Why hydrogen is the key to cleaning up heavy industry

Remember when hydrogen was touted as the answer to everything? From powering our cars to heating our homes, it seemed like the perfect solution to our climate challenges. But as often happens with new technologies, we've learned a lot along the way. Today, experts are taking a more focused approach, and they've identified where hydrogen can make the biggest difference: heavy industry. This isn't just a theoretical direction - it's backed by real-world projects and economic analyses, according to the recent 2024 Global Hydrogen Review by the International Energy Agency.

The 2024 Australian National Hydrogen Strategy < also highlights these key industries where hydrogen can make a significant impact: ammonia production and iron manufacturing. Ammonia production, crucial for making the fertilisers that help feed the world, accounts for 3% of global emissions. Steel manufacturing, the backbone of modern construction and infrastructure, contributes an even larger 8% to global emissions. For Australia, this presents a unique opportunity - while the country currently imports fossil fuel-based ammonia, it's also the world's largest iron ore exporter.

Using hydrogen where it performs best

What makes these industries different is how they use hydrogen. In both ammonia production and steelmaking, hydrogen serves as a chemical rather than a fuel source - it's a crucial ingredient in the production process itself. This is fundamentally different from using hydrogen as a fuel for heating or transportation, where it has to compete with direct electrification options like heat pumps or electric vehicles, which are typically more efficient and cost-effective. When hydrogen is used as a chemical agent in industry, there are often no viable electrical alternatives, making it essential for decarbonisation in these sectors.

In Australia, this industrial transformation is already gaining momentum. South Australia has taken a bold step by launching the country's first green iron and steel strategy, demonstrating how hydrogen can revolutionise traditional iron and steel production. The South Australian Green Iron Study has uncovered something remarkable: when you make green iron in Australia using green hydrogen and ship it to European manufacturers for steelmaking, it's 21% cheaper than shipping raw materials such as iron ore and hydrogen carriers. It holds the potential to reshape global industrial supply chains.

Producing hydrogen for use on site

But how do we make this work in practice? The answer lies in what experts call the "industry hub" approach. Think of it as a carefully planned industrial ecosystem where hydrogen production and use happen in the same place. Recent Monash-Geoscience Australia Economic Fairways modelling has revealed an exciting discovery: many potential hydrogen hub locations align perfectly with future iron ore operations.

One of the biggest challenges with hydrogen has always been moving it around. Unlike oil or gas, hydrogen is tricky and expensive to transport in large quantities. That's why the hub approach makes so much sense - when you produce hydrogen right where you need it, you eliminate these logistical headaches entirely.

Even more exciting is how these hubs can help solve renewable energy challenges: by co-locating flexible industrial users who can adjust their production based on energy availability, we can make better use of renewable energy that might otherwise be curtailed during peak production periods. This "agile demand" approach means less waste and more efficient use of our renewable resources.

Designing renewable energy systems specifically for hydrogen production

The economics of making this work largely depend on renewable energy. Studies show renewable costs will dominate the overall production costs of green ammonia and steel. However, nature offers a clever solution: in Australia, we find that the wind often blows strongest at night while the sun shines during the day. By designing renewable energy systems that capture both resources, and making ammonia and steel plants flexible enough to adjust their production accordingly, we can slash the need for expensive energy storage. Each site needs its own careful optimisation plan, but the potential cost savings are substantial.

Governments are catching on to this potential. The federal government has committed substantial funding through multiple initiatives: a $2 billion (with the recent additional $2 billion) Hydrogen Head-start program and the $22.7 billion "Future Made In Australia" Initiative planned over the next decade. These complementary programs aim to kickstart new clean industrial processes and strengthen domestic manufacturing capabilities.

Supporting production and creating demand

Making these clean industrial processes competitive requires a comprehensive policy approach. Carbon pricing mechanisms can help level the playing field between traditional and clean production methods, while capital support through low-interest government loans can help overcome the initial investment hurdles for new facilities. But it's not just about production - creating demand is equally crucial. Government procurement targets for green steel and green ammonia can provide the market certainty needed for investment. Meanwhile, carbon border adjustment mechanisms, such as those being developed in the European Union, could help protect these emerging clean industries and encourage global adoption of low-emission production methods.

The future of clean industry is taking shape, and hydrogen is playing a starring role. By focusing on heavy industries such as steel and ammonia production, we're using hydrogen more strategically than ever before. It's not the universal solution we once thought it might be, but it's proving to be exactly the tool we need where it matters most. In heavy industry, hydrogen isn't just part of the solution – it's catalysing a fundamental transformation toward a cleaner industry ecosystem with shared renewable and critical infrastructures. Making this vision a reality requires coordinated, system-wide planning across government, industry and energy sectors, supported by strong policy frameworks and targeted investment strategies.

Dr. Changlong Wang is a Research Associate at Monash University, a Climate Future Fellow at the University of Melbourne, and an Academic Visitor at the University of Oxford. He wrote the South Australian Green Iron Supply Chain Study, which directly informed Australia’s first green iron strategy.