To hear veteran economist Ross Garnaut tell it, Australia can not only become a green energy superpower, it basically is one — but for the passage of time.
The story goes roughly like this: home to a big, sunny, windy country, Australia has a comparative advantage in raw energy that can be easily harnessed into domestic, green industrial production.
“If we don’t muck up the opportunity, we will be by far the world’s largest exporter of iron metal and steel, as well as a global leader in aluminium metal,” Garnaut says.
It’s an optimistic vision. But how realistic is it?
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Notice that — at least in version 1.0 of his vision — Australia’s superpower status will not involve exporting green energy, instead using it to manufacture green steel and aluminium. The argument goes like this: it’s more efficient to ship Queensland (metallurgical) coal to Japan or China to make steel than it is to South Australia. But hydrogen has to be liquefied to be transported, and that’s both expensive and involves a lot of energy loss.
This means hydrogen is well suited to highly decentralised production. Moreover, Australia isn’t exactly the only country with hydrogen plans. For instance, earlier this year Breakthrough Energy Ventures — a coalition of green energy investors founded by Bill Gates and including Jeff Bezos, Richard Branson, Michael Bloomberg, and Jack Ma — invested in Israeli company H2Pro which aims to produce green hydrogen at US$1 a kilogram.
Gates and co probably aren’t investing in H2Pro because Israel has a mortal lock on water or sunshine. They’re presumably investing because of the technology the company has and will continue to develop. It’s the innovation, not the natural resources, that are the scarce input. And to that end, I don’t see lots of Israeli economists running around declaring Israel to be the next “green energy superpower”. If Australia’s hydrogen isn’t produced from renewable energy sources (i.e. if it is “blue”, not “green”) our export markets for it or resulting products will be limited at best.
By contrast, Sun Cable’s Australia-Asia Power Link leverages the fact that Australia has a lot of sunshine and cheap land. Or, as it puts it, aims to “harness and store solar energy from one of the most reliably sunny places on the planet in the Northern Territory of Australia, for 24/7 transmission to Darwin and Singapore via a high voltage direct current (HVDC) transmission system”.
A key aspect is the ability to run a cable from Darwin to Indonesia and then Singapore with little energy loss in a reliable and cost-effective manner. Ten years ago that looked like science fiction. Today it looks like reality.
Here, Australia really does have a comparative advantage that’s hard to replicate. Which other country has abundant, reliable and cheap sunshine right on the doorstep of Asia? Without the technology that’s not worth much, but it looks increasingly like we will have both.
There’s one additional ingredient to getting these green energy projects off the ground: the ability to assemble large amounts of financial capital. As I’ve pointed out before, a large block of capital can play a vital role in assembling the required capital for a big project.
But it need not just be a large block of capital. It can also be a highly connected person. Most projects in most walks of life require bringing together different constituents to make it successful. In the case of green energy that includes politicians, business leaders and environmentalists — at a minimum.
Coordinating these sometimes disparate interests requires more than just money. It requires what Robert Akerlof and I call a “mover and shaker”. This raises a number of questions. Who is central in the relevant network of actors? What attributes does such a person need to act as a focal point? Might it be that we end up coordinating on the wrong person and hence the wrong technology?
I will explore all these issues in a companion piece. But let’s not forget that the world of the 1980s coordinated on VHS not Betamax, despite the latter being a superior technology. It turns out that this logic extends past 1980s technology and other boomerish examples. Stayed tuned.
All this suggests the need for a more clear-eyed view of what it takes for success in the green energy ecosystem.
It will take a lot more than cheerleading to achieve such a fundamental economic transformation. Let’s not forget that there were plenty of hobbyists and enthusiasts in Silicon Valley in the 1970s. But it wasn’t random enthusiasts at the Homebrew Computer Club, but Steve Jobs who changed the world. And Jobs was not an enthusiast. He was a revolutionary.
Who will be our Steve Jobs?