IEEFA warns Australia on green steel after $1B pledge

An analyst said projects that followed a “gas first” model struggled to secure buyers and offered no price premium.

As Australia commits $1b to developing a green iron industry, the Institute for Energy Economics and Financial Analysis (IEEFA) says the government should learn from costly missteps in the United States and Europe to avoid repeating them.

EEFA analyst for global steel Lachlan Wright said several low-emission steel projects overseas that received substantial government grants were later delayed or cancelled due to structural weaknesses in their design and execution.

Wright said projects that followed a “gas first” model struggled to secure buyers and offered no price premium, whilst those based on renewable hydrogen performed better, with hydrogen-based direct reduced iron fetching a 20%-30% premium.

Half of Australia’s new Green Iron Investment Fund will go towards the Whyalla Steelworks transformation, with the remainder available to greenfield and brownfield projects across the country on a 25:75 cost-sharing basis.

IEEFA recommended that Australia prioritise integrated projects that combine ironmaking, renewable energy generation and electrolysers to ensure long-term access to affordable, low-emissions energy.

It also urged policymakers to link hydrogen production support with end-use industries such as green steel.

The IEEFA report found that successful overseas projects tended to operate where reliable clean power and coordinated policy frameworks were in place, allowing stakeholders to secure offtake and supply agreements with greater confidence.