Australia's Hydrogen Strategy Should Prioritise Ammonia and Green Iron Over Exports

IEEFA's submission to Australia's National Hydrogen Strategy review argues that green hydrogen holds genuine promise for domestic ammonia production and green iron manufacturing, but that direct hydrogen exports and blending into gas distribution networks do not make financial sense. The submission calls for urgent action to prevent Australia from losing its hydrogen opportunity to international competitors.

IEEFA identifies green ammonia production and hydrogen-based direct reduced iron manufacturing as the two most financially viable applications for Australia's green hydrogen. Ammonia can be produced with limited retrofitting of existing facilities, offers an export pathway without the prohibitive cost of shipping hydrogen itself, and has potential future applications in long-haul shipping fuel. Green iron production via direct reduced iron technology, exported as hot briquetted iron, would leverage Australia's combined advantage of abundant renewable energy and large iron ore reserves, a proposition already attracting interest from major steelmakers including POSCO, Nippon Steel and China Baowu.

In contrast, IEEFA finds that direct hydrogen exports are economically unviable given shipping energy losses of approximately 75% when liquefying and transporting hydrogen from Australia to Japan in the Hydrogen Energy Supply Chain project. Blending hydrogen into gas distribution networks for residential use is similarly uneconomic, costing ten times more than electrification to power a home. The submission also cautions against hydrogen from fossil fuels with carbon capture and storage, noting that CCS projects have systematically underperformed, with Australia's Gorgon LNG facility achieving only a 32% capture rate over its first six years.

Australia faces a competitive disadvantage in green iron because most Pilbara iron ore falls below the 67% iron content threshold required for direct reduction processes, against reserves typically between 56% and 62% iron. The submission calls for accelerated research into technology adaptations that enable use of lower-grade Pilbara ore in DRI processes, and notes that countries including Brazil, the Middle East and Africa are moving quickly to claim green iron market share. IEEFA also recommends protecting domestic energy consumers from gas industry messaging that promotes a hydrogen future as an excuse to continue investing in gas appliances.

Key figure — 32% — capture rate achieved by Australia's Gorgon LNG carbon capture and storage facility in its first six years of operations, against its stated targets.