Australia's Green Hydrogen Strategy Should Focus on Ammonia and Green Iron

IEEFA's submission to Australia's National Hydrogen Strategy review identifies green ammonia and hydrogen-based green iron as the commercially sound priorities for Australia's hydrogen sector, while warning that direct hydrogen exports and blending into residential gas networks are financially unviable. Australia risks ceding its hydrogen opportunity to competitors unless it acts decisively, with only a single project of at least 10 MW having reached final investment decision in Australia by end-2022, against 1,400 MW in the European Union.

Green hydrogen produces strong commercial and technical case when applied to ammonia synthesis, which requires only limited feedstock retrofitting and offers an export pathway in ammonia form without the prohibitive cost of shipping hydrogen directly. Deloitte Access Economics estimates new green industrial activity — much of it hydrogen-based — represents an A$435 billion economic opportunity for Australia. Hydrogen-based direct reduced iron technology is currently the most promising pathway for decarbonising the global steel sector, and hot briquetted iron, a compressed DRI export form, is suited to shipping at scale. Australia's Pilbara region holds both the iron ore and the renewable energy resources to produce green iron competitively.

Direct hydrogen exports are found to be economically unviable. IEEFA's analysis of the Hydrogen Energy Supply Chain project transporting hydrogen from Victoria to Japan found that approximately 75% of the energy content is lost through liquefaction at -253 degrees Celsius, shipping, and regassing. Shipping liquefied hydrogen requires 2.5 times as many vessels as equivalent LNG cargoes. For residential end-use, hydrogen is five times less efficient than an electric heat pump for home heating, with transitioning gas networks to 100% hydrogen potentially costing 28% as much as building an entirely new network. Fossil fuel hydrogen with CCS is also dismissed given persistent project underperformance.

IEEFA calls on the Australian government to ensure its hydrogen strategy prioritises domestic industrial applications over export of hydrogen itself, protects the national electricity grid from competition for renewable resources with a new hydrogen export industry, and shields consumers from misleading gas industry messaging about a hydrogen household fuel future. Collaboration opportunities with India are identified as a priority area, given India's significant potential as a buyer of Australian green ammonia and green iron and the two countries' deepening bilateral energy and critical minerals engagement.

Key figure — A$435 billion — Deloitte Access Economics estimate of economic opportunity from new green industrial activity in Australia, much of it driven by hydrogen-based products.