There is still much that can be done to boost trade between Australia and Indonesia, while also fighting climate change. Clean energy exchange would be a good place to start. 

The Australia-Indonesia relationship has officially “shifted up a gear.” Well at least that’s the view of Australian Prime Minister Anthony Albanese after the two countries signed an EV (electronic vehicle) battery deal in July 2023. Indonesia seeks to position itself as a leading producer of lithium batteries in Asia – in the process, hoping to make itself an indispensable part of the burgeoning EV supply chain. Australia, meanwhile, is the largest exporter of lithium in the world. This would appear to be a match made in heaven.

For decades, consecutive governments on both sides have spoken of the high potential of this bilateral trading relationship. However, for a multitude of complex reasons, it has never truly taken off. Here, in the form of lithium mining, a viable means for turbocharging the Australia-Indonesia trade relationship is on the table. And better still, all in the name of reducing greenhouse gas emissions and playing our part in combatting climate change. Right?

As readers of this publication will be aware – batteries store energy, and as we teeter on the brink of irreversible climate catastrophe, the source of this energy matters more than ever. Currently, over 60 percent of Indonesia’s electricity is supplied by a young but inefficient fleet of coal-fired power plants. On top of this, gas represents almost 20 percent of electricity generation.

As a result, fossil fuel combustion in the power sector is Indonesia’s largest contributor to greenhouse gas emissions, making Indonesia the ninth largest emitter of CO2 globally. Although Indonesia has set the ambitious goal of net-zero emissions by 2060 or sooner, and the total phase out of coal-fired power plants by 2050, greenhouse gas emissions are only expected to increase as Indonesia’s economy continues to develop.

Although lithium battery production will undoubtedly play a significant role in de-carbonising and electrifying many aspects of day-to-day life, such as through their use of EVs and household electricity storage, electrifying the power grid will be crucial in the fight against climate change. After all, what good is an electric car or motorbike for reducing emissions if the source of its electricity is from upstream fossil fuels? Not to mention that the battery itself is manufactured in factories powered by fossil fuels.

While undoubtedly some of the EVs produced in Indonesia will be exported to countries which have a higher share of renewables in their energy supply (such as Singapore and Australia), the protected economic environment in which they are being produced is not conducive to export orientation and thus are unlikely to be internationally competitive.

There are also particular issues with lithium mining which means Australia would be wise not to become overdependent on it as an export commodity. While lithium will undoubtedly be a necessary cog in the renewable energy wheel, it is ultimately a finite resource which presents significant environmental challenges in mining. Lithium mining uses large quantities of water – to extract one tonne of lithium requires about 500,000 liters of water. It can also result in the poisoning of reservoirs and related health problems, potential increases in carbon dioxide emissions, production of large quantities of mineral waste, increased respiratory problems, and the alteration of the hydrological cycle.

Some commentators have therefore asked, “What industry can facilitate trade and investment between Indonesia and Australia better than the lithium sector?”

My response to this question would be that rather than focusing predominantly (or solely) on lithium exports to elevate their trade relationship, Australia and Indonesia would benefit most from cooperating in the production and export of renewable energy. Western Australia and the Northern Territory could leverage their renewable energy potential to provide clean and long-term cost-effective energy produced by wind and solar farms, as well as export green hydrogen – which is seen by many to be a critical piece in the puzzle.

Of course, a plan like this would require ongoing production of lithium batteries to store the renewable energy generated. Australia can obviously step up here. However, this would represent a more holistic, broadened, and sophisticated level of energy policy cooperation not seen before in the region. This idea is not new, but it is one which is yet to fully gain traction.

At least one significant renewable energy project has been mooted in Northern Australia in recent months. The Australia–Asia Power Link is a proposed electricity infrastructure project which is planned to provide 15 percent of Singapore’s energy supply from the world’s largest solar plant in the Northern Territory via the world’s longest submarine power cable. At this stage, the proposed plans show the underwater sea cable passing through Indonesian waters and bypassing Java – the world’s most-populous island – terminating in Singapore. It is unclear whether there has been any discussion of linking Java to the underwater sea cable.

For the time being, plans have stalled after Sun Cable, the company overseeing the project, was placed into voluntary administration following mining magnate Andrew Forrest’s refusal to inject more capital into the scheme. Although the project is widely viewed as unprecedented in scale, it is nonetheless seen by experts to be technically feasible, given that the solar, battery, and transmission technologies involved are mature.

If scale is indeed the primary barrier to a commercially viable venture of this nature, then perhaps Australia needs to consider exporting its renewable energy a little closer to home.

According to experts, delivering electricity via high voltage undersea cables is a relatively simple process. Although it is completely different technology, it is worth noting that Australia’s famous Cable Beach in Broome is named after the telegraph cable laid between Broome and Java in 1889. If the task of connecting Australia and Indonesia was achievable in the 19th century, then certainly connecting the two islands via high voltage electricity cables is not outside the realm of possibility in 2023 and beyond.

There are clear challenges which will need to be overcome to ensure the viability of a project of this scale. For example, Australia already faces the enormous challenge of establishing 10,000 kilometres of transmission lines to support its own renewable energy transition. On top of this, existing major transmission links between states are already near capacity and Australia will need to address the skills shortage in transmission line workers.

In addition, some critics will point to Andrew Forrest’s decision to drop out of the Sun Cable scheme as evidence of such a proposal being commercially unviable. These are all valid points.

These challenges are not necessarily insurmountable. There is a strong case supporting the economic and practical viability of such a project. It might just come down to whether we are up to taking up the challenge.

Aaron Bronitt is a 2022 New Colombo Plan Scholar (Indonesia).

This article is published under a Creative Commons License and may be republished with attribution.