Treasurer Jim Chalmers is backing the government's $1.4 billion plan to prop up local manufacturing of solar panels and batteries, despite Treasury advice to import them cheaply through friendly trading partners.
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Prime Minister Anthony Albanese announced in March that the government would transform the former Liddell coal-fired power station into a solar manufacturing hub, as he signalled the government would follow the lead of the United States with an interventionist green industry policy.
But Treasury advice on the government's $22.7 billion Future Made in Australia program, a centrepiece of Tuesday night's federal budget, declined to back solar or battery manufacture.
Asked about the advice on Wednesday, Dr Chalmers said the Treasury had supported the overall program.
"What you see in the package we announced ... is recognition, in the magnitude of our investment, that some of these opportunities are further developed than others," he told reporters.
Climate Change and Energy Minister Chris Bowen said there was no reason why Australia should not join the growing list of countries to make solar panels at home.
"Australians have invented the most efficient solar panel in the world, why wouldn't we want to make them in Australia?" he told The Canberra Times on Wednesday.
"The modern solar panel was invented in Australia ... We can make solar panels in Australia. We want more countries making solar panels. It's great if Indonesia, Vietnam, India, other countries make more solar panels, diversify [the] supply chain, but so should Australia."
Asked if Australian-made solar panels would be affordable to the consumer, he said: "With government support, the right policy, yes."
![Climate Change and Energy Minister Chris Bowen said there was no reason why Australia should not join the growing list of countries to make solar panels at home. Picture by Keegan Carroll Climate Change and Energy Minister Chris Bowen said there was no reason why Australia should not join the growing list of countries to make solar panels at home. Picture by Keegan Carroll](/images/transform/v1/crop/frm/234480217/046d1109-a968-49e0-a86c-29a01837f107.jpg/r0_256_5000_3078_w1200_h678_fmax.jpg)
Although Australian researchers invented the solar photovoltaic technology which enables solar panels to convert sunlight directly into electricity, China produces about 90 per cent of the world's solar panels and just 1 per cent are manufactured locally.
The Treasury advice said that, while the high concentration of supply chains in China left Australia exposed to "trade disruptions, competition for scarce supply, and unexpected events such as natural disasters", solar panels and batteries could be imported from other trading partners.
"Europe, Canada, France and India are implementing incentives likely to drive domestic manufacturing in areas such as solar PV and batteries," the advice said.
This would boost competition and allow Australian consumers to import batteries and solar panels "subsidised by international taxpayers".
"Accessing cheap clean energy technologies that are manufactured offshore supports Australia's ambition to become a renewable energy superpower," the advice said.
"Strong trade partnerships, such as those in place with jurisdictions such as the United States and India, can be used to diversify Australia's supply and reduce supply chain risks [and] ensure Australia continues to benefit from lowcost technologies manufactured in countries with highly competitive manufacturing cost bases."
Access to cheaper batteries and solar panels sourced from overseas "reduces the cost of renewable energy production in Australia, strengthening Australia's potential to become a renewable energy superpower."
Along with its centrepiece tax incentives worth $13.7 billion for green hydrogen and critical minerals, Tuesday night's budget includes more than $837 million for solar and $549 million for batteries - although the funding for these will be held in the contingency reserve "pending consultation and design".
There's $835.6 million to establish the Solar Sunshot program "to promote the development of solar manufacturing capabilities", to be administered by the Australian Renewable Energy Agency.
The solar program will also aim to "improve the industry's supply chain resilience through production incentives and other support", the budget papers say.
The budget includes $549 million to support battery manufacturing in Australia over the next eight years.
There's also $2 million over the next two years for a feasibility study into developing a green polysilicon [a material used to make solar panels] industry in Australia.
The Treasury advice assessed the Future Made in Australia program under two streams, examining whether industries:
- Will make a significant contribution to the net zero transition and are expected to have an enduring comparative advantage, and public investment is needed to make a significant contribution to emissions reduction at an efficient cost; or
- Where some level of domestic capability is necessary or efficient to deliver adequate economic resilience and security, and the private sector would not invest in this capability in the absence of public investment.