Companies that do not fully understand China’s supply chain risks in the net zero push: Energy lawyers

According to energy lawyer Scott Shrink, companies are not yet fully aware of the risks of relying on China’s supply chain.

In the “Foreseeable Future,” Holding Redlich’s partner Schlink said Australia will continue to rely on foreign manufacturers for renewable energy components for solar panels, wind turbines, and batteries.

“Production in South Korea and China is an important part of its imports,” he told The Epoch Times.

“Most of the decisions [with manufacturing] It’s simply the cost per unit of electricity — the person who has the cheapest cost of energy. Therefore, it quickly becomes a pricing and puts a heavy burden on those companies to proactively minimize supply chain costs.

“I would like to see more of Australia’s manufacturing industry, but my irony is that it has been trying to increase local content for 10 or 2 years in the turbine manufacturing sector, not necessarily a lot of success.”

Around it 75 percent The breakdown of wind turbine manufacturing in the world is SIEMENS GAMESA, General Electric, Nordex Group, Goldwind, Envision, Minyang, Windy, Shanghai Electric and CSIC, the latter 6 companies based in China. increase.

High cost-effectiveness to go abroad

For a country like Australia, which has a small population and manufacturing base, the local renewable energy industry is difficult to sustain.

“For example, in order to build a gearbox, some other countries have to promote manufacturing, so there isn’t necessarily a large supply network around it,” Shrink said. ..

It turns out that the manufacture of wind turbine blades is also very costly as it also requires the production of composites of steel, fiberglass, iron and copper.

“There are also geographical issues, so if the manufacturer is in Australia, for example, how feasible is it to be able to economically export to the highly demanded European, Asian and American markets?”

Australia’s solar panel industry faces similar challenges, with about six of Australia’s ten largest solar farms sourced from China. In addition, links to forced labor programs involving Uighur minority groups are available.

In fact, Sheffield Hallam University in the United Kingdom found The Xinjiang Uygur Autonomous Region in western China is the world’s source of 45% of polysilicon, and 95% of solar modules need this material.

Another major concern for the Australian Labor government and green energy advocates is to reconcile increased support for renewable energy projects with the promotion of sovereign production.

In particular, Beijing’s trade war against Australia and global supply chain pressure from the blockade of COVID-19 have revealed how dependent local industries were on foreign countries and businesses.

“It’s no exaggeration to say that there is a problem,” Shrink said. “I think the private sector is having a hard time understanding how important the issue is, and I think they are having a hard time understanding how they manage it. . “

“Even when advising on a transaction, we are having a hard time quantifying it. There are several major manufacturing companies in China that are part of the supply chain.

He said some companies with manufacturing bases in several jurisdictions are beginning to consider diversification.

Under the Albany-led Labor government, Australia plans to raise its emission reduction targets from 26-28% to 43% by 2030.

At the same time, Labor will also attempt to overhaul the energy grid so that by 2030, 82% of Australia’s electricity will come from renewable energy sources (wind, hydro, solar, biomass, etc.). Currently 64.67% (pdf) Electricity comes from coal-fired power generation.

The government has also entered into mineral security partnerships with the United States, Canada, Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom, and the European Commission. Australia aims to supply US manufacturers with important rare earth minerals to fuel the promotion of Net Zero.

“This partnership aims to promote public and private investment in mining, processing and recycling projects that comply with the highest environmental, social and governance (ESG) standards.” according to To Don Farrell, Minister of Trade.

But in reality, Schlink said there is a “long way” for renewables to become Australia’s leading supplier of electricity.

“I think every manufacturer will have a hard time getting enough supply to the market over the next decade,” he said. “We need to increase the supply of non-fossil fuels, but at the same time, the demand for electricity has increased significantly.”

“Over the next few decades, power generation will continue to be a burden.”

According to Australia’s energy market operators, Australia’s electricity demand will double by 2050.

Daniel Y. Ten


Daniel Y. Teng is based in Sydney. He focuses on national politics, including federal politics, COVID-19 response, and relations between Australia and China. Do you have a hint? Contact him at [email protected].