Australia regretting belated transition as IRA sparks global race for renewables


From pv magazine Australia

In August 2022, US President Joe Biden signed the $369 billion Inflation Reduction Act (IRA) into law and changed the face of the global energy transition.

The IRA is the largest climate and energy spending package in US history. The bill not only expands incentives to deploy clean energy toward emissions reduction goals, but includes new production incentives for domestic solar, wind and battery manufacturing.

Much like Australia, political polarisation in the US delayed clear policy to mitigate climate change and drive the transition to renewables. But now the sleeping giant has awoken and sparked an international clean energy arms race that few, if any, will be able to keep up with.

Race for renewables

In a period of global energy crisis and a decade of desperation when it comes to concrete action to mitigate the effects of climate change, the IRA is a cause to rejoice.

But as Australia’s Clean Energy Council Chief Executive Kane Thornton put it: “It is immediately clear the US package dwarfs the level of support Australian governments provide for the clean energy transition.”

“The consequences of inaction have the potential to damage Australian competitiveness across all industries for decades to come,” Thornton added.

European leaders have made a similar realisation. After years bemoaning the lack of climate leadership from the US without making significant moves of its own, the European Union is now bemoaning the US having taken the lead.

On Feb. 1, 2023, EU Commission President Ursula von der Leyen responded to the IRA with the $272 billion Green Deal Industrial Plan. “We only have a small window to invest in clean technology and innovation and to become leaders before the fossil fuel economy is over,” von der Leyen said.

European Commission President Ursula von der Leyen presents the Green Deal Industrial Plan.

The clean energy policy arms race sparked by the IRA means governments around the world can no longer excuse their inaction by pointing to the action of major emitters like the US and China. But now that excuse no longer holds. Indeed, pv magazine has learned of rumors in China that the government is looking to ramp up PV installations from 122 GW in 2022 to around 160 GW in 2023.

Thornton noted that US spending was positive for decarbonisation, but recognised that US incentives mean Australia now faces losing thousands of jobs and significant international investment to its closest ally.

“Australia has a prime opportunity to become a clean energy superpower,” continued Thornton, “but the brightest minds and the biggest wallets are now looking to the US for their best opportunity.”

Thornton is calling for the Australian federal government to respond to the IRA in its May Budget with a coherent masterplan and vast economic investment to prioritise the construction of renewable energy and storage, or risk dropping even further behind.

Ryan Carroll, a regional director at STEM workforce solutions provider Airswift, said the Australian government should “learn from Joe Biden and use the May Budget to promote investment and entrepreneurship. This will signal to the top energy minds that Australia is the place for career progression and innovative projects.”

Make or break

The Covid-19 pandemic and its run-on impacts throughout global supply chains demonstrated the benefits of domestic manufacturing. But now IRA incentives are attracting global manufacturers to the US and the likes of Australia and Europe are learning, as Shakespeare put it, that “delays have dangerous ends.”

Nevertheless, Australia’s long dormant clean energy manufacturing industry is showing small signs of life. The Albanese government’s proposed National Reconstruction Fund aims to boost investment in inshore manufacturing, including the production of solar panels, batteries and hydrogen electrolysers, and is now on the verge of parliament.

The government has earmarked up to $3 billion of the NRF’s initial $15 billion to support renewables and low-emission technologies.

Australian Prime Minister Anthony Albanese promised an end to the “climate wars.”

On Feb. 6, US-based solar tracker provider Array Technologies announced plans to set up manufacturing operations in Australia.

In July 2022, Australia’s sole solar panel manufacturer, Tindo Solar, unveiled its new $11 million production facility in Adelaide. In December 2022, Tindo announced a doubling of sales in both panels and battery storage.

The company said the boost came off the back of rising energy costs and increased consumer awareness of the benefits of buying quality and buying locally.

While there are critics who argue the IRA is a protectionist policy that will trigger a “race to the bottom” in which governments compete with evermore favorable incentives to attract clean energy manufacturers and multinational companies. few could argue the pre-IRA status quo was much better.

In fact, judging by the international reaction the IRA is already proving beneficial in kicking laggardly governments and investors into gear. The US has ignited the race for green power, and now it’s make or break time for trade blocs like the EU and trade partners like Australia.

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: