SYDNEY (BLOOMBERG) – Australia can benefit from its abundance of cheap wind and solar power generation to arrest decades of decline in its steel-making industry.

Harnessing the nation’s iron ore resources and using hydrogen produced by renewable power, Australia could capture about 6.5 per cent of the global steel market, generate about A$65 billion (S$60 billion) in annual export revenue and create tens of thousands of manufacturing jobs, the Grattan Institute policy think tank said in a report on Monday (May 11).

The so-called green steel would also cut the need for polluting metallurgical coal, a key ingredient in making steel based on current methods.

“Climate change is a wicked conundrum for Australia,” the report said. “It’s a threat to our health and to our agriculture and tourism industries – but tens of thousands of Australians work in industries that rely on fossil fuels. This practical plan could be a win-win-win.”

The technology to make “green hydrogen” is still in its infancy and efforts to make it a commercial reality are furthest advanced in Europe, where policymakers are quickly tightening the screws on industry to scale back pollution. The industrial gas maker Air Liquide SA, steelmaker ThyssenKrupp AG and oil major Royal Dutch Shell Plc have some of the highest profile demonstration projects.

Australia’s steel industry has long been in decline. It now ranks as only the 26th largest producer, with annual output of about 5.7 million tonnes, according to the World Steel Association. China, the top producer, churned out almost 1 billion tonnes in 2019, more than half the global total.

Efforts to resuscitate the sector have focused on finding cheaper sources of power. Sanjeev Gupta’s GFG Alliance in 2017 acquired the Whyalla steelworks in South Australia, after owner Arrium went into administration, and laid out plans to use solar electricity, hydro power and storage batteries to overcome soaring energy costs.

“Australia’s extensive wind and solar energy resources mean we can make hydrogen, and therefore green steel, more cheaply than countries such as Japan, Korea, and Indonesia,” the Grattan report said.

It would also create jobs in regions currently dominated by coal and other carbon-intensive industries, where livelihoods are threatened by global efforts to tackle climate change by cutting greenhouse-gas emissions.

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