BlueScope is looking to pay companies to set up at the Port Kembla steelworks and build wind towers, solar farms and other renewable energy infrastructure.
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On Monday, the steelmaker announced a $20 million plan to create a BlueScope renewable manufacturing zone at Port Kembla.
"Half of the $20 million incentive program will go to companies who want to build manufacturing capabilities in NSW, especially in the fast-growing renewable energy sector," BlueScope CEO Mark Vassella said.
"The other half will be invested by BlueScope directly into its steelworks to tool up our facilities in preparation for this exciting growth opportunity.
"BlueScope will incentivise companies that have a vision of smart, clean, green industrial solutions and will consider co-investing with start-ups, joint R&D pilot programs, office rental leases for manufacturing sites, warehouse and logistics facilities and access to special technical expertise within BlueScope."
Mr Vassella said the decision came on the back of last week's state government announcement of a $32 billion energy plan to upgrade the electricity network.
Part of that will look at developing Renewable Energy Zones, which will house solar farms, wind turbines and pumped hydro. The infrastructure would be built in NSW rather than overseas.
"We believe the Renewable Energy Zones will require 650,000 tonnes of steel over the next decade," Mr Vassella said.
"Today 100 per cent of those products are imported as prefabricated building work."
State Energy Minister Matt Kean was at the steelworks for Monday's announcement. He did not say whether the government would provide further funding to the creation of BlueScope's renewable manufacturing zone.
"The government energy road map will see $58 billion worth of investment coming into NSW," he said.
"Today's announcement is just the start of that."
He confirmed the government promise to look to use local steel and other materials in the construction of the energy infrastructure.
"I want to make sure that companies like BlueScope can provide the steel that we need to modernise our electricity system," Mr Kean said.
"That's why we're going to put the rules in place to ensure where it's cost-competitive, we're going to use local steel. We're going to create local jobs."
The government would look at "a range of factors" when determining cost-competitiveness and wanted to ensure steel dumping did not occur.
He said a Manufacturing Renewables Taskforce would be set up to work out those details.
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