➤ Australia lacks a national battery supply chain strategy, which is key to coordinate support for miners and other players in enticing foreign investment in upstream and downstream industries.

➤ Australia is already the world's biggest hard-rock lithium producer and is close to achieving a minimal viable supply chain, but a forecast decline in its market share of critical minerals will likely give the country less pricing power.

➤ Developments in comparable industries suggests the electric vehicle battery market will consolidate to 10 to 15 global cell manufacturing players.

In February, Shannon O'Rourke ushered in the Future Battery Industries Co-operative Research Centre's first major report since being appointed CEO in November 2021. The report spelled out the policy settings needed to capitalize on expected global battery demand growth of at least 10-fold over the next decade and a 40-fold increase in battery investment by 2050, with batteries set to capture 70% of all renewable energy investment in a net-zero world.

A diversified battery industry could contribute over A$7 billion annually to Australia's economy by 2030, according to conservative estimates by the Co-operative Research Centre, or CRC. The Future Battery Industries CRC is Australia's largest partnership of industry, government and researchers focused on battery industries, with 70 participant entities.

O'Rourke is an engineer by trade and previously worked at Australian oil and gas player Woodside Petroleum Ltd., U.S. oil and gas company Chevron Corp., U.S. drilling company Diamond Offshore Drilling Inc. and Rio Tinto Group subsidiary Comalco Research and Technology. S&P Global spoke to O'Rourke about what is at stake for Australia's fledgling value chain for EV metals. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: How did an oil and gas man get into managing a battery consortium?

Shannon O'Rourke: I have always had a deep curiosity about how business and technology can work together to deliver opportunity. At this particular point in time, I believe the battery industry represents the convergence of all three of these elements. I also understand how critical social license is and the need to deliver a dividend to the community — and as the time for energy storage is now, it would be a travesty not to build a future for Australia.

Do you see a link between the two fields — oil and gas, and batteries?

There's a clear link because the two compete — 80% of battery demand is forecast from transport, and 20% from stationary storage. EVs compete with oil [liquids], and grid storage competes with gas. The fundamentals are good. Storage costs have come down 88% in the last decade, while oil and gas prices have gone up.

Batteries, unlike fuels, can be chosen and tailored to their application, including sodium sulfur batteries for grid storage or high performance [nickel-manganese-cobalt] batteries for race vehicles.

The CRC's February report said Australia's market share of critical minerals will decline from 50% to 31% by 2030 amid expected consolidation. In what parts of the EV supply chain do you expect consolidation, and how does that challenge Australia's ability to gain a foothold?

Australia's overall production is expected to increase. However, the outcome of greater diversity in sources of supply will be a lower market share for Australia. This equates to lower pricing power and less leverage for Australia to secure a broader strategic deal in return for supply of its resources.

To quote McKinsey, past developments in comparable industries such as wind-turbine supply and tier 1 automotive supply suggest the market will consolidate to 10 to 15 global cell manufacturing players.

We believe that consolidation will be strong, not just in cell manufacturing but also downstream across module manufacturing and energy storage, and upstream into mineral processing and advanced materials. Battery manufacturing has good economies of scope, evidenced by Tesla Inc.'s dominance across EV, residential and utility scale storage, their direct procurement of raw materials like spodumene concentrate and value chain orchestration.

With fewer, larger players, who are naturally more connected to their home governments and influenced by home government priorities, it will be more difficult for Australia to successfully influence investment in an Australian value chain. All national and regional strategies that we have seen seek to capture the manufacturing opportunity within their borders.

What is the biggest or most pressing need to make this happen?

To build a successful and sustainable global, not cottage, industry will require a national battery strategy to underpin investment and policy decisions. A national strategy will deliver coordinated, material support; it will reinforce that our critical minerals actually represent an Australian manufacturing opportunity; and it will invite foreign investment into our value chains.

It was encouraging to see a greater midstream focus in the recently updated 2022 Critical Minerals Strategy. Investment incentives need to be targeted to advanced manufacturing facilities. We are confident that such a strategy, along with an industry attraction fund and a national battery institute, can deliver the jobs and growth outcome we have outlined in the report.

In what part of the battery supply chain do you see Australia playing a role?

We are close to achieving a "minimum viable supply chain" in Australia.

Australia is already seeing investments in mineral processing, advanced materials, cell manufacturing, energy storage and mobile equipment. Having a minimum presence in each segment can enable Australian businesses to compete with other vertically integrated hubs.

What would attracting all this investment for a battery value chain do for Australia's mining industry?

Investing in a battery industry will provide an outsized return on investment. Australia's federal government expects to spend A$21 billion on critical minerals by 2030, to deliver 100,000 jobs by 2050. Our plan delivers one-third of those jobs 20 years earlier, and for a quarter of the cost. It's a great investment.

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