As the US rejoins the UN’s Paris Climate Agreement, what does the renewables race mean for the Australian manufacturing sector? Greg O’Loan argues that energy and technology are intrinsically linked and smart investments in both is the only way for manufacturers to gain a competitive edge.
Fortescue Metals Group’s Chairman and founder, Dr Andrew ‘Twiggy ’ Forrest, surprised a few with his first Boyer Lecture of 2021, highlighting the mining giant’s commitment to renewables, green hydrogen, and ultimately to the production of green steel .
Acknowledging his group’s significant greenhouse gas contribution – two million tonnes a year, more than the entire emissions of Bhutan – Twiggy said the answer is not in stopping mining iron ore, which is critical to the production of steel and to humanity, but instead ensuring that iron ore and steel activity use zero-emissions energy. Twiggy believes green hydrogen – the purest source of energy in the world – could replace up to three-quarters of global emissions, if we improve the technology and add scale. He argues that the green hydrogen market could generate revenues – at the very least – of US$12 trillion by 2050.
So, as the US rejoins the UN’s Paris Climate Agreement and Australia’s Federal Government prepares to commit to net zero emissions by 2050, what does the renewables race mean for the Australian manufacturing sector, particularly for energy-hungry sectors such as steel manufacturing? And while we are admittedly still a few years away from net zero emissions, what can manufacturers do today to take ownership of their energy consumption and help reduce the impact of fluctuating energy pricing on their business?
Australia can’t manufacture everything it wants, but it is capable of manufacturing everything it needs. Pre-COVID-19, our country depended on imports to a high degree, which created risk as supply chains were threatened. COVID-19 only highlighted the complexity and fragility of supply chains.
And while Australia has certainly benefited from being an island nation during COVID-19, it has come with added challenges. What 2020 clearly showed was that it is key for the Australian Government to continue to move away from short-term solutions and refuel the Australian economy by investing locally.
This could be particularly beneficial when it comes to energy production, for example. Australia has reaped significant benefits from the ready availability of fossil fuel. It has given energy-intensive industries a competitive advantage. In fact, so much of the success of Australia’s energy-hungry manufacturing sector has been tied to energy pricing.
However Australia’s reliance on fossil fuel-based energy is also an economic vulnerability. Beyond the environmental damages, the consequences for Australian goods manufacturing that have a high carbon footprint could be severe as the world moves towards action for greenhouse gas reduction.
The global push towards renewable energy via the Paris Accord has created a global need – and therefore opportunity – for reductions in emissions and renewable energy developments. Government investment in cheaper, reliable and robust renewable energy alternatives could reduce this reliance and reinvigorate Australian manufacturing.
Moreover, beyond green hydrogen, Australia’s largely uninhabited interior offers significant space to build solar and wind farms, particularly in the mid-west of the country. By shifting to cost-effective renewables and gaining more control over the production of the energy required to power local manufacturing, Australia can reduce its reliance on overseas providers and fossil fuels, and control its own destiny.
However, Government policy and investment in greener energy is just one part of the puzzle.
Manufacturers focus on energy efficiency for a lot of reasons: sustainability, tax incentives, and of course the cost of running the plant and making products. And while manufacturers can’t control fluctuating energy pricing, there are ways to implement technology smarts to help them reduce their energy consumption.
Smart software can access real-time data to analyse, report and track energy usage, analyse load patterns, production requirements, and resource demands, schedule workloads and improve productivity and reduce pollutant emissions. For example, beacons on air conditioning units and the data that they capture can allow a manufacturing plant’s work area to stay at an optimum temperature while saving energy.
Thankfully, last year only accelerated the rollout of smart technology. The significant disruption caused by COVID-19 has increased the relevance of Industry 4.0 – the ongoing automation of traditional manufacturing and industrial practices, using modern smart technology such the Internet of Things (IoT), machine learning and artificial intelligence. Investment in technology is now finally seen as a higher priority at board level.
Manufacturing companies are now looking to implement contingency plans to prevent similar disruption in the future, looking at what capabilities are required to continue operations, both in terms of employees, and in terms of plant and equipment.
And this huge uptake of digital transformation, through intelligent, connected, and industry-focused solutions based on deep industry knowledge, only makes energy tracking faster, more seamless and more accurate.
For manufacturers, this is a huge opportunity. These solutions are also naturally scalable and purpose-fit, and accessible for employees, regardless of where they’re working. In my view, energy and technology are intrinsically linked for manufacturers, and smart investments in both of these areas is the only way for them to gain a competitive edge.
As Fortescue’s leadership team makes its intentions clear about becoming one of the world’s largest green energy and product businesses, I have no doubt many others will soon follow, and at Epicor we look forward to accompanying these changemakers on their ambitious journey.
Greg O’Loan is Regional Vice-President for ANZ at Epicor Software Corporation.