Several big battery projects in Australia vital for storing renewable energy to meet the nation’s climate goals are highly likely to be using materials sourced through the forced labour of Uyghur and other Turkic ethnic groups in China, ASPI research has found.

ASPI has examined the supply chains for big battery projects across various Australian states and found that, even when the batteries are sourced from US-based companies, critical components are still obtained from Chinese suppliers. These suppliers carry well-documented risks of involvement in human rights abuses.

Australia needs big batteries because its renewable energy plans require storage for intermittent sources such as wind, solar and hydro. That’s why state and territory governments are pouring billions of dollars into battery energy storage systems (BESS), also known as big batteries.

However, most of the global battery supply is controlled by companies based in the People’s Republic of China and is dependent on raw materials mined and processed in Xinjiang Uyghur autonomous region (XUAR). Two of the largest companies that supply batteries and lithium cells for batteries—Contemporary Amperex Technology Co. Ltd. (CATL) and EVE—are used in Australian projects in spite of having been reported to be implicated in grave human rights violations, notably forced labour of Uyghur and other Turkic ethnic groups in the manufacturing and processing of raw materials. In a damning 2022 report, the United Nations stated that such violations might constitute crimes against humanity.

Our findings indicate that a legislative or policy directive is required to ensure that the default for Australian companies and governments is to source batteries that are guaranteed not to involve forced labour. Only then can Australia reach its climate goals without that success coming at the expense of human rights.

This directive should compel Australian governments to act as model contractors and incentivise and require private sector partners to undertake appropriate due diligence. It would mean mandating that project owners and operators know the origins, sources and supply chains of the batteries and their materials and are able to confirm they do not carry the risk of human rights abuses. When dealing with countries known to engage in modern slavery, such as China, it cannot be sufficient to say there is no evidence of forced labour. Rather, the supply chain must be known to be free of these risks.

If this work does not provide complete confidence, then the battery suppliers should not be used.

Understanding Chinese battery supply chains is indeed notoriously difficult. Faced with scrutiny from foreign governments and non-government researchers, Chinese companies often obscure their supply chains through intricate webs of suppliers and corporate affiliations, creating significant challenges for consumers and regulators trying to trace the origins of materials and labour. But difficult doesn’t mean impossible.

In June 2022, The New York Times uncovered that Xinjiang Nonferrous Metal Industry (Group), a Chinese state-owned enterprise, was directly exploiting forced Uyghur labour in the mining sector under the guise of a surplus labour transfer program. And in September 2023, the Washington Post detailed concerns about forced labour within the supply chains of several electric vehicle companies, including Tesla, Ford and Volkswagen.

One of the supply chains examined by the Washington Post involved CATL (宁德时代新能源科技股份有限公司), the world’s largest EV battery maker, which has contracts with seven major global automakers.

CATL attracted the scrutiny of US lawmakers in February 2023 after it struck a deal with automaker Ford. The scrutiny prompted the battery company to ostensibly divest its ownership stake in Xinjiang Zhicun Lithium (新疆志存锂业有限公司), a company reported to be connected to forced labour practices in Xinjiang. Zhicun produces lithium carbonate, which is central to the manufacture of lithium-ion batteries, from its facilities in Xinjiang.

However, while CATL officially divested from Zhicun, it continued to exercise significant control or guidance over the company’s operations through a series of holding companies and by the appointment of Guan Chaoyu as a manager of Zhicun’s new shareholder company, Chendao Capital. Guan also holds positions in several companies where CATL has invested, according to two US House of Representatives’ Select Committees.

ASPI’s research now reveals that despite the official divestment, CATL and Zhicun also continue to collaborate through a joint subsidiary, Wanzai Shidai Zhicun New Energy Materials Co., Ltd. (万载时代志存新能源材料有限公司), established in July 2022 with a registered capital of 1 billion yuan (A$211 million). This company is jointly held by Yichun Shidai New Energy Resources Co., Ltd., which is fully owned by CATL, and Zhicun Lithium Industry, with shareholding ratios of 80 percent and 20 percent, respectively.

In August 2023, a group of Republican lawmakers called on the US Department of Homeland Security to add CATL and associated companies to the Uyghur Forced Labor Prevention Act Entity List, citing their connections to coercive labour transfer programs in Xinjiang that were first outlined in a December 2022 report by Laura T. Murphy and others at Sheffield Hallam University. In June, lawmakers accused CATL and another Chinese firm Gotion of ‘state-sponsored slave labour’ and called for them to be added to a US import ban list.

While the spotlight on companies like CATL and their potential reliance on modern slavery has focused on the electric vehicle industry and the involvement of companies like Ford, Tesla and BYD, the overlap of supply chains means the same human rights risks extend to large-scale battery energy storage systems, such as those being constructed across Australia.

Despite what is publicly known, Australian governments and companies in almost all states are readily engaging with CATL, EVE and companies that use their products.

The responsibility for the projects and the selection of providers is complex.

At Collie, in Western Australia, two major battery projects are being built.

One is being built by French company NEOEN using Tesla Megapack batteries. The project is split into stage 1 and stage 2—with the contracts for both awarded by the Australian Energy Market Operator (AEMO), which is jointly operated by the Commonwealth, state and territory governments, and industry.

The second project is being developed by energy company Synergy, which is wholly owned by the WA government. In September 2023, the WA government announced it had awarded contracts exceeding $1 billion to CATL directly for the Synergy projects at Collie and another site, Kwinana. Both stages one and two of the Kwinana project use CATL batteries.

Meanwhile, in New South Wales, the most significant project is the 850-MWh Waratah Super Battery near Newcastle, supplied by Powin, a US-based company. Powin’s batteries are supplied with lithium cells made by CATL and EVE, another Chinese battery manufacturer. A quick Google search would have revealed that, earlier this year, Swedish research on human rights due diligence found that ‘through equity ownership, joint operations, and collaborations, EVE’s products are also linked to the oppression of ethnic Turkic groups in Xinjiang’.

In Queensland, the government is building a 300MWh big battery through the publicly owned energy company Stanwell, in partnership with Tesla, near Rockhampton. These Tesla Megapack big batteries and EV batteries are made with lithium-ion cells that are made by CATL.

CATL batteries have also been used in other renewable energy projects in Victoria, such as the Phillip Island Battery Energy Storage System, established in 2022, and the IKEA power project in South Australia, established in 2020. NEOEN also operates the Victorian Big Battery, the largest BESS in Victoria.

This raises the question of what requirements governments are putting on major battery suppliers such as Tesla and Powin, and the project owners and operators. There is ample public documentation to show that projects in WA, SA, NSW, VIC and QLD are using battery packs with lithium cells produced by CATL and EVE.

Australia’s stance against human rights abuses and proclaimed global leadership in combating modern slavery should dictate that both governments and companies make it a condition of their contracts with suppliers—even US companies such as Tesla and Powin—that the battery packs provided to Australia are not sourced from any country that engages in these human rights violations. Yes, such goods made in North America and Europe may be more expensive, but that is in part because corporations from these regions have to abide by stricter labour laws and human rights protections.

ASPI sought responses from a wide range of Australian and international entities responsible for the projects, including state governments, energy companies and the Australian Energy Market Operator.

The Victorian Department of Energy, Environment and Climate Action referred questions to NEOEN. The Clean Energy Finance Corporation, a federal government green bank that invests in clean energy and contributed $160 million in investment to the Victorian Big Battery, said it made risk-based assessments of the modern slavery risk associated with investments by conducting due diligence on relevant partners and supply chain participants. It said this included consideration of publicly available information such as academic and international reports including ASPI’s own research. It also queried suppliers about their modern slavery risk management practices.

NSW EnergyCo, the statutory authority responsible for the state’s renewable energy project planning, provided a background statement pointing to the Renewable Energy Sector Board plan that states project proponents are required to provide evidence that they have registered a modern slavery statement with the Australian Border Force and that their registered modern slavery statement is compliant with the Commonwealth Modern Slavery Act. (2018) It referred questions about batteries’ manufacturing to Powin.

The WA Department of Energy, Mines, Industry, Regulation and Safety referred questions to public company Synergy, which did not respond by the deadline, and to NEOEN.

The Queensland Department of Energy and Climate referred questions to public company Stanwell, which pointed us to its modern slavery statement. The most recent statement, covering 2022-23, said that of their ‘tier two’ suppliers—that is, those that are one step removed from directly supplying Stanwell—70 percent had suppliers in countries considered high risk for slavery, but none of the key suppliers had self-reported any problems. However, Stanwell did not respond to our direct written questions about Tesla and CATL.

NEOEN declined to comment. Tesla and Powin did not respond to written questions.

AEMO said it could not comment on specific projects and referred questions to project owners for queries on investment and materials.

CATL provided a written statement saying that it has never bought any products from Xinjiang Zhicun. It said it had never owned any interest nor exercised control in its operations. It further said that based on its ‘investigation and fact-checking, Xinjiang Zhicun has never engaged in any forced labor activities’. It said it worked with Jiangxi Jinhui, a subsidiary of Xinjiang Zhicun’s parent company Jiangxi Zhicun, to process lepidolite, which is a lithium-bearing mineral, in Jiangxi Province. CATL’s emphatic response contradicts the substantial media reporting, academic research and investigations done by members of the US Congress, making it highly doubtful that Australian governments and companies should derive any confidence from it as a guide to the risks of these supply chains.

This is a known problem with a known solution. It requires Australian governments and their contracted suppliers to do adequate due diligence. When battery supply chains involve Chinese suppliers, there is a high risk of exposure to forced labour that is deliberately hidden through shell companies and obscured local ownership and shareholder arrangements. This necessitates a different approach to due diligence: not a ‘tick-box’ approach to compliance but one that puts a burden of proof on suppliers and procurers to assure supply chains are verifiably free from modern slavery. If that can’t be done, these products should not be permitted in Australia.

With China’s dominance of the battery supply chain, sourcing from other countries is difficult, though not impossible—at least not yet. Australia could introduce a procurement requirement that companies and governments building and operating big battery projects stipulate in contracts that their suppliers source all components through processes and from regions that are free from forced labour risks.

The Australian government and its partners—in particular the US, Japan and Korea, all of whom have some capacity in this area—should collaborate to reduce the near-monopoly level of Chinese control (which begins at the scientific research stage). This would be the only way the Australian government could achieve its stated objectives to ‘diversify global battery supply chains’ and ‘to ensure Australia builds sovereign capabilities’, while also ‘taking a global leadership role in combating modern slavery’.

In addition, given the known threat of economic coercion from Beijing, Australia should consider its reliance on Chinese battery suppliers as a strategic vulnerability, against our national interest. The nation’s climate goals necessitate robust energy storage solutions, but they cannot come at the expense of human rights. The documented use of forced Uyghur labour in Chinese battery supply chains, potentially constituting crimes against humanity, underscores the urgency for Australian companies and policymakers to prioritise trusted, reliable and secure sourcing. By prioritising alternatives to Chinese batteries, Australia can lead not only in renewable energy innovation but also in upholding global standards of human dignity and justice.

Source: The Strategist