In last week’s article we investigated the feasibility of a manufacturing revival coexisting with real and effective climate action in Australia. To follow this up, we are taking a look at some of the expert analysis of the challenges and opportunities present in establishing low emissions manufacturing.
This is thanks to the newly released Special Report conducted by Manufacturing Australia and L.E.K Consulting; Low Emissions Manufacturing: Australia’s Opportunities.
The paper has been prepared to assist policymakers, industry and interested members of the public to better comprehend the facets of a successful transition to low emissions manufacturing. Drawing upon a deep pool of industry knowledge and exposure, Manufacturing Australia has been able to provide a detailed breakdown of a transition with a focus on four of the most energy intensive manufacturing sectors; steel, ammonia, aluminium, and cement/concrete.
As well as examining the numbers associated with industry transition, the report works to show why maintaining and growing Australia’s manufacturing capabilities through that transition is important to the nation’s longer-term economic sovereignty and security.
In this article, we are sharing some of the key outcomes of the hundred-page report’s analysis.
Contribution of Australian Manufacturing
We talk at length about the importance of onshore manufacturing for Australia’s economy, self-sufficiency and communities and with the Special Report’s breakdown of the numbers, we are able to quantify the contribution of the industry to further support these assertions.
The Australian manufacturing industry contributed around 5.6% of GDP in FY2019/2020, representing over $108 billion of annual gross value added to the Australian economy. This is across an extremely diverse range of manufacturing outputs, from the vital elements of modern infrastructure like chemicals, metals and building materials through to our vast food products sector and into the broad advanced manufacturing field of highly specialised producers.
Despite a smaller GDP contribution in comparison to the mining industry, manufacturing accounts for a higher percentage of employment. Approximately 7% of Australia’s workforce are employed in manufacturing, a touch under 900,000 people whereas mining supports a little over 2%. These roles are defined by highly-skilled, well-paid and full time employees, with mean incomes in the manufacturing sector sitting about 28% higher than the national mean income.
One such activity along the production curve that is adding enormous value to the sector and in-turn, the nation’s economy, is research and development (R&D). With an intelligent and capable flow of talent through our workforce, Australian manufacturing’s investments in automation, innovation and R&D are leading the way. Per FY2018 statistics, manufacturers are spending upwards of $4.5 billion on R&D representing the greatest proportion of GDP contribution on R&D out of any sector.
The importance of R&D investment can be seen through the example of Dulux Group’s adoption of advanced manufacturing technologies in their Merrifield plant. The $165 million investment established global best-in-class paint manufacturing in Victoria by embracing automation and innovative factory design. The integration of industry 4.0 technologies has made the new facility one of the top five Industry 4.0 batch plants in the world, reducing production time by 87.5% and drastically reducing the amount of raw material ‘touches’ required. Efficiency is improved, wastage is all-but eliminated and upwards of 60 highly skilled, safer and valuable jobs are created.
In essence, manufacturing’s contribution to Australia is substantial. It is pivotal to value-adding in the economy, provides a large number of skilled and high paying jobs, encourages major commitment to innovation and R&D investments, boosts our sovereign capability and will underpin efforts to close the loop in the circular economy at the environment’s benefit.
Decarbonising Australian Manufacturing
“There are significant opportunities for Australia in a transition to low emissions manufacturing – if Australia can provide globally competitive energy inputs, a transition to low emissions manufacturing will not only secure today’s 1.3 million direct and indirect manufacturing jobs but potentially create 100,000 new, high-quality manufacturing jobs. This is in line with experience from the US ‘manufacturing renaissance’, which was enabled by competitive energy inputs becoming available from around 2010.”
‘Net-zero by 2050’ is, on the surface, an ambitious goal. Particularly in Australia where much of our livelihood has depended on extractive industries with large environmental footprints. A transition will undoubtedly be challenging, characterised by extensive investment, major policy reform and time-consuming infrastructure facilitation. However, low emissions manufacturing technologies are real and provide viable pathways to net-zero by 2050. The report explores these pathways in great detail across the four previously mentioned sectors, steel, aluminium, ammonia and cement and are summarised below.
- Steel production is highly carbon intensive. For every tonne of steel produced in 2019, 1.83 tonnes of carbon dioxide were emitted with much of this linked to the use of metallurgical coal both as an input into the steelmaking process and as the source of 75% of steelmaking energy demand.
- In Australia currently there are two primary crude steel production plants, accounting for less than 1% of global steel production making us a net importer of steel.
- The Decarbonisation pathway for the steel industry is challenging. It cannot simply be addressed through the switch to general zero-emissions technologies. In the immediate future, there are adoptable processes that can assist with emissions reductions such as efficiency improvements, alternative feedstock options and increased recycling.
- In the longer term, significant investment into methods that are still in the research and development phase will be required, and even with the appropriate expenditure it is unlikely these systems will be deployable at the industrial scale to fulfil steel requirements by 2050.
- Hydrogen-based direct reduced iron-electric arc furnace (DRI-EAF) is the most prospective technology but is not yet proven or available at the commercial scale. The natural gas-powered variety of DRI-EAF is available, but it requires carbon capture use and storage technology to remove emissions – a technology which itself is in its infancy and difficult to install in appropriate proximity to steel manufacturing plants.
- Vast quantities of renewable energy are required to run the DRI-EAF steel making method, undermining cost competitiveness. The energy required to produce 3.1Mt of steel would be 12.1TWh. This is approximately 22% of the total renewable electricity generated in Australia in 2019.
- Therefore, to have any fighting chance of establishing ‘green steel’ production in Australia, we would first need to generate competitively priced hydrogen and extensive, expensive supporting infrastructure. However we do possess some natural competitive advantages that could bolster our decarbonised steel industry such as solar and wind resources and access to high quality iron-ore.
Aluminium and Alumina
- According to the report, alumina/bauxite and aluminium metal were Australia’s 8th and 17th largest exports by value, respectively, and aluminium was Australia’s highest-earning manufacturing export.
- Estimates show that the aluminium industry contributes to 6% of Australia’s emissions with the process of smelting requiring significant electricity input.
- We are the largest bauxite producer in the world, largest exporter of alumina, and the Sixth-largest producer of aluminium. The industry has proved a strong-point in our economy as ‘lightweighting’ has continued to grow across multiple industries in the zero-carbon pursuit globally.
- In comparison to steel, the decarbonisation pathway is relatively clear for the Aluminium industry. With a decarbonised electricity grid, the alumina production process and primary aluminium manufacturing can become zero-emission processes.
- Electricity is a source of over 80% of emissions for aluminium production in Australia and is therefore the largest potential area for reduction on a path to net zero. However, the success of this is largely dependent on firm supplies of renewable energy at a competitive cost so as to not affect production rates and the price of the commodity in the market.
- Decarbonisation will also require development of non-carbon-based anodes. Commercialisation of inert anodes for primary aluminium production is expected to reduce process emissions from 1.6t CO2/tonne of aluminium to less than 0.01t CO2/tonne aluminium.
- Therefore, across all stages of the aluminium production chain, zero-emissions manufacturing can be enabled by competitively priced firm renewable electricity and hydrogen supporting infrastructure.
- The applications of ammonia are broad and critical to a number of essential processes such as agricultural fertilisers, pharmaceuticals, fuel in engines and gas turbines for shipping and power generation, and also as a carrier for storing energy and transporting hydrogen.
- Globally, ammonia production generates over 420 million tonnes of CO2 annually and accounts for 1.8% of CO2 emissions.
- Australia has seven ammonia plants, representing less than 1.5% of global ammonia production. Whilst small, the Australian ammonia supply chain is critical as an employer and contributor to the broader economy across areas such as inorganic chemical, industrial gas and fertiliser manufacturing.
- There exists a relatively comprehensive pathway to decarbonisation for ammonia manufacturing, with three clear options for reduction or elimination of emissions:
- Process optimisation involves integration of renewable energy like solar for site services and efficiency improvement technology for inputs like gas. This can only reduce emissions, not eliminate altogether but they are deployable immediately.
- Carbon Capture Use and Storage (CCUS) can be utilised to extract the very high concentration of CO2 emitted from the processing of gas to make hydrogen. Though CCUS cannot capture the entirety of CO2 emitted from the ammonia production process, making it a lowered emissions investment not a zero-emissions alternative.
- Hydrogen electrolysis (green hydrogen) involves replacing hydrogen produced using steam methane reforming of natural gas with hydrogen produced via electrolysis using renewable energy. The result is the production of carbon-free ammonia (green ammonia).
- As with the previously mentioned steel and aluminium industries, the decarbonisation of ammonia manufacturing will be enabled by competitively priced renewable electricity but will also hinge on the deployment of hydrogen electrolysers and infrastructure for the third party distribution and storage of CO2.
- Global cement demand is expected to continue growing given the growth of urbanisation and industrial infrastructure development but also due to concrete’s role as a vital element for decarbonisation infrastructure.
- Complicating decarbonisation efforts in cement and concrete manufacturing is the fact that over half of the emissions produced result from the production process instead of the energy input requirements. It accounts for around 1% of Australian emissions.
- Multiple solutions are required to decarbonise this industry, including a change in standards, reduction in clinker factor, fuel switching and CCS from process emissions.
- Clinker substitution technologies are available now, and simply involve the utilisation of supplementary cementitious materials given a change in cement and asset standards across the industry.
- Fuel switching will entail alternative fuels and raw materials with a higher share of biogenic wastes in place of fossil fuels such as wood waste or biomass. These currently only satisfy under 20% of the energy requirements for the industry and present significant supply chain logistics challenges.
- Carbon Capture storage for cement kilns is in its infancy, showing prohibitive costs, but has the potential to develop into a deployable resource to eliminate emissions from cement manufacturing.
- Green hydrogen has potential for partial fossil fuel replacement, and when produced through electrolysis using renewable electricity, it is emissions free. Again, the technology is a long way from commercial use, particularly for cement manufacturing.
From the reports in-depth analysis of each of these major manufacturing sectors in Australia, we can see that across the board, globally competitive energy inputs are paramount to achieving net-zero emissions targets whilst retaining the strength of these industries. The process is high-risk with high-reward. Direct electrification using clean electricity, hydrogen as a feedstock, hydrogen for heat and carbon capture, usage and storage are key long-term pathways. But many of these technologies are in their infancy globally, and require significant improvement before they can be deployed at scale.
In releasing this report, Manufacturing Australia, and the industry as a whole, are encouraging governments to accelerate low emissions manufacturing technology co-investment as well as the building of the necessary clean-energy infrastructure. Further, they are highlighting the need to stimulate demand for ‘green manufacturing’ through procurement, accreditation and consistent national standards. Underpinning all of this is the necessity of investment incentives that de-risk capital investments in low emissions technologies for manufacturers to level the playing field for trade-exposed industries in Australia.