Powering the Future: U.S.-Australia Cooperation in Clean Energy Storage

Introduction

Australia loses an estimated $9.3 billion annually due to insufficient clean energy storage.¹ Without effective storage systems, we risk wasting our vast clean energy resources during peak demand periods, which are crucial for a reliable and sustainable energy future. Australia’s reliance on China for much of the global renewable energy supply chain has raised concerns about energy security. To address this, Australia should strengthen its collaboration with the U.S. in developing advanced energy storage technologies, building on the recent U.S.-Australia Climate, Critical Minerals, and Clean Energy Transformation Compact. This partnership will support Australia’s energy transition goals and its commitment to achieving Net Zero emissions. Investments in storage technology are key to maximising clean energy use, reducing fossil fuel dependence, and building a more resilient energy infrastructure.

China’s Dominance in Global Renewable Energy Supply Chains

China continues to hold a dominant position in the global renewable energy market, particularly through its consolidation of manufacturing across various segments of the supply chain. This has resulted in a highly integrated solar photovoltaic (PV) and lithium-ion battery manufacturing industry. Over the past decade, China has controlled over 80% of all stages of PV manufacturing globally, from polysilicon and ingots to wafers, cells, and modules, with the Xinjiang province alone accounting for 40% of global polysilicon production.²

Given China’s control over 87% of global lithium hydroxide and 66% of lithium carbonate supplies, critical components for battery manufacturing,³ the significant jurisdictional and geographic concentration of production implies that potential disruptions from pandemics, natural disasters, technical failures, or political instability could severely impact global energy security and Australia’s clean energy goals.⁴ With a focus on centralised manufacturing, China may impose trade restrictions on key material exports to maintain its competitive advantage, either in response to trade tensions or to prioritise domestic needs. In turn, the U.S. is expected to introduce tariffs to counteract risks associated with overcapacity and price depression caused by China’s policy-driven subsidies. These measures aim to counteract market distortions that undermine international competition.⁵

To safeguard its renewable energy initiatives, Australia must diversify its solar and battery procurement strategy and reduce the risks associated with a heavily concentrated supply chain. The U.S. has acknowledged the need to adopt a set of tools to improve the resilience of its PV and lithium battery supply chain, including sourcing and processing critical minerals, through collaboration across the federal government, corporate stakeholders, the research community and international allies.⁶ By working closely with Australia, which alone produces 52% of the world’s lithium,⁷ the U.S. can develop a strong and self-sufficient clean energy sector, essential for more resilient supply chains, economic stability, and national security.

Enhancing U.S.-Australia Collaboration in Clean Energy Storage Solutions

There is a significant opportunity for impactful collaboration within the U.S.-Australia Alliance to enhance both countries’ clean energy storage capacity and capabilities through increasing U.S. investment in Australian battery solutions and enhancing bilateral technology exchanges and collaborative research and development efforts. The most significant barrier to Australia’s ability to secure a reliable, sovereign clean energy supply that can withstand environmental and geopolitical instability is its limited capacity to store the excess of clean energy it generates. Australia currently has an energy storage capacity of 3GW, with forecasts indicating that the country will require a minimum storage capacity of 22GW by 2030, and at least 49GW by 2050, to achieve its Net Zero target.⁸

Australia is well positioned to be the primary partner of the U.S. in developing this capacity, due to both its supply of battery minerals and stable investment environment, and has demonstrated its commitment to enhancing its battery manufacturing industry through the release of the 2024 National Battery Strategy.⁹ An example of the potential of this bilateral investment to create tangible change is the Hornsdale Power Reserve in South Australia. This 150-megawatt grid-connected battery, co-delivered by U.S. company Tesla, saved South Australian consumers over $150 million in its first two years of operation.¹⁰

Since the establishment of the Hornsdale Power Reserve in 2017, the 2022 U.S. Inflation Reduction Act has created an enabling environment through which further U.S. investment in battery storage solutions can be facilitated, by incentivising the use of battery components from the United States and its allies.¹¹ U.S. decarbonisation company First Mode expanded its operations to Western Australia in 2022, and in 2024 exported its first Australian-built 264 kilowatt-hour battery to the U.S., where it will contribute to the decarbonisation of the U.S. mining and rail industry. The company credited Australia’s mining and engineering expertise, as well as the support and advocacy of the Australian Government, for its success, and will continue to operate from Perth and generate decarbonisation and battery solutions for both counties.¹² These examples illustrate that the Australian and U.S. Governments must continue to act to leverage the two countries’ complementary nature in the realm of battery storage solutions in pursuit of their shared objectives of establishing secure and resilient energy supply chains, and achieving Net Zero by 2050.

Transitioning to Renewable Energy: Aligning Battery Technology With Clean Energy Sources

To facilitate long-term supply chain resilience, a transition in battery technology must be aligned with a transition in energy sources, from the depletable to the renewable. Historically, Australia has been heavily reliant upon depletable energy sources including coal and imported oil, which, while providing a secure energy source, carries significant risks including; commercial instability, environmental impacts, and source dependency, all of which undermine Australia and the U.S.’ energy security.¹³ Through a transition to renewable clean energy sources, Australia and the U.S.’ energy supply will be more resilient to external risk factors and more sustainable with secure, renewable sovereign energy sources.

As of 2023, coal accounts for 46% of electricity generation in Australia with renewable energy sources accounting for 35% of total electricity generation. Of the 35%, solar and wind collectively contribute 28% of total generation.¹⁴ This shift represents meaningful progress in Australia’s transition away from a coal-dominated energy system, driven by a growing commitment to sustainability and global climate obligations. In this regard, the Australia-United States Climate, Critical Minerals and Clean Energy Transformation Compact (The Compact) has been a key enabler in fostering collaborative efforts in clean energy development. The continuing success of this transition hinges on the two pillars of the Compact, namely coordinating supply chains and accelerating market development and investment to support the clean energy economy, as well as supporting climate mitigation, adaptation, and resilience in the Indo-Pacific and beyond. These pillars, alongside robust R&D to advance next-generation energy technologies, are essential for driving the long-term success of clean energy collaboration between Australia and the U.S. Further development in technologies such as offshore wind, advanced solar photovoltaics, and green hydrogen not only offer sustainable energy solutions but also reduce Australia’s reliance on imported energy resources.

The shift away from coal and traditional energy sources must also be managed equitably, ensuring Australia’s First Nations peoples and Traditional Owners are active partners in the transition. Historically, First Nations peoples have not been participants in traditional energy generation processes, an imbalance that is being reflected in the renewable energy sector. To date, only about 1% of renewable energy projects in Australia involve First Nations equity, a stark contrast to Canada, where 20% of such projects include Indigenous ownership.¹⁵ Initiatives like the First Nations Clean Energy Network are crucial in this context, providing a vital forum for promoting equitable participation of First Nations peoples in the energy transition. Noting large-scale energy diversification projects will take place across regional and remote Australia, there is the opportunity to ensure First Nations peoples are not only appropriately consulted but are also development partners, especially as native title rights and interests expand across Australia.¹⁶

Conclusion

To ensure a rapid transition towards renewable energy sources, Australia and the U.S. must continue to build upon the Compact. Though the Compact provides a clear high-level framework, there is a critical need to develop a detailed, cross-government renewable energy research, development and innovation strategy. This strategy should be crafted in partnership with First Nations stakeholders, ensuring their rights and interests are incorporated into the future development of sustainable energy projects. To ensure a rapid transition towards clean energy, Australia and the U.S. need to move from promoting the transition, to having a clear, public facing strategy to guide implementation.

Recommendations

1. Enhance research and development (R&D) financing, supported by the U.S. Inflation Reduction Act (IRA), to expedite the development of next-generation renewable energy technologies, including offshore wind, advanced solar photovoltaics, and green hydrogen.
2. Develop a renewable energy grid storage strategy that incorporates domestic production of solar photovoltaics and lithium-ion batteries, aimed at reducing dependency on China-dominated supply chains and supporting Australia’s clean energy transition initiatives.
3. Subsidies for home battery storage systems and support for large grid-scale projects should also be considered in the renewable energy grid storage strategy to address Australia’s inadequate clean energy storage infrastructure. Federal assistance in this area is essential.
4. Develop a detailed, cross-government strategy for renewable energy research, development, and innovation. This strategy should be crafted in partnership with First Nations stakeholders, ensuring their rights and interests are integrated into future sustainable energy projects.