss.

1.25Tailored support for the production of green metals such as aluminium

1.26Considering that green metals production are, rightly, a priority area under the National Interest Framework (NIF), the sector should receive greater Government support, especially in light of the numerous challenges faced by producers.

1.27The Australian Aluminium Council (AAC) for instance notes the high cost of transitioning to green smelters, which currently exceeds its historic profits. The Government must incentivise production by implementing a production credit similar to those offered under the Inflation Reduction Act.

1.28Greater large-scale funding will be required to deal with additional challenges cited by the AAC, such as the high cost of capital needed to operate alumina refineries as well as developing the clean technology needed to turn bauxite into green alumina.

1.29Additional funds should build off the Powering the Regions model, but should be adjusted substantially to account for the required scale.

1.30The states should contribute reasonably to these new, green export opportunities.

1.31Greater and more refined support for the production of Low Carbon Liquid Fuels for Australian use.

1.32While FMIA recognises the importance of LCLFs and to that end has allocated $1.7 billion to supporting the sector, green fuel production requires more extensive support.

1.33As per Bioenergy Australia, this $1.7 billion sum will most likely attract projects to Australia, but this does not automatically mean that the fuel they produce will be retained within the country. Instead, it is more likely that this fuel will be sold to jurisdictions where it can achieve the highest price point.

1.34To keep fuel within the country thus assisting with our decarbonisation, Bioenergy Australia has stated that firms must be assured that there is a minimum level of demand. This in turn requires a government procurement policy to guarantee offtake agreements. For example, offtake agreements for the Australian Defence Force (ADF) which consumes approximately 500 million litres per year, would be sensible.

1.35In recent years, companies have been seeking to accelerate the development of Sustainable Aviation Fuels (SAF) in Australia. Qantas for instance, has previously co-invested $200 million in line with their commitment to reaching a 10% SAF to overall fuel mix by 2030.

1.36Acknowledgment of the dual potential for LCLFs to be used domestically and as an international export.

1.37To balance the need to retain some low-carbon fuel for domestic use while having excess capacity to export, the Government should focus on the production of biofuels.

1.38Due to the substantial reserves of biomass in Australia’s possession, there is effectively no ceiling for the amount of biofuels that we can produce using sugarcane, algae and tallow to name a few potential feedstocks.

1.39Australia has a history of substantial innovation in the feedstock field. Biofuels according to Energy Australia can play a significant role in the ongoing effort to decarbonise by replacing conventional jet fuel, which Qantas has estimated can reduce direct aviation emissions by up to 90%.

1.40FMIA must acknowledge and support the growing LCLF industry considering its potential environmental and economic benefits.

1.41Refinement of the NIF to better reinforce current defence priorities.

1.42Apart from a brief mention on page 2 of the NIF, defence is largely absent despite geopolitical concerns such as the disruption of our sea lines of communication by a hostile neighbouring power. This is clearly in the national interest to counter.

1.43The NIF should be informed by the current set of Defence strategic papers including the 2024 National Defence Strategy (NDS), the 2023 Defence Strategic Review (DSR) and the 2024 Defence Industry Development Strategy (DIDS).

1.44The NIF’s economic resilience and security stream must therefore be redefined to reference the importance of supporting our sovereign defence manufacturing capability, by identifying opportunities to manufacture locally, to reduce our dependence on foreign military sales as set out by the NDS.

1.45The need for a sovereign defence industrial base was previously pushed by the DSR, which recommended “the establishment of a domestic manufacturing capability”.

1.46The stream must further make explicit note of Export Finance Australia (EFA)’s role in assisting defence exports with the aim of growing a sovereign defence industrial base, particularly with reference to the domestic manufacture of guided weapons, explosive ordnance and munitions as outlined by the DIDS.

1.47The NDS has since echoed the DSR and noted the need to “maintain a domestic footprint for local manufacturing" by cooperating with international partners where appropriate to help bolster the resilience of the Australian defence industry.

1.48Despite it being in our national interest to build a sovereign defence industrial base, the DIDS has only allocated an unenviable $130 million towards realising this goal. In stark contrast, FMIA as a whole has received an allocation of $22.7 billion.

1.49Expansions to EFA’s national interest account meanwhile are necessary but must also have a transparent and consistent process for subsequent expansions, to account for changing priorities as noted in our ADF strategic papers.

Senator David Van

Member

Independent Senator for Victoria