Australia’s manufacturing industry could slash its annual energy bill by 23 per cent if it switches to renewable energy, new research has claimed.

The Australia Institute’s Centre for Future Work argues in a report released on Friday that the manufacturing industry could save $1.6 billion a year if it switched its energy supply to 100 per cent renewables.

This cost saving could subsequently help the industry transition from resource extraction to value-added production, which requires more skills and pays higher wages.

For example, Australian firms could focus on manufacturing lithium-ion batteries, rather than exporting raw lithium for other countries to process.

Report author and Centre for Future Work researcher Dan Nahum said renewable energy should power the move, as Australia has a comparative advantage in generating wind and solar.

This is because Australia enjoys “unparalleled access to solar and wind power” and can harness it using “a very small proportion of its landmass”.

Transitioning to renewables-powered manufacturing is win-win-win,” Mr Nahum said.

“It enhances the international competitiveness of Australian manufacturing, it creates more good manufacturing jobs in the Australian economy, and it is a win for the world trying to reduce emissions.”

The report says the annual cost saving from switching entirely to renewables will increase over time, as the cost of renewable power generation is steadily falling.

By 2050, it says manufacturers will cut their energy bills by a third, or $2.2 billion a year, if they all make the switch to 100 per cent renewables.

Government must step up

Although many manufacturers are already taking advantage of the opportunities offered by renewables, the government should speed up the process by developing “more consistent and supportive policy measures,” the report says.

“There is abundant evidence of the success of active policy approaches to promote the linkages between renewable energy and manufacturing in other countries,” Mr Nahum writes in the report.

“Indeed, across the OECD, most other industrial countries are outperforming Australia on both reducing emissions and supporting domestic manufacturing.”

He adds: “There is no positive statistical relationship between manufacturing in OECD countries (as a proportion of GDP or exports) and carbon emissions. In fact, there is a weak negative correlation between manufacturing success and carbon pollution: in general, countries which emit less tend to manufacture more.”

The report comes at a time of heightened interest in Australia’s manufacturing industry, after the coronavirus exposed the fragility of international supply chains.

• Read more: Why the coronavirus must spark a revival in Australian manufacturing

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Renewed focus

Finance Minister Mathias Cormann last month said in parliament that a lack of self-sufficiency in manufacturing personal protective equipment had temporarily exposed the country’s vulnerabilities.

Prime Minister Scott Morrison has said the government is working to improve the nation’s “economic sovereignty” by exploring ways to bolster its manufacturing capabilities. 

And Former Treasurer Wayne Swann said in a webinar organised by the Australia Institute that the pandemic demonstrated Australia’s manufacturing base had been whittled down over the years.

Mr Swann said could rebuild it whilst simultaneously tackling climate change.

“I think it certainly demonstrated that in this country, our industrial base has been hollowed out,” Mr Swan said.

“The closure of the car industry, for example, has left us stranded without key skills, which we now find in a pandemic we need.

“There’s going to be a new debate about re-industrialisation in Australia in the years ahead. And in particular, how we do it powered by renewable energy.”