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MELBOURNE INSTITUTE Applied Economic & Social Research

Rebir birth of th of Industr Industry y Clus Cluster ters: s: Er Era P a Post

• st Auto

uto Ass Assembl embly y in VIC and in VIC and SA SA

• Prof. Dr. John P. Haisken-DeNew

johnhd@unimelb.edu.au

Tuesday, 25 July 2017

2017 Economic and Social Outlook Conference Special thanks to GM Holden:

• A. Winnett, T. Frost, J. Getgood, S. Renshaw

Disclaimer: The author is not a representative of GM Holden or any firms mentioned here. The author alone is solely responsible for the content of this presentation.

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The Problem:

A cluster around the automotive industry existed for 100 years, now in 2017 totally disappearing in Australia. Metro Melbourne and Adelaide have been impacted heavily.

Where to from here?

Page 4 Haisken-DeNew | Tuesday, 25 July 2017

Productivity

• Vehicles assembled: 210,000
• R&D share of sector: 12.1% (1.5 CDN)
• GDP Contribution: A$3.1B

Labour Cost

• Earnings/Year: A$72,000
• Compensation Cost: 92% of US at PPP

Even with Continental Drift, Transport Costs are a Killer!

SOURCE: Jim Stanford (2017) “When an Auto Industry Disappears: Australia’s Experience and Lessons for Canada”, Canadian Public Policy, Vol 43, No S1, S57-

• S74. See Table 1, 2, 3 ; Figure 2

Page 5 Haisken-DeNew | Tuesday, 25 July 2017

Tip of the Iceberg: Death of the Auto Industry = Death of these Cities?

Employment Losses to Big 3

• Primary Loss: 6,700
• Supply Chain Loss: 25,000 of 40,000

60 of 117 Tier 1 Firms Multiplier Effects

• Supply Chain Employment Losses
• Losses concentrated geographically
• Supply Chain could be 300m away

Company Where End Job Losses

Toyota

Altona, Port Melbourne VIC

Oct 2017 2600 Holden

Port Phillip /Mel VIC, Elizabeth SA

Oct 2017 2900 Ford

Geelong, Broad- meadows VIC

Oct 2016 1200

SOURCE: Simone Fox Koob, The Australian 2 Feb 2017 “Automotive aftermarket apocalypse set to cost 25,000 jobs“; Wikipedia; Australian Automotive Aftermarket Association, May 2015,The Future Australian Automotive Manufacturing Industry Supplementary Submission to the Senate Standing Committee on Economics

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“Full” Impact of Loss of Auto Industry

• Worrall & Spoehr (2014): Net loss of 200,000 jobs nationally to 2018

Permanent loss of $29 billion of GDP

• Net job loss: 100,000 in Victoria; 24,000 in SA, rest outside
• Job growth rate VIC/SA “effectively halved” through to 2018
• Survey of Firms:

Impact to Northern Suburbs of Adelaide SA

• 33% reported at least some risk of closure,
• 40% believed they would have to shed staff,
• Profitability would be negatively affected:

in retail (53%), manufacturing (45%), construction (44%)

Haisken-DeNew | Tuesday, 25 July 2017 SOURCE: Worrall, L., Spoehr, J., The Future of the Automotive Transformation Scheme: Submission to Senate Standing Committee on Economics. Australia’s Innovation System, 2014. Adelaide: Australian Workplace Innovation and Social Research Centre, the University of Adelaide. (Innovative Manufacturing CRC)

Page 7 Haisken-DeNew | Tuesday, 25 July 2017

You’re Fired!

Economic Journal 2009

Firm Closures Clearly Negative

• Self Esteem
• Financial
• Reorganisation
• Role Models
• Human Capital
• Women

SOURCE: Sonja C. Kassenboehmer and John P. Haisken-DeNew (2009) “You're Fired! The Causal Negative Effect of Entry Unemployment on Life Satisfaction” The Economic Journal Vol. 119, No. 536, pp. 448-462.

Page 8 Haisken-DeNew | Tuesday, 25 July 2017

Want to Work Fulltime: Displaced Autoworkers

Holden “About Me” Survey (Aug 2014)

Vast majority want to work fulltime!

Full Time Part Time Casual Self Voluntary Exit

SOURCE: Holden Aug 2014 “About Me” Survey

Page 9 Haisken-DeNew | Tuesday, 25 July 2017

Education of: Displaced Autoworkers

Holden “About Me” Survey (Aug 2014)

• Affecting metropolitan areas in VIC/SA
• Likely representative of industry
• Half high school attainment
• TAFE Certificates

These people are employable!

0.1 0.2 0.3 0.4 0.5

Year 9 Year 10 Year 11 Year 12

0.1 0.2 0.3 0.4 0.5 SOURCE: Holden Aug 2014 “About Me” Survey

Page 10 Haisken-DeNew | Tuesday, 25 July 2017

Desire to Use of Skills: Displaced Autoworkers

Holden “About Me” Survey (Aug 2014)

• STRONG Preference to continue to use

your existing qualifications/certifications

• r trade in future employment

These people want to use their skills!

SOURCE: Holden Aug 2014 “About Me” Survey

Yes No

Page 11 Haisken-DeNew | Tuesday, 25 July 2017

Interest in IT Skills: Displaced Autoworkers

Holden “About Me” Survey (Aug 2014)

• STRONG Interest in gaining or

advancing skills in computer software, packages, systems or processes

And they want to learn new IT skills!

SOURCE: Holden Aug 2014 “About Me” Survey

Yes No

Page 12 Haisken-DeNew | Tuesday, 25 July 2017

HILDA Panel at Melbourne Institute

Employment prospects

• HILDA 2001-2015
• Men/Women
• Mining/Manufacturing/Construction
• Simple Probit: Re-employment

People from MMC are employable, versatile, want to work

SOURCE: Own calculations, HILDA Survey; http://melbourneinstitute.unimelb.edu.au/hilda

• Of the people currently not working, what is

probability person’s last job was in MMC? MMC SAME AS ANY OTHER INDUSTRY

• Given a person was MMC last period, what is

probability person is employed this period? ONLY 0.2 %-PT LOWER

• What is the probability of working in MMC,

given that you had lost your MMC job in previous period? ABOUT 44%, BUT 2015 ALMOST 10% LOWER.

Page 13 Haisken-DeNew | Tuesday, 25 July 2017

Maintaining Skilled Work Force in VIC/SA

Pro-Active Policies/Incentives

• Firm providing active support to

workers to re-enter a job market they last looked at years ago

How to make that transition best?

SOURCE: Own pictures, visit to Holden, Elizabeth SA, May 2017

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What new growth industry could use the skill set of the existing car workers in Melbourne and Adelaide?

“Smarter Energy”

Some examples in Canada, NOW

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Australia Lagging Behind OECD in Clean Energy

Changing Composition of Energy Use

• Need to Burn Less Coal!
• Better use Electricity Capacity!
• More Renewables!

SOURCE: Ross Garnaut (2008) The Garnaut Climate Change Review, Chapter 7, “Australia’s Emissions in a Global Context”, Fig 7.6

10 20 30 40 50

Coal Petroleum Gas Nuclear Renewable

Fuel Mix Contributing to Total Primary Energy Supply, 2005

Australia OECD

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5 10 15 20 25 30

Australia (2006) OECD Avg (2005) World Avg (2005) Per Capita Greehouse Gas Emissions Tonnes CO2

SOURCE: Ross Garnaut (2008) The Garnaut Climate Change Review, Chapter 7, “Australia’s Emissions in a Global Context”, Fig 7.1; 7.4

5 10 15

Australia OECD Avg World Avg Per Capital Emissions: Energy Use Tonnes CO2 (2005)

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Brown and Black Coal

Very Intensive Use Coal has many bad externalities

SOURCE: http://www.energymatters.com.au/energy-efficiency/australian-electricity-statistics/

Page 18 Haisken-DeNew | Tuesday, 25 July 2017

World Price of COAL

External Volatility

• Exports
• Main Input

for Energy

SOURCE: http://www.indexmundi.com/commodities/?commodity=coal-australian&months=180

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World Price of N-GAS

External Volatility

• Main Input

for Energy

• Int’l

SOURCE: http://www.indexmundi.com/commodities/?commodity=natural-gas&months=180

Page 20 Haisken-DeNew | Tuesday, 25 July 2017

Price of Domestic Solar Dropping 2012-17

Future

• Price decline
• Low variation
• Plan-ability

SOURCE: https://www.solarchoice.net.au/blog/solar-power-system-prices

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Australia’s NEM (National Electricity Market)

• NSW, QLD, SA, TAS and VIC
• NEM supports 19 million residents

World’s Longest AC system: 40,000 km of lines

• NEM supplies 200 TWh (200,000,000 MWh/a)
• Household Pricing: simple price points like peak and off-peak
• BUT Wholesale Market:

Price depends on market and environmental conditions

• Heatwave can cause price to skyrocket

Can rise from $100/MWh to $12,000/MWh

Haisken-DeNew | Tuesday, 25 July 2017 SOURCE: http://www.energymatters.com.au/energy-efficiency/electricity-demand-price/

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Energy Demand Wholesale Mkt

Predicted and Unexpected VICTORIA

• 12 noon – 6am
• Price $80-$160 MWh

HIGH PRICE VOLATILITY

SOURCE: http://www.energymatters.com.au/energy-efficiency/electricity-demand-price/

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Energy Demand Wholesale Mkt

Predicted and Unexpected SOUTH AUSTRALIA

• 12 noon – 6am
• Price $70-$140 MWh

HIGH PRICE VOLATILITY

SOURCE: http://www.energymatters.com.au/energy-efficiency/electricity-demand-price/

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A NEW “SMARTER ENERGY” INDUSTRY

• Growth Industry
• City Jobs: Producer/Consumer
• High-Tech Embedded Jobs
• Clean Air
• Education & Human Capital

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Smart Energy

LiON Batteries

• Toronto Hydro

June 2017

• paired with

50 KW transformer

• Each stores 15KWh
• Distributed all over
• Load at 1am off peak
• Resupply at peak

SOURCE: https://www.thestar.com/news/gta/2017/06/21/toronto-hydro-ryerson-launch-pilot-project-to-store-energy-in-pole-mounted-compact-box.html

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Decentralised Storage Toronto June 2017

Characteristics

• 0.5 MW in a small rack
• In: takes surplus night electricity
• Out: Grid resupply / “Servo”
• Can provide 3-phase fast charge 400v
• The infrastructure for E-Cars

SOURCE: Own pictures, Toronto, Ontario, Canada, June 2017

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Rack Storage Toronto June 2017

Descentralised Storage

• Uses modules: generic Li-Ion Batteries
• Regulates temperature
• Monitors status
• Each module quickly serviced
• Can be used to resupply grid
• Can be used for E-Car “Servo”
• Can be buffer for demand surges

SOURCE: Own pictures, Toronto, Ontario, Canada, June 2017

Page 28 Haisken-DeNew | Tuesday, 25 July 2017

Canada and Australia

Expanding decentralisation of supply

• Providing infrastructure for E-Cars
• Stabilising supply & Resupply

Canadian Experience: many former employees from the AUTO INDUSTRY: RIGHT SKILL-SET !!!

• High-tech, high value
• Keep human capital
• Keeping jobs in the cities

SOURCE: Own pictures, Toronto, Ontario, Canada, June 2017

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Next Steps…

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Some Advances with “New Mining / Clean Coal”

• High Efficiency Low Emission (HELE)

Coal (higher temperatures, 40% lower emissions)

• Carbon Capture and Storage:

Reduce emissions by 90%

This alone is not enough.

Clustering Know-How

Smart Energy & E-Car Technology

• Keep high-tech jobs in VIC/SA
• Embed technology into components
• Use generic LiON storage
• Recycling Concept

We need to build a Consortium

• Automotive Companies: E-Cars
• Mining Companies
• Universities, CSIRO, ARC
• Government: State/Commonwealth

SOURCE: http://www.makingthefuturepossible.info/

Page 31 Haisken-DeNew | Tuesday, 25 July 2017

Mining companies need to move with the times!

• BHP Billiton
• BHP Billiton Mitsubishi Alliance (BMA);
• Anglo American Metallurgical Coal Ltd;
• Xstrata Coal Pty Ltd;
• Peabody Pacific Pty Ltd

Why? It is in their

• wn interest!

Mining companies need to invest in Smarter Energy

• Dominance of coal not sustainable
• Chinese dramatically reduced demand
• Investment in Know-How
• Investment in Human Capital
• Embed the technology
• Compete in areas in which we can excel
• Value-add over primary industries

SOURCE: http://www.makingthefuturepossible.info/

Page 32 Haisken-DeNew | Tuesday, 25 July 2017

Tesla’s Nevada Giga Factory

$5B invest in NV

• Start 2017
• Produce more

than 2013’s

• Drop price of

production 30%

• Yearly: 35 GWh
• Soon 150 GWh

SOURCE: https://www.tesla.com/en_AU/gigafactory; https://en.wikipedia.org/wiki/Gigafactory_1

Page 33 Haisken-DeNew | Tuesday, 25 July 2017

N E W !! South Australia’s new LiON Facility

Jamestown SA

• July 2017
• Store 129 MWh
• Output 100 MWh

SOURCE: http://www.abc.net.au/news/2017-07-07/what-is-tesla-big-sa-battery-and-how-will-it-work/8688992

Page 34 Haisken-DeNew | Tuesday, 25 July 2017

THIS WEEK !! Victoria’s new LiON Facility

Melbourne Trams

• Late 2018
• Output 75 MWh

Bendigo, Horsham, Ararat, Red Cliffs, Kerang

• Late 2017
• Output 2x40 MWh

SOURCE: http://www.theage.com.au/victoria/gore-power-to-you-former-vicepresident-launches-victorias-green-energy-plan-20170713-gxaggu.html

Page 35 Haisken-DeNew | Tuesday, 25 July 2017

THIS WEEK!! Victoria / Dandenong based SEA Automotive

Electric Trucks being produced locally by Ex-Auto Workers

SOURCE: https://www.facebook.com/DanielAndrewsMP/videos/1471322036265661/ http://www.seaauto.com.au/author/sea-automotive/

Page 36 Haisken-DeNew | Tuesday, 25 July 2017

Australia is the Sunniest Place on Earth

Australia is predestined to use solar energy intensively

IF NOT HERE in AUS, THEN NOWHERE!

SOURCE: http://www.abc.net.au/news/factcheck/2015-08-10/solar-coverage-fact-check-is-australia-sunniest-continent/6659316

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Technical Progress in Solar Technology Increasing Efficiency Perovskite

SOURCE: Jacek J. Jasieniak, Monash University, Centre of Excellence “Exciton Science” http://www.excitonscience.com/

Theoretical Efficiency of 60% higher than Si. Leverages low of Silicon devices >10x cheaper than alternative tandems Fit into the supply chain of silicon installers. Emerging market No Silicon equivalent Existing products are inefficient and expensive Research prototypes have record efficiency

Tandem Solar Cells Semi-Transparent Building Integrated Solar Cells

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Win in-Win in So Solution f lution for Melbou

• r Melbourne/Adelaide

ne/Adelaide

• Employment: Keeping Jobs Here!

Keep technical know-how in the VIC/SA regions: Skill set match Growing employment in a growth industry

• Clean Energy Targets

Lower greenhouse gas emissions Cleaner air, higher quality of life

• Energy Supply

More electrical GRID capacity / E-Car density High output 3-phase electrical Superchargers, quick and efficient

All compatible with Finkel Review / Clean Energy Targets

Haisken-DeNew | Tuesday, 25 July 2017 SOURCE: Own

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Emissions from LiON Batteries Emissions from Solar/Wind Emissions to run E-Cars Response Time for E-Supply ICB Cars likely in Europe 2040 Time Time to Waste

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