Welcome to the first part of the interview with Rachel Howard from Mission Possible Partnership where the role of aluminium in green energy transition in Australia takes a centre stage. Unlike many other large economies, construction & infrastructure sector leads the demand for aluminium, representing 30-40 per cent. Although aluminium is not formally considered as a critical mineral in Australia, but according to Rachel, it has indispensable role to play in driving environmental and economic growth. Mission Possible Partnership plays a key role here by fostering producers, technology providers, financiers, and government bureaucrats to accelerate this transition.

Rachel Howard leads Development of Industrial Decarbonisation programmes for Mission Possible Partnership – working to bring about industrial transformation at speed and bridge the gap between industry, finance and government. She has deep heavy industry experience across iron ore, electricity, oil and gas, metals and minerals and is currently leading projects on green iron corridors and the use of regulatory tools for green ammonia. Rachel is an expert contributor to Government policy on green metals and industrial decarbonisation through trade. 

Prior to Mission Possible Partnership she worked at McKinsey & Co and family offices shaping strategy and leading large-scale programme delivery including making the first tech-for-good focused investments at Minderoo Foundation and launching a first-in-market advisory firm on tech policy. Rachel holds an MBA from London Business School and is passionate about capital as a force for good. 

To know the full conversation, read the interview:

AL Circle:  With Australia incorporating aluminium into its green energy transition, do you foresee the country officially recognising aluminium as a critical mineral and what challenges or opportunities would this move present to the industry?

Rachel Howard: There's a strong case for aluminium and more specifically low carbon aluminium to be treated as a strategic if not critical mineral within our policy framework. Globally, the metal is indispensable for advancing critical low carbon economy materials, such as those needed for grid expansion, renewable energy systems, electric mobility etc. that we talked about. The opportunity in recognising it formally would unlock priority access to concessional finance and policy support, positioning it as a clean commodity. This would also strengthen our agreements with partners like Japan, Korea, and the EU.

Well, while formal recognition offers significant opportunities, there are also critical mechanisms that can support and accelerate the growth of low-carbon aluminium without granting it that status. We are eager to explore some of these avenues further during our discussion.

AL Circle: Given that only 5 out of the 70 clean industry projects in Australia are aluminium-related, how do you assess the aluminium industry's true potential to drive the country's green transition, and is the metal being utilised effectively enough?

Rachel Howard: I wouldn't read the number of projects as having a minor role in the transition. In many ways aluminium is at two important intersects, both decarbonising heavy industry and supplying a material that's essential for a low carbon economy.

We know that aluminium is critical for transmission, renewables, electric mobility, buildings, defence applications and it goes well beyond the number of standalone projects in the pipeline.

AL Circle:  Green transition involves sectors like renewables, electric vehicles, defence and green buildings where aluminium is widely used. How much aluminium is currently being deployed in Australia within these sectors and how do you think this usage is aligned with the country's green transition goals?

Rachel Howard: Australia presents an interesting profile, with some similarities to other regions and a few unique aspects. One key parallel lies in construction and infrastructure, which represents the largest portion of aluminium consumption in Australia. There are experts who have better details on the share of each end-user sector but construction, infrastructure, and extrusions - including windows, facades, and structural components - likely account for 30 to 40 percent of total aluminium demand.

The next big category is general manufacturing and consumer goods, such as packaging, which accounts for about 15 to 20 percent of aluminium application in end-user sector. However, the fastest growing sector is renewables and electrical systems, currently accounting for about 15-20 per cent. This is for use in solar mounting systems, wind turbine components, transition, grid infrastructure, transmission lines. So they're some of the big end use cases now and emerging in Australia.

What is different from many other countries is that our transport segments are relatively smaller, with limited manufacturing in the automotive industry, which is otherwise a typical end-use consumer of aluminium. The transport sector in Australia likely represents only about 10 percent of total aluminium end use.

Now, to answer the question of whether the usage is aligned with the country's green transition goals, the aluminium used in these sectors is not yet low-carbon, and there is limited demand-side policy to incentivise the capital investment needed to shift the production of aluminium to green. And while deployment is increasing, it's not, I would say, fully aligned with our green transition plans. The next step to do so would be to introduce measures like green public procurement standards, which would call on low-carbon aluminium, ensuring the traceability and certification, the guarantee of origin scheme, and supporting, in some way, premium markets for low-carbon aluminium for those producers who are able, you know, making the effort to shift.

AL Circle: In your experience working with carbon intensive industries, how does MPP specifically collaborate with aluminium industry leaders in Australia to accelerate the green transition? Are there notable gaps or barriers that need to be addressed according to you?

Rachel Howard: At Mission Possible, we work across the value chain by engaging producers, technology providers, financiers, and government bureaucrats to increasingly discuss the near-term initiatives which can unlock bankability for low-carbon aluminium projects and broadly for clean industrial projects. The Build Clean Now campaign, which we recently launched in Australia, is part of a global push to see year-on-year progress in clean industry FIDs. That Build Clean Now workshop was a tangible manifestation of the type of interventions that Mission Possible like to take, which is bringing together federal government, so the key federal government agencies are there, the sub-national government departments, the special investment vehicles, and the pipeline of advanced projects, bringing them together to discuss what is the current barriers and the priorities they see for near-term interventions. Now, in that process, which was in our view some of the most granular discussions on what could be done realistically in the near-term, the gaps are very clear, and we see them as twofold, two big priorities.

Gap number one, clean industry, including clean aluminium, needs a secure bankable demand. So voluntary demand based on corporate commitments isn't going to do the job for the scale and the duration needed to underwrite really large-scale investments. Some form of compliance demand or an equivalent measure like government procurement is needed.

Now, what's happening in the aluminium sector is we have the Green Building Council of Australia driving a voluntary system, so a 10 per cent reduction in embodied emissions would allow you to seek the Green Star rating. The next step is mandatory disclosure of embodied emissions. This is being advocated for but is not yet in place, and there are no requirements for low-carbon aluminium in our high-growth new energy sectors, even those being funded and supported by government finance tranches. So, there are still quite a few steps that can be taken to secure that bankable demand, which has to come from a mandatory or regulatory measure.

The second big gap is leveraging finance solutions, and this is to dramatically lower the cost, which we know is really plaguing low-carbon projects. So there is a really good example of this in the aluminium sector in Australia of using a finance mechanism which can dramatically enhance bankability, and that was for the Tamargo smelter in New South Wales.

So, this smelter alone consumes 10 per cent of the state's electricity, which is about 700 megawatts. A new kind of support was announced in December last year, which plays with the financial lever that's available, and I think provides a blueprint for future transition models. In this deal, the federal government will use the government-owned Snowy Hydro electricity generator to guarantee affordable power to the Tomago smelter, where it would otherwise be facing double its energy costs, potentially in the next three to five years. So, using government balance sheets to de-risk the project is a known lever to lower the cost of capital, but it hasn't been deployed widely in the clean industry sectors, and I think this is the first example in the aluminium sector in Australia.

And to speak to the value of this lever, the cost reduction is significant. Some figures and research suggest that a 1 per cent drop in the cost of capital equates to a $10 per megawatt-hour cost, a lower cost in power. And our studies show that putting a government balance sheet into the project configuration to provide some form of guarantee or de-risking can reduce the cost of capital from say 11-12 per cent on large-scale CAPEX projects to more like 7-8 per cent. So, that is a dramatic value lever that we think could be more widely deployed and is a gap in an opportunity today.

Part 2 coming soon...