A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) claims that improving the efficiency of electrolyzers has become more important than reducing the cost of electrolyzers for the development of the environmentally friendly iron industry in Australia.
Australia is committed to building an environmentally friendly iron export sector based on its rich iron ore reserves and renewable energy sources. According to the report, although renewable energy sources have become the cheapest source of electricity generation, they have not yet achieved economic competitiveness in iron production. However, lower renewable energy costs and rising coal and gas prices have narrowed this gap.
Highly efficient electrolyzers can reduce the cost of environmentally friendly iron
The report highlights the role of electrolyzers in the production of environmentally friendly hydrogen, a key factor in the production of environmentally friendly cast iron. According to IEEFA analyst Lachlan Wright, increasing the efficiency of electrolyzers can reduce the cost of hydrogen production, even if prices for electrolyzers remain high.
According to IEEFA estimates, access to highly efficient electrolyzers can reduce green iron production costs by 15-20 percent, bringing them closer to the historical iron trading range.
Rising costs for electrolyzers are challenging the economics of the project
The report notes that expectations of a significant reduction in prices for electrolyzers in the early 2020s have not been fulfilled. Instead, prices for electrolyzers have increased, and no significant drop is expected in the near future. As a result, it has become more difficult to develop projects based on cheaper electrolysis cells and variable renewable energy, which has led to the cancellation of several hydrogen-based steel and iron production projects.
According to the IEEFA, recent technological improvements have allowed new high-efficiency electrolyzers to offset higher capital costs by reducing electricity consumption.
Rechargeable batteries support renewable energy production
The report also highlights the dramatic reduction in battery storage costs since 2020. Over the past three years, battery adoption in Australia has more than quadrupled, reducing the cost of guaranteed renewable energy.
