Powering a future metals industry in Australia with wind and solar will be the key to both maintaining international competitiveness of Australia’s manufacturing exports, as well as strengthening Australia’s local electricity system.
Speaking to a webinar organised by the Clean Energy Council, the Grattan Institute’s Tony Wood said that there was an opportunity for Australia to maximise the value of both an emerging market for renewable hydrogen and Australia’s iron ore resources, by integrating renewable hydrogen in the steel manufacturing process.
“You can either do the entire process effectively in Australia, taking the iron ore to iron and then through the steel. You can pause at the direct reduction iron process and export the iron and that could be processed into steel in the destination country,” Wood said.
“Or, we can do what we do with coal today and export the iron ore and the renewable hydrogen to produce the steel. Each of those ways is economically somewhat different.”
“If you talk about a country like Japan, it looks like that first pathway would be a good way to go. We should combine the renewable hydrogen and the iron ore in Australia, right through to the steel process.”
There has been significantly increase in interest in the production of renewable hydrogen, as a way of linking low cost supplies of wind and solar energy into traditional, energy intensive manufacturing industries like metals manufacturing.
Renewable electricity can already supply low-cost energy to aluminium production, by directly supplying zero emissions electricity to aluminium smelters. However, there is an added challenge for steel manufacturing, which requires a source of thermal heat to fuel iron smelters, which provides an opportunity for renewable hydrogen to solve that challenge.
Several European steel producers have already launched pilot projects to explore the potential of replacing coal used in steel production with zero emissions supplies of renewable hydrogen.
An analysis undertaken by the Grattan Institute suggests that while both renewable hydrogen and iron ore represent substantial export opportunities for Australia, value-adding both through the production of green steel would deliver even greater benefits to the Australian economy, including thousands of jobs.
The use of hydrogen could also provide increased flexibility in the Australian energy system, working as an intermediary between supplies of wind and solar energy, and energy use in steel production. As RenewEconomy editor Giles Parkinson wrote last week, it means smelters can effectively act as giant batteries.Â
“This is interestingly different from Aluminium is that the hydrogen itself becomes the buffer between the intermittent supply of renewable energy and the continuous process of making the iron,” Wood says. “And so storing hydrogen for reasonably short periods of time is important.”
Speaking to the Clean Energy Council webinar, the Australian Aluminium Council’s Margi Johnson agreed that the production of aluminium in Australia also had a role to play in helping to balance Australia’s energy system.
“What I would say is without smelters, the challenge is even harder. Aluminium smelters have been increasingly called upon to provide demand management services provide great stability and reliability, particularly in recent summers because of the large fast acting interoperability we provide,” Johnson said.
“Retaining these large industrial loads will help support the transition to low emission electricity. So aluminium smelters can provide both short term for example, frequency control, and also longer term for example, load shedding style interruptions.”
Wood added that ongoing investment in improving renewable hydrogen technologies would be key, ensuring that the cost of production continues to fall towards competitive levels, and that recent investments made by the Australian Renewable Energy Agency and the Clean Energy Finance Corporation would be key.
“This is not a today opportunity. But if we don’t start preparing it, we don’t want to find ourselves in ten years time saying ‘what the hell happened’?”
Several large-scale wind and solar projects, paired with hydrogen production facilities, have been proposed in Australia, including a massive 5,000MW proposal for Western Australia, which as won the backing of leading global hydrogen electrolyser provider Siemens.
