Mirroring India's PLI, Australia has unveiled a policy aimed at boosting investments in the clean energy sector and reducing reliance on China, which currently holds 60 percent of the world’s manufacturing capacity for solar PV, wind systems, and batteries
The 'Future Made in Australia Act uses public finance to boost the domestic clean energy supply chains, similar to initiatives in the US, Europe, and India. It aims to support local manufacturing and critical industries such as green metals, green hydrogen, and critical minerals through subsidies and incentives.
Between 2021 and 2030, global electricity generation from committed solar and wind projects (excluding China) is expected to more than triple from 125 GW to 459 GW.
Such ambitious decarbonisation targets require stable markets and resilient supply chains. Today’s clean energy supply chains face several security concerns – notably the high dependence on imports from individual countries like China in key stages of clean energy supply chains.
China possesses at least 60 percent of the world’s manufacturing capacity for most mass-produced technologies, such as solar photovoltaic (PV), wind systems, and batteries. This situation makes wind and solar players vulnerable to disruption, with 79 percent of the global capacity for polysilicon being located in China, half of that in the Xinjiang province.
Minerals such as aluminium, glass, copper, silicon, lithium, cobalt, and nickel are critical for technologies that drive clean energy. These include batteries and solar PVs. Extracting and processing these minerals can take up to a decade. Countries relying heavily on imports, particularly from China, need to plan investments strategically. New manufacturers of components face challenges in securing financing, accessing international markets, and expanding operations due to market entry barriers created by a few dominant players.
Increased public funding is vital to de-risk innovations and investments in supply chains that undergird the clean energy sector and attract private capital. Many governments are actively creating policies and incentives to promote domestic clean-energy manufacturing. The Production Linked Incentive (PLI) scheme in India for module manufacturing has an outlay of US$2.4 billion and aims to reduce imports and create domestic green jobs. This level of commitment is what's needed to drive the clean energy sector forward.
Governments face challenges in building supply chain resilience through public finances. Domestic content sourcing encourages domestic capacity and global competitiveness but relies on imports from countries being pursued for resilience. Developing countries cannot match the incentives of developed economies. Offering appropriate incentives in specific supply chain sections is more effective than overly ambitious goals.
Australia's economy relies heavily on international trade. The Future Made in Australia Act promotes cooperation between Australia and India to achieve clean energy goals while maintaining competitive neutrality. Likewise, the Australia-India Economic Cooperation and Trade Agreement allows Indian corporations to invest in Australian critical mineral mines and collaborate with Australian firms on mining technology.
A shared pool of public finance can be created to finance collaborative arrangements between India and Australia, and multilateral development banks can contribute to this bi-sovereign pool of capital. This collective capital pool can offer catalytic support through grants for capacity building, project preparation, and research and development in refining technology and low-carbon mining in both countries.
With these incentives, strategic cross-border investments by private entities in both nations can be facilitated. NIIF can set up a similar fund in partnership with its Australian counterparts to finance low-carbon technologies in India and foster collaboration between Indian and Australian companies.