Why major Australian manufacturers are backing the NEG
Chemistry Australia CEO Samantha Read has added to calls for the states and territories to make investment and growth the priority at Friday’s COAG Energy Council Meeting, and agree to the principles of the National Energy Guarantee (NEG). Chemistry Australia represents Australia’s $40 billion Australian chemistry industry, including major Australian manufacturers.
“Supply, cost and reliability are all crucial factors for major Australian manufacturers competing in global markets, and requiring 24/7 supply certainty. Tying these factors to emissions reduction targets through a technology agnostic mechanism, provides the foundation for a durable and holistic approach to energy policy.
“Unplanned power outages to a manufacturing plant can have disastrous consequences, risking serious damage to valuable equipment and infrastructure. Plants can take days to restart and weeks to return to full capacity, impacting jobs and supply chains reliant on timely delivery.
“We have manufacturing members who put the cost of restarting their plant, after even a short black-out of a second, at over $2 million. When you add the cost of this operational risk to the uncertainty of supply and the tripling of contract prices, we are seeing a pretty hostile business environment.
“The cost and supply reliability of base load power is a major driver for manufacturing investment decisions and the viability of existing facilities. Addressing the complex energy trilemma in a single mechanism has been a crucial shift in thinking that makes sense for major energy users.
Ms Read said that manufacturing members were concerned about the closure of coal-fired plants, with gas the likely replacement for base load electricity generation.
“The closure of major coal-fired capacity is further straining the already perilous gas supply situation. AEMO’s forecast of a 2022 gas shortfall in Victoria without additional capacity, highlights that new gas and energy investment is urgent,” said Ms Read.
“This should sound alarm bells for states and territories that have been restricting the gas market through bans and moratoria. Increasing gas supply is critical to addressing the current energy crisis.
“Gas plays a critical role in the Australian chemistry industry and supply chains. It is used for both process energy and as a non-substitutable ingredient for the manufacturing of products such as fertilisers, polyethylene used in food packaging and piping, and explosives for mining.
“Energy policy needs to address the impact that the diversion of gas for power generation would have on the total system, including manufacturers whose operations rely on gas,” said Ms Read.
Ms Read said that the industry is interested in creative thinking about energy solutions, including energy from waste and the co-location of new energy generation infrastructure with manufacturing to improve energy efficiency.
“There are already some fantastic examples from this industry, including co-generation and closed-loop systems that recoup the energy from steam produced during manufacturing processes,” said Ms Read.
“A technology agnostic approach should provide flexibility to promote the full gamut of innovative solutions. The National Energy Guarantee is still the only new thinking for a longer-term solution to the energy trilemma,” said Ms Read.
Ms Read added that the industry was acutely aware that many everyday Australians were being hit twice by the ongoing policy uncertainty.
“No-one likes to see closures and jobs go, especially when people are already struggling with high energy and gas costs at home. But the fact is that current gas and electricity prices are not sustainable for trade-exposed manufacturers,” said Ms Read.
“They’re not sustainable for the hundreds of thousands of downstream customers who must continue absorbing increased input costs, many of which are small to medium Australian-owned businesses.
“While job losses are very visible, what we aren’t seeing is the significant cost of the lost investment opportunity from years of policy inaction.
“Australia is fortunate to have a wealth of all forms of energy. We should be in a position where they are being utilised for the benefit of Australians to build a strong and globally competitive economy.
“We support a policy that allows the market to invest in the most effective mix of technologies. There’s a lot of detail to come, but let’s have agreement on the high-level model.
“A lack of political consensus has led to this position, it’s time for this to stop. We can’t afford it, it’s preventing investment in the energy sector, and damaging the customer base,” said Ms Read.
Gas is particularly essential to the business of chemistry. It’s important for process energy, and it is also a non-substitutable ingredient for advanced manufacturing. The Australian chemistry industry uses 10% of Australia’s domestic gas for its molecular properties to create a huge range of products essential to our everyday lives. These include fertilisers for our crops, cleaning products for health and hygiene in our homes and hospitals, and smart packaging to keep our food fresher for longer.
Media contacts:
Claire Selby – [email protected] or 0448 028 876
Krista Imberger – [email protected] or 0439 318 290
Chemistry Australia is the pre-eminent national body representing the $40 billion Australian chemistry industry, one of the largest manufacturing sectors in the country. The industry employs more than 60,000 people and contributes more than $11.6 billion to GDP in industry value add. Members of Chemistry Australia are positioned across the entire value chain including manufacturers, importers and distributors, logistics and supply chain partners, raw material suppliers, fabricators, compounders, recyclers, research, academia and service providers to the industry. These businesses range from small family-owned companies to leading national and multinational enterprises.
