Electrification: Australia’s Chance to Power the World | The Decade Ahead

**Bryce** (0:00)
Global electricity demand is about to double, and what's driving that runs on four critical minerals. Australia is sitting on some of the biggest deposits on earth. This week, we're unpacking the investment case for each one.
Welcome to The Decade Ahead, a 10-part series on Equity Mates where we're unpacking 10 themes for the next 10 years. My name is Bryce.

**Ren** (0:23)
And I'm Ren, and today we are talking about how Australia can be a green metals superpower. Electrification is changing the energy grid, and Australia has a chance to be a real beneficiary of it, if we take advantage of it.

**Bryce** (0:39)
Global demand for electricity, Ren, is absolutely booming, as I said in my intro, and there are some big things driving that. EVs are soaring in popularity. We've got data centers, which you can't look past, absolutely driving up demand.

**Ren** (0:52)
Yeah. The way I think about electrification as a theme is, it's like there's a two-part process here. The first part is existing energy use is transitioning. Yeah. Obviously, driven by climate change, we're seeing coal and stuff that produces electricity switch to renewables, but we're also seeing oil-based energy switch to electric energy.

**Bryce** (1:16)
Yeah.

**Ren** (1:16)
The classic example being cars. Cars, yeah. So there's an electrification there. All things being equal, we're using more energy and less other types of.

**Bryce** (1:26)
More electricity.

**Ren** (1:27)
More electricity and less other types of energy. Thank you. So that's like part one. And then part two is there's like heaps more demand on the energy grid. And so one, the obvious one is AI and data centers, which is just sucking up huge amounts of electricity.
But there's also this really big story around emerging markets, electrifying and getting more people connected to power. As people enter the middle class, they buy home appliances, they get air conditioning. There's all these like new demands on the grid. They get cars, which more and more are electric. The suppliers of the raw minerals that power this electrification trend are going to be big winners.

**Bryce** (2:11)
Big time. Well, Australia, we have a handful of those critical minerals. We have some of the largest deposits in the world, and we'll dive into those in a moment. Let's just look to 2035 to, I guess, contextualize why this is a theme for the next decade. Global electricity demand is projected to soar by 30 to 50% by 2035, driven by a lot of the things we just mentioned, data centers, industrial electrification and the like.
Australia, our electricity demand will double by 2050

**Ren** (2:39)
Yeah, and that's according to AEMO, the energy market operator. Double by 2050 That's obviously not 2035
It just shows the scale of the challenge and the opportunity that we have.

**Bryce** (2:50)
Well, by 2035 here in Australia, data center sector demand could represent about 8 to 11% of our total electricity consumption. To compare that to today, it's 1%.

**Ren** (3:02)
Yeah.

**Bryce** (3:03)
So it's what you were talking about earlier. It's not just a transition. It's an increase.

**Ren** (3:09)
So there's a number of ways you can play this electrification boom. There's the big electricity utilities. You can look at Origin and AGL.
There's the service providers, people that are installing poles and wires and servicing them. In the US, a company that's done incredibly well in the past year is Quanta Services.
They do a lot of the electric work for data centers. They've more than doubled in the past year. So there's a number of different ways to play this boom. We're not going to talk about all of them. For this episode, we're going to drill down on one where Australia has a comparative advantage. And that is, once again, the Australian story is that we are blessed with the metals that the world needs.

**Bryce** (3:59)
So the IMF has identified four that are most crucial for this thematic. We've got Copper, Lithium, Nickel and Cobalt. So if we start with Copper, it's the foundational metal that is moving electricity.
You need Copper.

**Ren** (4:13)
And here's the thing, Australia has the second largest reserves of Copper in the world. We're currently in eighth place in terms of production. But as Copper is hitting all time highs, we have got the reserves.

**Bryce** (4:26)
That's the wire ETF if anyone's interested in Copper.
So the second is Lithium, very popular for batteries in EVs. It's the metal.

**Ren** (4:37)
Very popular for batteries in EVs and investors in 2021

**Bryce** (4:41)
Yeah, big time, big time. We definitely rode that boom. Roughly 80% of the global lithium production goes towards battery manufacturing. And would you believe Australia is the largest producer of lithium in the world, producing double that of second place Chile?