Download the full PDF here.
22nd July 2024
James Flick
General Manager
Industrial Net Zero Policy Branch
Department of Industry, Science and Resources
10 Binara Street
Canberra ACT 2601
Dear James,
Re: A Future Made in Australia: Unlocking Australia’s Green Iron, Steel, Alumina and Aluminium Opportunity
The Australian Hydrogen Council (AHC) welcomes the opportunity to engage with the development of Australia’s green metals opportunity under the Future Made in Australia Act (FMIA).
AHC is the peak body for the hydrogen industry and our membership includes companies from across the hydrogen value chain. Our members are at the forefront of Australia’s hydrogen industry, developing the technology, skills and partnerships necessary to ensure that hydrogen and its derivatives play a meaningful role in decarbonising Australian industry.
The proposed Future Made in Australia Act is a vital Australian Government response to changes in global supply chains and energy security, as well as a necessary step to reinvigorate Australian capabilities and grow economic complexity. The energy transition is hugely challenging but it also presents an important opportunity for Australia to develop competitive advantage in renewable energy production, technology and use within the global marketplace, as well as ensuring ongoing prosperity in our region.
In the 2024–25 Budget, five industries were announced as aligned with the proposed National Interest Framework under the FMIA:
- Renewable hydrogen;
- Critical minerals processing;
- Green metals;
- Low carbon liquid fuels; and
- Clean energy manufacturing, including battery and solar panel supply chains.
These industries are critical to both Australia’s decarbonisation and sovereign manufacturing capabilities. Hydrogen plays a role in most of the identified sectors. Beyond renewable hydrogen itself (to decarbonise the hard to electrify parts of our economy, and as a potential export), low carbon liquid fuels, such as sustainable aviation fuel (SAF), need hydrogen as a feedstock to support scale when there is insufficient biofuel. There will be other manufacturing opportunities as well, such as from emerging technologies across the hydrogen value chain, for example in manufacture of components and assembly of fuel cells and electrolysers.
Hydrogen also has a strong role to play in green metals, particularly in the production of iron and alumina.
Hydrogen’s role in green metals
For steelmaking, hydrogen can support the production of green iron by removing oxygen from the iron ore. Direct reduced iron (DRI) is currently produced at scale with natural gas; however, steelmakers are considering the use of hydrogen for DRI manufacturing to make the steelmaking process CO2-free, and several projects are in train. This could be a significant export opportunity for Australia, as countries seek to reduce their energy consumption and shift to importing iron from countries like Australia rather than importing iron ore and using energy domestically for processing. (The iron-to-steel stage is likely to remain in countries using the steel because steel is a relatively complex and bespoke product.)
While Australia is not a first mover on DRI with hydrogen, we are the largest exporter of iron ore, and so there is a market opportunity. This is particularly as decarbonisation policies start to bite and we can produce hydrogen cleanly. Given that the technologies currently being piloted and trialled (direct reduction furnace technology, electric arc furnace) are not expected to be deployed at scale until the late 2030s/early 2040s, Australian governments and corporates have significant motivation and lead time to ensure investment in the secure supply of hydrogen feedstock for DRI.
However, Australia could still be left behind in the global move to green steel. The bulk of the iron ore currently mined for export in Australia is incompatible for use in the production of DRI as the ore contains too many impurities. Australian iron ore is predominantly hematite-goethite, which, while a higher-grade ore, is not ideal for the DRI process because processing it to the required standard is currently difficult. Magnetite is a lower grade ore but can be processed (a process called beneficiation) for use in DRI processes. As noted by the Australian Industry Energy Transitions Initiative:
Developing new methods of processing hematite-goethite for its use in green steelmaking (especially DRI-EAF) could allow continued use of existing mines and infrastructure and preserve Australia’s current iron ore markets. The processing of hematite-goethite for use in DRI-EAF technologies is poorly understood and will require R&D to enable commercially viable methods. Furthermore, yield losses during beneficiation will need to be addressed so as to not decrease the economic viability of this route.[1]
There is therefore a fundamental need to develop and demonstrate means of producing DRI from both magnetite and hematite-goethite if Australia is to reach its potential in iron exports.
Hydrogen can also support green alumina production. Australia is the second largest producer of alumina in the world, and the largest exporter. Primary aluminium is made from bauxite, which is refined to make alumina before being smelted to make aluminium. Refining bauxite to produce alumina has four stages: digestion, clarification, precipitation, and calcination. Digestion takes place at 150-270°C and calcination at temperatures above 1000°C. Hydrogen can substitute for natural gas in calcination and is considered a strong alternative to electrification.
The pathway for green metals is still nascent as the technologies are being developed. We know that there will be requirements for low-cost renewable electricity and hydrogen (as metals processing is energy intensive), and in some cases, the ongoing technology will not be determined until the results of trials and demonstrations have been finalised. Therefore, multiple streams of investment will continue to be required to investigate each technology until there is a clear, proven pathway. For example, ARENA has backed both the electrification and hydrogen studies in the alumina calcination process with the outcomes expected in 2030. The outcomes of studies such as these, alongside industry-led pilot studies and the sustainable finance taxonomies, will assist investors in their long-term investment strategies.
We are pleased to see the dedication to developing the technology pipeline for the processing of green metals under the FMIA, including through the ARENA-administered Innovation Fund (to facilitate commercial scale up) and the Green Metals Innovation Network (to plan for and train the future workforce). It is Australia’s opportunity to focus this support and investment on the information gaps and prove up prospective technologies through long term, robust studies and analysis.
We have discussed at length the requirements to develop hydrogen at scale, including necessary infrastructure, and RD&D in our comprehensive response to the National Hydrogen Strategy.[2]
The AHC has also provided responses many of the consultations undertaken to date, as follows:
- Electricity and Energy Sector Plan (considering the grid capabilities and role of molecules),[3]
- Climate Change Authority issues paper (discussing sequencing, concurrent investments and ambition),[4]
- Sustainable Finance Taxonomy (establishing the framework to support transitionary and green capital),[5]
- Carbon Leakage Review (exploring a carbon border adjustment mechanism that should ideally protect Australian decarbonisation of hydrogen, ammonia and urea),[6]
- Hydrogen Production Tax Incentive (maximising eligibility and access to scale the industry), [7] and
- Low Carbon Liquid Fuels consultation (encouraging long term decarbonisation and stimulating demand).[8]
AHC commends the Australian Government for the systemic reform undertaken via the development of the sectoral plans, the development of the legal and regulatory regime for climate disclosures and the sustainable finance strategy, the issuance of the green bonds, and now the reforms built into the FMIA Bill. The Australian Government’s rollout or development of the demand side support models for green metals should where possible be matched with the Hydrogen Production Tax Incentive (HPTI) to simultaneously support demand and supply for priority industries.
Recommendation: That the Australian Government continues to support work to prove up prospective technologies through targeted grants and long term, robust studies and analysis.
Recommendation: To incentivise private investment, ARENA, CEFC, the NRF and EFA should clarify their investment mandates with regards to supporting processing of green metals in Australia.
Supply side support for green metals end users
The focus on green metals is a comparative advantage for Australia to reconsider the flow of trade of our most valuable resources. This investment into decarbonising and maintaining existing Australian metals processing facilities can contribute to the expansion and diversification of Australian exports and increase Australia’s sovereign manufacturing capability, for example in the development of the offshore wind industry. One of the key concerns surrounding this policy is timeliness – Australia’s metal processing facilities are aging and need to strategically plan and reinvest in technology that will allow them to trade in an increasingly decarbonised world.
The development of a policy approach to incentivise green metals will need to both consider the supply of the green metals and the uptake. Bold policy action, alongside financial incentives or programme funding, will be required in order to ensure that industry undertakes the significant capital investments required.
Significant consideration will need to be given to the downstream costs on construction. Construction already has long lead times and inflated costs due to supply chain challenges, and the green metals industry will inherently have a green premium, which will result in a flow down impact onto the consumer. The challenge requires strategic planning and could benefit from mechanisms that directly support consumer uptake.
Recommendation: That incentives developed to drive demand should be focused on end users, to increase uptake and defray the costs associated with the transition.
Use government procurement levers
We support the development of an Australian advanced manufacturing industry and are open to a range of policy approaches. One of the greatest opportunities in this space is the utilisation of government procurement levers, especially in the use of decarbonised materials in government supported or funded projects, similar to the United States’ Buy Clean Initiative:[9]
Through Buy Clean, the Federal Government is for the first time prioritizing the use of American-made, lower-carbon construction materials in Federal procurement and Federally-funded projects. This is advancing America’s industrial capacity to supply the goods and materials of the future while growing good jobs for American workers.
A similar Australian demand side initiative could mandate, where possible, that projects supported under FMIA and other investment vehicles source green cement and metals (as well as the technologies developed and manufactured in Australia) in the construction of any buildings or projects backed by public investment. By committing to being the first customer for green metals and other decarbonised products, the Australian government creates demand, supports the order book of nascent Australian companies, and reduce risk and uncertainty for subsequent buyers and investors.
This type of initiative would ideally be supported by a strong and rigorous Australian carbon border adjustment mechanism (CBAM) to avoid the perverse outcome of parallel imports of cheaper, more emissions intensive materials undercutting Australia’s decarbonisation investment and efforts. The Australian Government should also consider an ASEAN level CBAM, both to strengthen regional investment partnerships and initiatives aimed at increasing friendshoring in critical sectors and to increase the likelihood of successful industrial decarbonisation.
Recommendation: That the Australian Government consider implementing a scheme analogous to the Buy Clean Initiative in the United States.
Recommendation: That the proposed CBAM be expanded beyond cement and steel to cover hydrogen and its derivatives.
Certification of green metals
We support the Australian Government’s commitment to funding to develop a certification scheme for green metals through an expansion of the Guarantee of Origin scheme. Given that the nascent green metals industry will require significant investment and attract a green premium, it is vital that there is robust certification of the emissions intensity across the product lifecycle. There is not yet a globally agreed definition of ‘green’ or ‘clean’ for metals, and there is significant work to be done in designing adequate emissions recording; however, this work will safeguard against greenwashing and facilitate investor confidence.
Recommendation: That the expansion of the Guarantee of Origin Scheme cover green metals to align with international best practice for the measurement and certification of scope 1, 2, and 3 emissions for the production of DRI and green steel.
Once again, we welcome the Future Made in Australia package, including this exploration of the green metals opportunity for Australia and look forward to working closely with Department of Industry, Science and Resources as the scope for future programs and incentives is developed.
If you wish to discuss any element of this submission in further detail with me or our members, please contact me at [email protected].
Yours sincerely,
Fiona Simon
CEO
Australian Hydrogen Council
[1] Climateworks Centre and Climate-KIC Australia (2023) Pathways to industrial decarbonisation: Positioning Australian industry to prosper in a net zero global economy, Australian Industry Energy Transitions Initiative, Phase 3, February, https://www.energy-transitions.org/publications/pathways-to-industrial-decarbonisation/.
[2] AHC (2023) A fit-for-purpose refreshed NHS: next steps for building Australia’s hydrogen industry, 17 August, https://h2council.com.au/ahc-publications/.
[3] AHC (2024) Electricity & Energy Sector Plan – Discussion Paper, 26 April, https://h2council.com.au/wp-content/uploads/2024/04/240426-AHC-submission_Electricity-and-Energy-Sector-Plan.pdf.
[4] AHC (2024) Re: Climate Change Authority 2024 issues paper: targets, pathways and progress, 21 May, https://h2council.com.au/wp-content/uploads/2024/05/240521-AHC-submission-CCA-issues-paper.pdf.
[5] AHC (2024) Australian Sustainable Finance Taxonomy V0.1 consultation, 7 July, https://h2council.com.au/wp-content/uploads/2024/07/240707-AHC-submission-to-ASFI.pdf.
[6] AHC (2023) Re: Public consultation on the proposed approach to assess and address carbon leakage risk, as part of the Carbon Leakage Review, 15 December, https://h2council.com.au/wp-content/uploads/2023/12/231215-Carbon-Leakage-Review-AHC-SUB_for-submission.pdf.
[7] AHC (2024) The Hydrogen Production Tax Incentive, 12 July, https://h2council.com.au/wp-content/uploads/2024/07/240712-AHC-HPTI-submission_final.pdf.
[8] AHC (2024) Submission to the low carbon liquid fuels and transport sector plan, 18 July, https://h2council.com.au/wp-content/uploads/2024/07/240718-AHC-submission-to-LCLF-and-transport-sector-plan.pdf.
[9] Office of the Federal Chief Sustainability Officer (2023) Federal Buy Clean Initiative, Council on Environmental Quality, USA Government, https://www.sustainability.gov/buyclean/.
