Australia’s steel sector is drawing criticism for focusing its decarbonisation efforts on natural gas rather than the global trend toward green hydrogen, according to a briefing which warns this risks locking the country into uncompetitive, high-emission technology.
Kallanish notes from the Institute for Energy Economics and Financial Analysis (IEEFA) that while developed nations are prioritizing replacing fossil fuels with renewable energy and green hydrogen, major Australian steel producer BlueScope Steel is lobbying hard for accelerated domestic gas development and supply prices below AUD 10/gigajoule ($6.55/GJ).
According to IEEFA, new domestic gas projects are unlikely to meet the sub-AUD 10/GJ price target. Furthermore, even if the price is met, Australia would struggle to compete with low-cost DRI producers in the Middle East.
Meanwhile, gas-based direct reduced iron (DRI), while cleaner than coal, is not green, emitting around 1.4 tonnes of CO2/t of steel.
Analysts dismiss carbon capture and storage (CCS) as a viable solution, citing its history of underperformance and limited success in the steel sector globally.
The analysis suggests Australia should be following leaders like Oman and Sweden, which are mandating or building DRI facilities using early green hydrogen uptake.
“The only effective way to decarbonise DRI-based steelmaking is to replace gas with green hydrogen,” the analysis says.
“Rather than new gas field developments that won’t give the steel sector what it needs… Australia should be targeting early green hydrogen use for DRI. This would reduce the demand for gas at future Australian DRI plants and put them on a realistic decarbonisation pathway,” it concludes.
