CEDA Head of Research Andrew Barker's address to the 2024 Regional Development South Australia Summit

I'm going to talk about two pieces of work that we've been doing at the Committee for Economic Development of Australia, or CEDA, that are relevant to the topics of discussion today for regional SA, and indeed right here in the Upper Spencer Gulf.

Firstly, the labour-market impacts of the energy transition and secondly, around opportunities in clean-energy precincts, which overlap with a lot of the discussion earlier today.

If you're not familiar with CEDA, we're an independent member-based think tank that undertakes research and holds events to contribute to sustainable long-term prosperity for all Australians.

We really value our partnership with Regional Development Australia.

It's really important to get regional perspectives, and particularly on this topic, local expertise and engagement are going to be essential.

Jobs and the net-zero transition

In terms of the net-zero workforce challenge, we need to have a jobs transition as well as an energy transition.

There are going to be job losses in higher emissions industries, but also opportunities in clean energy.

There's an important role for government and for local expertise like we have in the room here today, to smooth the transition, to update training, to field new roles and to support the most adversely affected regions and workers.

Of course, here in South Australia there's already been quite a significant transition towards renewable energy, particularly in the electricity sector, with already three-quarters of generation coming from renewables.

Compared to other states, where there's more coal-fired power generation remaining, here in South Australia there are more opportunities and fewer challenges, relatively speaking, going forward.

We started this work by looking at the scale of job changes from the energy transition and the horizontal axis in this chart is job losses in high emissions roles such as coal-fired power generation and the vertical axis is new jobs in clean-energy generation, storage and transport.

The main point here is that the new jobs exceed the job losses, but there's also lots of variation across studies.

The net-zero Australia report, that’s just a couple of the scenarios that Richard [Bolt, an earlier keynote speaker, Principal at Nous Group, Chair Hydro Tasmania and Member of the Climate Change Authority] was talking about earlier, includes a substantial component of clean-energy exports as well, powered by renewables.

We also looked at economy-wide models and the difference here is that these explicitly include labour constraints, where the new workers need to come from somewhere else in the economy, and it also includes other sectors like critical minerals, for example.

These studies are a bit older, we haven't had enough work done in this area.

What we found was that while these models show slightly more job losses than gains, job growth is certainly not disrupted over the period and there are still lots of opportunities alongside the challenges.

Since we did this work, Jobs and Skills Australia released its clean-energy capacity study, showing that while fossil fuel jobs will contract, there will be tens or hundreds of thousands of new jobs in clean energy.

Growth in these occupations is found to be concentrated in regional Australia, providing a great opportunity as clean energy will continue to provide well-paid employment here.

The challenge here is more around building the skills and housing the workers, as we've heard.

Moving from old energy jobs to new energy jobs

Zooming in on some of the key sectors where jobs will decline, areas like coal mining, fossil fuel and electricity generation, it's clear that these pay higher wages.

This can be as much as a 60 per cent deviation from the economy-wide average.

What we've done is we looked at how much of those high wages can be explained by the characteristics of the workers, their education, their age, work experience and other characteristics.

What we find is that most of the deviation is not explained by those characteristics.

The grey parts are the bits that are not explained by differences in characteristics and this is worrying because it means that these people might suffer income losses and trouble finding similar quality work when they lose these jobs.

It's also worrying because of the regional concentration of many of these jobs in areas like the Latrobe Valley in Victoria and the Hunter Valley in SA.

Since we did this work, the e61 Institute has done some analysis showing that even four years after they lose a job, people who worked in coal-fired power generation still have income 50 per cent less than they did when they were working in that sector, whereas across the whole economy, people who lose a job are earning 30 per cent less.

That is a big negative effect and a challenging transition to overcome for those people.

The silver lining is that wages are also relatively high in clean energy.

Now those jobs might not match regionally, exactly, and the other point is they generally require higher levels of education.

That's consistent with skill biased technological change – these are newer technologies, so people require higher levels of education on average.

But even after accounting for that, there are still higher wages in these sectors.

What we really need to do here is help people to move to take advantage of these opportunities.

Not all workers in old energy sources will stay in energy, but those who do will help with emerging skill shortages.

One other point we made in the report is we're not starting from a great place in Australia around this.

We have relatively low job mobility compared to more dynamic labour markets like the Nordic countries or like the United States, where people move jobs more often.

Job mobility has declined over four decades and we haven't had a great success with structural adjustments in the past, like the automotive manufacturing closures.

Training needs to evolve to allow people to move to these new opportunities, but we heard from both from TAFEs and from businesses that it's been pretty slow for the training to adapt to these new clean-energy technologies.

Things like occupational licensing need to adapt to the new technologies as well.

We have a case study about a business that services Caterpillar vehicles saying they have problems with occupational licensing.

As they move to hybrid vehicles they need their servicing people to do a four-year electrical apprenticeship to learn how to rewire a house and to also have an apprenticeship as a diesel mechanic.

Those people don't exist, so we need these regulatory settings to evolve as well.

Another positive aspect is there are relatively strong similarities in the skills that are required in renewables and that exist among people who are working in fossil fuel industries.

These are four of the key skill sets: engineering and technical operation, management, monitoring and science that are required in renewables.

Not surprisingly, that green bar, the average attainment of those skills among people working in renewables, is high.

The left-hand side is the average across all people in in the economy and those in fossil fuels that are sort of in the middle, so there is more similarity in those skills than people working in other sectors.

It's also worth noting there's great variation across different jobs.

We spoke a lot with our members around this and they talked about how engineers are relatively easy to retrain and there are lots of opportunities for them. They have strong foundational skills, which helps them to retrain.

Similarly, electricians can move to new opportunities in clean energy, but in other roles like power station operators, it's a lot more difficult for them to move across.

Key recommendations

Where we got to on policy recommendations on this work, before I move across to talk about precincts, is that there will be opportunities in clean energy alongside challenges for fossil fuel workers and the real key is to enable people to move to jobs that will best use their skills and give them quality work.

1. First of all, this takes analysis and communication. People need to know what the transition will look like and where the opportunities will be.
2. And second, we need a more dynamic labour market that enables people to move to better suited jobs. This means allowing the training system to adapt, it means rather than guaranteeing jobs or protecting work for people with certain qualifications, it means updating the system and the regulation to the new skills that are needed. Because if we have skill shortages, this could hold up the transition that we need.
3. We also think there's a very important role to support adversely affected workers and communities. That clearly has an important regional development aspect, as it needs to happen locally. One of the gaps there is personalised support for those who are not employed directly by the firms closing power stations, the contractors and the related businesses. There's an important role for the new Net Aero Authority there.

Clean-energy precincts

The next piece of work I want to talk about was released in May this year, and of course, talking about precincts and the Government’s role in that is also relevant to the Future Made in Australia.

Consistent with previous work by Climateworks and as we've heard a lot of times today, we found there are huge opportunities in clean-energy precincts for Australia and Australian governments have recognised this with over $8 billion in support for hydrogen alone.

At the same time, we consistently heard from proponents that they're facing a number of barriers when they're trying to get these clean-energy precincts off the ground.

That's around cumbersome planning and permitting, around skill shortages and around a lack of coordination to bring different groups together, because that adds real complexity to developing successful precincts, so we came up with a framework for government support.

What are we talking about in terms of clea- energy precincts? We're talking about industrial businesses, research institutions and education providers, government and local communities working together to deliver innovation, skill development and leading towards clean energy products and clean energy exports.

This map is from the Climateworks analysis showing that there are potential clean energy precincts in all states of Australia, including right here in the Upper Spencer Gulf with the Port Bonython Hydrogen Hub offering the opportunity to build on the existing substantial industrial base there.

To further explain what we're talking about, here is the plan for the Port of Newcastle's Clean Energy precinct.

There's 220 hectares of industrial-zoned land, that green area in the port.

We're not talking about the renewable energy zone, which is a much bigger area, but rather the concentration of businesses, of the University of Newcastle and TAFE NSW, in that precinct that use renewable energy in order to create clean-energy products.

The key opportunity for precincts is from exports of clean energy or embedded in green minerals or metals, in particular. This is where the greatest opportunity is and where Australia's unique resources can give us a sustainable comparative advantage.

Through co-location, precincts can also enable shared use of existing or new infrastructure, skill development and sharing across participants, including for research where research institutions are involved, and the use and reuse of byproducts.

We can learn some of the lessons from successful innovation precincts internationally like Silicon Valley or indeed Tonsley here in South Australia that we had a case study on, because clean energy precincts are a special example of an innovation precinct.

What's important here is that these characteristics of successful precincts map pretty well to clean energy precincts in Australia.

We need clear objectives and be clear about what policy tool does what.

There's, of course, a large and growing demand for clean energy globally, and Australia has a comparative advantage in clean-energy-intensive activities.

There's a barrier for competition from other countries that don't have the same wind and solar and land that we have.

There's existing infrastructure that can be used and there are ESG capital pools that could be tapped into for projects that offer a commercial return.

The one that really stands out is the accommodative regulation and zoning, which is not necessarily such a good situation in Australia.

We heard from proponents that even where land has been zoned industrial, the preference was to proceed with approvals on an incremental basis, so that didn't give them certainty about their whole clean-energy project.

It didn't enable a proper consideration of the cumulative environmental effects, which is what really matters as well.

We heard that many different agencies would be involved. We heard about dozens of different agencies coming on site so it's hard to know who does what and there's also potentially duplication across different agencies.

Regulations haven't kept up with the new clean-energy technology and the specific safety requirements of things like green ammonia.

Of course, we need to protect the environmental and social values and have a good system of planning and permitting, but there's considerable opportunity to streamline that process and do it better.

One of the challenges of actually getting these clean-energy precincts off the ground is that it involves a number of parties working together.

There's a really important coordination role, and each party needs to play to their strengths.

Businesses need to assess and invest in commercial opportunities communities.

Communities are central.

Governments have important roles in ensuring that there is fit-for-purpose planning and permitting.

Key recommendations

We recommended single points of contact or lead agencies to make it clearer what project proponents need to do.

Governments have a role in provision of shared infrastructure, things like road and rail and port facilities and also around coordination of skilling and the really important community engagement.

Just to emphasise that: community engagement is really key.

There's a need for early, deep and active consultation to ensure the community is on board, but also to make sure that the proposed project plays to the strengths of the local area, because you need the skills and the comparative advantage to make this work long term, sustainably.

Doing this properly gives communities, including First Nations communities, the tools and the opportunities to participate and to shape the development of precincts.

As mentioned, we developed a framework for government support for clean-energy precincts. We have a hierarchy, from things that:

1. Enable the development of precincts, like planning and permitting systems that aren't too complex;
2. Guide towards particular projects or particular outcomes through things like provision of shared infrastructure; and
3. Government direct investment. As we get towards greater government involvement, especially through investment in projects that shifts risks from the private sector to the taxpayers, you need to be conscious about that and who's best placed to manage those risks.

The framework leads us to our conclusions from this work.

We found that:

• All levels of government have really important roles to play, to enable and to guide clean energy precincts through coordination, through reforms to planning to streamline that system and simplify it, and through the provision of shared infrastructure.
• Where governments go further and invest, as is already happening in Australia and internationally, we argue, consistent with analysis by international organisations such as the OECD and the IMF, that it's very important to start with clear objectives.
• There's a real need for a deeper and more transparent analysis of market opportunities to make sure that there is a sustainable comparative advantage for the local area where the investments going ahead.
• This means we shouldn't be trying to compete head-to-head in the same areas that are being scaled up and subsidised internationally where we don't have that advantage, like in solar panel manufacturing for example, but rather look at how we can feed into global supply chains because clean energy is going to grow rapidly globally so we have real opportunities with our resources.
• There's an important need to focus on areas where there's going to be emerging technologies, because where you have innovation, that's where you get the real spillover benefits from these precincts and the real longer-term benefits for the economy and for communities and society.
• There needs to be regular evaluation and updating of how governments are involved, allowing for the possibility of failure.
• We're not always going to get these things right, things are going to change over time and we need to be ready to cut losses and have off-ramps where investments aren't paying off and that's been one of the problems with industry policy in the past that we need to learn from and improve on.

As I mentioned earlier, there are big opportunities, but it's also very complex to bring these clean-energy precincts together.

Well thought-out and targeted government policy will give our precincts the best chance of the global success that they promise.

Thank you.