There’s a rapidly increasing awareness that the global future of energy is coming, ready or not. Recent contributions to The Strategist describe very different possible Australian responses to the emerging renewable energy transformation, from David Uren ^[1] and from Grant Wilson ^[2].

How this develops will be fundamental to Australia’s security, not just because it will determine the power of a future economy to support Australia’s security agendas, but because Defence will inevitably be part of the energy transition, and the ADF will operate in this transformed environment.

As a central component of the energy transformation in grid scale and domestic energy storage and transportation, battery systems are now recognised as a dominant future industry and source of wealth. The government is preparing a national battery strategy ^[3] and released an issues paper seeking public comment.

Projected world demand for electric vehicles alone over the next four years will require successive annual doublings of battery production. By some estimates the annual average revenue stream from the global battery industry by 2050 will be in the order of US$1,000 – $1,250 billion.

However, it’s unlikely that the global battery industry will continue functioning as it does. Currently, China dominates global battery production with some 75% of world battery cell output.

Nonetheless, the neoliberal globalist model on which this position has been built is currently (and likely to remain) out of fashion with major Western nations.

Donald Trump began the trend in 2016, capturing the votes of those disadvantaged by globalised manufacturing. The Corona virus pandemic exposed the weakness of globalised systems facing crisis, reinvigorating local manufacturing policies. Following the pandemic, failures of global supply hubs have disrupted commerce and added to globalised inflation.

A neo-mercantilist approach is emerging as the preferred way of managing national renewable energy transformations. The US is promoting the development and adoption of renewable technologies under the Inflation Reduction Act, allocating around US$369 billion in subsidies for work undertaken in America. The European Union has replicated US policy by committing $9.6 billion to subsidise battery production through the Net Zero Industries Act.

Such actions are in part a response to the need to hugely invest in renewables, but the dominance of security concerns over market dynamics seems unlikely to abate soon. Current geopolitical competition and insecurity seems entrenched by America’s distrust of China and the European Community’s need for energy independence from Russia. An America so concerned about China that it would accede to the transfer of nuclear-powered submarine technology as a key part of the AUKUS ^[4] agreement is unlikely to allow itself to be dependent on battery supplies from China.

Nonetheless, battery supply during the 2020s is likely to be insecure. Demand for energy storage is expected to increase from 34 GWh in 2020 to 1,028 GWh in 2030, requiring investment of some US$262 billion.

With high competition for batteries, a scramble by Western trading partners to secure supply will boost Australia’s balance of payments but prices are likely to represent premiums for shortage rather than uncorrupted market signals.

The danger is that Australia might repeat past practice; selling raw product and failing to invest in the more substantial returns from manufacturing. This could end in the ultimate failure of policy, replicating Australia’s current gas price increases, with Australia a global leader in minerals supply but failing through overseas production disruption to secure the batteries needed for its own energy transformation.

As a base line then, Australian policy should not rely on market-based approaches where the subsidies of other countries massively distort the market. Instead, policy should ensure that local manufacture can supply sufficient battery systems to allow Australia’s own unimpeded renewable energy transformation.

Part of this will reflect the needs of Defence which will be a significant participant in Australia’s energy transformation. Notwithstanding the AUKUS decision, electrification of ADF capabilities can be expected to proceed alongside civil and commercial technological developments.

More importantly, electrification will have specific relevance to the combat effectiveness of the ADF. In 2020, the UK defence R&D organisation, Qinetiq, published Powering the Electrified Battlespace,  a study of the electrification of warfare, which concluded that ‘the fundamental enabler for all future warfare is electric power’.

The ADF is increasingly deploying platforms and systems relying on batteries for their operation. Hybrid and EV versions of the Bushmaster troop carrier are being developed. They are understood to be short on range currently but with operationally significant rates of acceleration. The Navy is exploring battery powered autonomous craft such as the Bluebottle ^[5] surface surveillance drone and the Ghost Shark ^[6] uncrewed underwater vehicle, while the Army is evaluating high-performance electric bikes for stealthy scouting missions. In February, Australia announced it was sending $33 million worth of electrically powered aerial drones to Ukraine. No less significant are the logistics required to support the great number of batteries used in the field at individual and unit level.

Defence’s strategy for exploiting the renewable energy transition is currently unclear. We have suggested ^[7] organisational changes Defence needs to make to better understand and adapt to the electrified battlespace. Regardless, Defence will be major users of renewable energy systems, including batteries.

Consequently, government support for the development of battery manufacturing, at least underwriting the nation’s renewable energy transition, appears unavoidable. This is not popular in policy formation but the decade of the 2030s is likely to be far from normal. If such times justify spending $300-ish billion on one aspect of maritime security, it seems more than justified to spend $17-23 billion to 2030 on a fundamental of national security—building a battery manufacturing industry.