Session 2: Green Steel: is domestically produced low carbon materials economically viable?
Presenters: Natsuko Ogawa, Ashurst ("NO"), Tony Wood, Grattan Institute ("TW")
Discussing the Australian Federal Government's Technology Investment Roadmap.
Steel and carbon are important global commodities. The resurgence of domestic manufacturing and necessity of lower emissions leads to low carbon materials emerging as a priority technology. In this webinar recording, we consider:
- Why this is a priority low emission technology;
- What is needed to meet this stretch goal; and
- Likely impediments and opportunities
NO: Good afternoon, my name is Natsuko Ogawa, I'm a partner from the Corporate Transactions team of Ashurst in Melbourne, and it's my great pleasure this afternoon to welcome you all to our Energy Tech Roadmap session. And today, we're focusing on low carbon materials.
I can see that quite a number of people are still joining us. We have quite a broad range of people signed up for this session this afternoon, across a range of industries, and government, including the energy sector, and of course, steel and aluminium.
Whilst just sort of waiting for people to start coming along, we will get going with the formalities. I'd like to start by doing the welcome to country, so, I'd like to acknowledge the traditional custodians of the land on which I'm sitting here today and joining this meeting, the Wurundjeri people of the Kulin Nation, and to pay my respects to their elders, past, present, and emerging; and acknowledging all of the countries from whom, for all the countries that you're all joining from as well.
So this is our second seminar in our webinar series, which has followed the federal government's first low emission technology statement and, as I mentioned earlier, our focus today is on low carbon materials, which are steel and aluminium.
This is one of the priority areas of technology in which the federal government has indicated that they would like to support.
Now before this statement came out, the Grattan Institute issued its report called 'Start with Steel', which in our minds remains at the forefront of the thinking around how Australia can become a global superpower in green commodities, particularly green steel.
We're absolutely delighted to have Tony Wood join us this afternoon. Tony co-authored that report and we're going to have a bit of a conversation this afternoon.
So let me just start off by introducing Tony and if, so I think this is going to be a bit of a conversation which hopefully, towards the end of the session, we'll also have some time to take some questions. Sorry, before I do introduce Tony, I'll just note that, for those of you who are now coming online, you have a chat box that you can enter questions into. The chat box also has a contact number in case you're having tech issues, for you to call and hopefully we'll be able to resolve that for you.
So by way of introduction, Tony has been the Director of the Energy Program at the Grattan Institute since 2011. After 14 years in senior executive roles at Origin Energy.
From 2009 to 2014 he was also Program Director of Clean Energy Projects at the Clinton Foundation, advising governments in the Asiapac region on effective deployment of large-scale low emissions energy technologies. In 2008, Tony was seconded to provide an industry perspective to the first Ghana climate change review.
Tony was awarded a member of the Order of Australia in January 2018 in recognition of his significant service to conservation and the environment particularly in the areas of energy policy climate change and sustainability.
And in October 2019, Tony was elected as a fellow of the Australian Academy of Technology and Engineering.
So welcome Tony, thanks very much for joining us this afternoon. I know from our discussions, and we've had a couple before this session, that you've got a whole lot of insights to share with us. So in the limited time available, I won't hold things up, I'll get straight onto some of the topics that we have agreed we'll have a chat about and if so, hopefully, there will be some feedback from the audience as well as we go through.
So just to set the scene a bit, the energy transition debate today has tended to focus on moving away a from fossil fuel, coal fired power stations and gas fired stations into renewables. And there's been a huge amount of interest in Australia and around the world in terms of the renewables space and particularly hydrogen as being the new area of renewables that people are really really interested in. And that's including developing a domestic market for hydrogen in Australia, as well as taking advantage of our positioning, potentially as a hydrogen exporter.
We do have a separate session coming up on hydrogen so we're probably not going to spend too much time talking about that this afternoon. But your paper was focused around low carbon materials, green steel and aluminium and I thought it would be interesting if you could kick us off by talking about how you ended up focusing on that particular opportunity.
TW: Thank you Nat and thank to Ashurst for this opportunity, I'm glad for this opportunity to have some discussion around this work. In some ways this report highlights more than most we've done, strongly demonstrates the fundamental principal of Grattan and that is follow the numbers. Because we didn't start with Steel even though that is the title of the report; we started trying to understand a couple of key questions and that led us to a report which is called Start with Steel. Two questions we had was; of the sectors outside electricity, but I think there has been, for good reason, a lot of focus on reducing emissions in the electricity sector, both globally and in Australia. But outside that, are these what's so loosely called difficult to decarbonize areas.
What might be the most perspective for economic position and what would be necessary to cause that to change?
And the second thing we were looking at, was, if the world turns away from our fossil fuel exports in the next 30 years or so, then what do we replace it with in terms of export revenue? And in particular in terms of job, because we had, we saw some evidence that, in some areas where there were swings in the last federal election towards the Liberal National Party Coalition Government, that losing jobs was an important issue. So when we did the economic analysis, we found that was a number of the sectors, at some point, are likely to be interesting such as ammonia, such as aviation fuel, possibly even cement which has got to be one of the most more difficult. When you look at the metal side of things, aluminium and steel, in particular steel, we found that it looks really interesting. Not because there's an answer there tomorrow, but because the steel sector, (a) there is a, has a solution and (b) that solution, the terms in which that solution would be commercially viable and the premium you would pay for green steel over black steel would potentially be a gap that will be closable. For us that means steel ticked the box and then we unpacked in our accord OK, well if that's the case, what would we need to do in Australia to take advantage of what seems to be a potential opportunity and we think a particularly exciting one at that.
NO: That's right, and do you think that, in terms of prioritizing steel, that, are there some more immediate opportunities, do you think, of the steel versus something like hydrogen where, you know, as we said, there is a lot of noise out there, but it's kind of hard to know what we can do about that opportunity in the immediate future.
TW: I think, I wouldn't try and put the kibosh on your next webinar, but I think you'll hear an awful lot of noise about hydrogen. We already are, I mean there's either almost 40 projects on hydrogen around Australia at the moment, just about every state, half of most of the universities and many cities have hydrogen strategies and hydrogen hub strategies to be honest, I mean a lot of it is 'blah'. Now, that doesn't mean there's not going to be some very big opportunities and some interesting challenges and I think the real important issue is that we try and unpick those.
And so whether or not, you know, if you think about hydrogen as an export commodity, do we export the hydrogen, do we export hydrogen in something else, do we export electricity which is obviously the core of green hydrogen anyway? There's some fundamental questions there and each of those questions and each of those possible applications for hydrogen play out very differently in terms of the economics, in terms of where the price [point] will be at which hydrogen provides a significant commercial advantage and what might be the role of government in the policy sense in supporting a move towards these technologies?
And it's when you start imposing the discipline of walking through those different value chains and different timescales, that you start to get a feel for well, how might the technology investment roadmap actually make sense for Australia? Because it's not supposed to be, it's government money going into these programs, it's not supposed to be just for the commercial interests it's also supposed to be addressing some of the fundamental technology risks that there is a real role for government in.
NO: Yes, just sort of going back then to steel and aluminium. Obviously it was then encouraging to see the government starting to look at those as being the low carbon materials and prioritizing development of technology around those commodities as opposed to only focusing on hydrogen, for example. So really sort of starting to think about, as you were saying, you know exporting, potentially, something else that's not hydrogen or electricity in that form.
And so it was interesting to see that they have set some stretch goals around the, I guess, the price or the, the value of emissions fuel production and the goals are $900 per ton for steel and $2700 per ton for low emissions aluminium. Tony what do you think is needed to actually move towards achieving those goals? I know you have some views too about, you know, whether those goals are actually right in terms of the numbers. But do you think that that kind of, I guess, sort of goal setting will encourage the co-investment by the private sector with government in the necessary technology to achieve those kind of goals?
TW: The challenge here is that to impose some targets or goals but then have an activity based upon achieving them because when you're thinking about goals that might be 5-10 years or more out, then we know we are going to get the numbers wrong and in particular the wider technology roadmap has been phrased is a suggestion that, well if we just throw enough money into technology, then the green version, the green steel or the green aluminium will be at least as a cost competitive or even cheaper than the black version and I think that's almost certainly not true.
In our work, what we were looking at is, in most cases in this area, there will be a premium for the green version and the question is what's going to drive people to pay that premium? Is it going to be a carrot, is it going to be a stick, is it going to government policy, is it going to be consumer demand? Those sort of things. So fundamentally what we're trying to do is grow a new industry sector from the beginnings and both supply and demand have to be grown at the same time. And that's hard to do because the technology roadmap is addressing the supply side and that's going to require investment from, I think, there's a strong role for government in early stage technology and support but equally you need to have the private sector at the table to take advantage of that funding from government to develop what might be a pilot project or whatever to then start to make some progress down the cost.
And then those same companies are the ones who are going to have to be engaged with the consumers of these products because I think there will be, almost inevitably, a premium that may start higher and come down over time but it's hard to see how that premium would disappear. For example with renewable energy, we now know at least by a per hour basis that wind and solar are cheaper than new coal fired power stations. So I think that's where one of the challenges really does lie, in terms of aligning the current investment opportunity and then making sure that the movement towards those targets is achievable. Because, I mean, I don't even know what sort of field $900 relates to, but I think having a headline target does help the focus, in the same way that the government has talked about $2 a kilogram for hydrogen. Right now hydrogen probably costs, renewable hydrogen probably more like $5 or $6 per kilogram. When you get to $2 then some things become really interesting and some things have still got some ways to go. So, you know, I think each of these targets provides a focus more than an end game.
NO: Yes. And Tony do you think, when you're sort of looking at technologies for development in that context, how should those technologies be assessed by the government? Do you think that… I think the government has tended to be, in the past, not wanting to pick winners, I guess, around technologies. What's your thinking around that in terms of how government then goes about supporting the technology development that clearly this roadmap seems to contemplate?
TW: I think there's two principles and both are necessary. One is that there is a role for government to support early stage technologies that have the potential to seriously make a material contribution to Australia and the potential to be competitive on costs. And it's worthwhile giving them a chance. However, it's just as important in principle to have a very disciplined approach to how you go about doing this, because I know I have in my past, and I'm sure many people have the same experience where we start off by being neutral, but as soon as we have given birth to something, a project or a technology, whatever it might be. Suddenly they become our children and we all know that we tend to protect our children and it's very hard not to keep throwing money at something even though it looks like it's not going where it should so… One of the reasons I'm quite supportive of Arena as being one of the market, one of the agencies to follow this program is because they do have strong track record of following that discipline. We are going to fund this. This is why we're funding this particular project and this is the milestones this particular technology has to achieve and so a great example, nothing [*] technology roadmap is the projects are being funded in [*] Victoria to basically make hydrogen [*] round coal. And the reason they're doing that is that they've got major Chinese investment behind it, sorry not Chinese, Japanese investment behind it is that they want to prove the supply chain works.
Even if you make it from brown coal, let alone renewables, you can take hydrogen, liquefy it in Australia, deal with the carbon dioxide in that case, put the stuff on a ship, send it to Japan and then the product can be used in Japan. Now, it's very clear what that pilot project is supposed to deliver. It's going to be equally clear that in whatever projects and technologies the investment technology roadmap supports, the same clarity applies because otherwise you're doing that kind of thing with it. This is not about picking losers but it's about saying look, you know the best horses before the race starts. Which are the ones that we think are worth spending some money on in a training camp before we make sure they're ready to go on the racetrack?
NO: Yes, and I think that's sort of interesting when you do think about the brown coal scenario and it maybe, sort of, somehow leads into my next question is to potentially to leverage, I suppose or to look at this in the context of fossil fuels or existing coal or gas reserves to try and shore up what it might look like once we actually do go completely green and I know that's a conversation that's being had and again your hydrogen as well around blue and green, etc. hydrogen. But one of the things that I wanted to have a chat with you about Tony, is we do have a number of steel and aluminium sector participants on this call and it has been a very tough few years for that industry and energy costs are obviously a big part of that challenge that those sectors currently face. Now your paper does actually indicate that there may be some ways forward for that industry, particularly in steel as it has the chance to transform itself into a green industry through some of the initiatives that you've talked about.
But do you think the government statements, and there's been quite a lot of, I guess, follow-up press as well on the roadmap, does that give existing participants in those industries some hope that the government will help them through the transition, I guess, from what they do today to transforming into something else that might be more sustainable in the future?
TW: It's a tricky thing because I think there's two broad… It's very clear in some of the debate over the last couple of months, there's two very broad levers that governments can pull. So one of them is to say look, the direction of the world is clear. We are moving towards a low emissions future and therefore we need to be making investments, particularly in public funding, that are heading us in that direction and are consistent with a low emissions future. Recognising that this going to play over at least a couple of decades, maybe even three or four decades, who knows. There's still, in the history of the energy sector in this country, let alone globally, from a relatively short time between this whole thing around and the interesting thing is to adjust is a very significant challenge for them. So I think there is a role for governments to be making it clear, and then the industry already know this, I mean that's why a lot of industry associations are on board with the zero concept by 2050 even they know what it means. So there is a role for governments to sort out this direction. There's a lot of disagreement about the speed between different parts of the politics of Australia. But we know the direction and therefore it makes sense for the government to support those technologies.
It equally makes much less sense to me for governments to do things like invest in a gas led recovery when that's going in the other direction. You're trying to find ways of supporting ongoing or even more fossil fuel in the future when clearly we should be going in the other direction and that's something… I started my life, you mentioned before, in the energy industry working on gas so, you know, I'm very sensitive to the issues around companies that use a lot of gas but if the future is clear, then we should be moving towards the future and not towards the past and that means whether it's alumina, whether it's aluminium and whether it's steel, whether it's the iron making part of the steel process or the steel making part of the process, focusing on those areas which will help those companies in their transition. I think it's very important both in a technology supporting sense, but also in a long-term policy framework that provides either a carrot or a stick to deploy those technologies at scale in the future towards a zero emissions future.
NO: Any maybe, Tony, it might be just good at that point to just ask you to elaborate a little bit more around the carrot and stick point. Obviously not wanting to necessarily get into climate change policy, another subject that you have a lot of expertise in, but do you have any observations around that as to your thinking on what's going to be needed there?
TW: I think the… whilst we did our work we've done the with the Start with Steel report, we also have been strongly supportive of the government's technology investment roadmap, we think it's absolutely clear that we should move in that direction and the role of government makes a lot of sense. All the other stuff we just talked about has to be done but that's the direction [that's clear]. Now what that does is it develops the technology to the point that if they're going to be successful, they're helping them down the costs to be competitive. Some of the challenges are more commercial than they are technology based but they will become more clear at the time. The challenge is that we do not have in this country, policies to then deploy those technologies at scale. And there's only two ways that's going to happen. One is either a carrot or a stick. One of the carrots might grow or come from consumer demand and we do know there are very early signs still that some consumers, in particular industrial consumers who are worried about the emissions profile of their entire supply chain who themselves have committed to net zero by 2050, they want to make sure their supply chain is green or low emissions let's say, so that means that if you're a car manufacturer, that means green steel or green aluminium. So that's one way the demand could come from. The other one of course is from governments where governments either put in place some sort of stiff regulation carbon taxes and those sorts of things or carrots where they provide an incentive to invest in lower technologies.
I have been involved, like many people in so many debates around what's the best policy. I don’t care anymore, just have one. So I'm optimistic that as we move through the next phase of this, we will see the development of some combination of carrots and sticks that will provide the commercial incentive to not just drive down the cost of these technologies but then ultimately deploy them at scale so that our economy and the sectors of our economy could move towards that low emissions future and, you know, even the current prime minister said that net zero by 2050 is absolutely achievable even though he's not yet committed Australia to that particular time.
NO: And I wonder, Tony, whether, I guess we can't isolate ourselves from the rest of the world in all of that are you’re talking about demand from consumers and, or even wholesale consumers of products who are under pressure to move towards zero themselves and, I guess that premium you were talking about that might look like a premium but actually is something they're prepared to pay because, in the scheme of things from their perspective, it's actually something that makes sense for them to pay so it's interesting thinking about that demand side aspect and the potential growth of that, particularly when you look at some of the commodities we're talking about, aluminium has got this great recyclability aspect to it which is actually one of the great attributes of it that perhaps doesn't get emphasized enough in some of the discussions.
OK. And I just want to stick with the international aspect and I note that we're coming up towards 1:30 and I was going to actually make this my last question so that we could open it up to the floor so please start thinking about any questions and shooting them through to us through the questions box. Tony, just this last question I was going to ask you. In what I do, I do deal quite often with international investors coming into the Australian market and fortunately we are a very attractive market for foreign investment, particularly in energy and resources and in manufacturing as well. So I'm always very conscious though that we are always competing with other countries for that money to come in and the support to come in from the private sector and I'd just be interested to know what your thoughts are on how well you think Australia stacks up against the rest of the world when you look at opportunities like green steel. Why Australia? And that might be because of, not just because of our government incentives, but other conditions that support it.
TW: I think this is actually a question that we will be asking ourselves over and over again. Why Australia? Because we're not, you know, there are some particular aspects of the opportunity that arises fundamentally from the diversity of renewable energy and the scale of that renewable energy that Australia has. We're not unique in the world and the opportunities that come out of that will not be handed to us on a plate. So your question is one that's going to have to be answered and re-answered I think over the next couple of decades. But I think you can see there's some simple things we already know so we already know that well there are countries that will have similar scale of renewable energy and therefore the potential to make things out of that. Not many of them have the same other resources we have in terms of, say, bauxite alumina and iron ore, particularly the combinations of iron ore that better lend themselves to green steel manufacturing. Secondly, we are globally well positioned in terms of this is the age and century then this is not a bad place to be. And then finally a number of the countries to whom we already export fossil fuels are not themselves in a position to be able to, they don’t have the renewable energy resources we have. And so developing the commercial, the commercial relationships with the companies in those countries becomes critically important. And that example I used before that in relation to the coal to hydrogen project in the La Trobe Valley is an example there where Japanese companies and the Japanese government supported by the government are very keen on getting clean hydrogen from Australia.
So I think that there are some… A lot of the things are lining up in our favour but that doesn't mean we will be uniquely in that position to do this. The second thing that makes it interesting when governments do announce things like the technology investment roadmap and the funding for these programs, particularly the money that's been provided to Arena and the CEFC for this. Of course companies will come and take the money and this again is why the discipline needs to be applied. So OK well, that's all very well and good but we need to know when individual projects are being proposed, what are these projects going to do to justify the government funding in this area because the government funding here is to drive the benefit for Australians and if commercial companies, overseas companies can get the benefit that's great but the primary focus is to develop the opportunity for Australia. So we know what our import green steel, for example, what we want to do is make it here. so I think it's a delicate balance. At the moment, at least in the short to medium term I think the governments are right.
NO: And Tony, do you see which other countries in the world are doing well in this area, attracting that investment do you think?
TW: When we were doing our work a few months ago on our report and in conversations we've had since, exactly the same questions arise everywhere. You can look at the carbon policy in the European context and say that they're doing better than we are but the companies involved ask exactly the same questions. Who's going to pay for green aluminium or green steel and who's going to pay for aviation fuel? Who's going to impose a demand as a regulatory requirement on airlines in Europe to use their low emission fuels and therefore so I don't think it's all clear that there's a model we can follow. There's things we can learn on the visual basis but again there are things about Australia, the size of our country, the relatively small population, the fact we do have, we all develop skills in certain areas, particularly resource development and extraction that are not unique but they are very powerful ones so I think yes, we should absolutely be looking to lean fromwhat others are doing but I don't think there's a single model that you can say why don't we do it… why don't we do it like they do because I don't think 'they' exist.
NO: Yes, and I guess that's part of the opportunity is to be a first mover or a country that is seen to be placed to start that journey and often that means that the industry establishes itself over time as we've seen with other industries like LNG for example where big foundation investments from international investors help to build an industry.
Well we have got a great question from the audience which I'm going to put to you Tony. It's something that I don't think we've actually spoken about so I'll see how you go. The question is 'How does this green production of steel and aluminium fit in with the recycling industry and green manufacturing in Australia?'
TW: Sure. Steel is a great example of this. You know, around the world, including Australia, depending on the country, depending on its history with steel manufacturing or steel usage more than manufacturing, a lot of steel comes from recycled steel, sometimes as much as 80% and, you know, you can certainly go a long way down that path and, I mean, there is energy used in turning recycled steel into new steel. And that tends to be a process that doesn't involve blast furnaces and doesn't involve making iron from iron ore or all the other things that are related to what we were talking about, but I certainly relates to how you move forward.
So, you could certainly, and I think we should be, absolutely making sure that recently used and recycled steel remains a significant part of what happens going forward. But I do think also it's hard to see that there won't be an ongoing role for new steel coming from iron ore, iron making and that will then continue to be a role so I think in that case, this should not be, and I don't think anyone's suggesting it should be a replacement for recycled steel and I suspect the same thing applies to recycled aluminium. That whole area is, almost certainly has to be part and I think, to be fair, in many countries it is already a significant part of the metal and manufacturing industry.
NO: OK. Well thanks very much for that question. We still have a little bit more time so please feel free to send some further questions through. Tony, one other question I might just throw at you which we had a quick chat about as well. And that was just to put this all in context for generators of electricity. We do have quite a number of energy companies online who I know are active in both the conventional and also in renewable energy development and we did mention, I think, that wind and solar aren't regarded as being innovative or new technologies anymore and so maybe aren't the primary focus of the technology roadmap. What do you think all of this means for those kind of companies? Particularly when you think about the potential opportunities that green commodities provide.
TW: I think one of the lessons for developers and investors and mainstream energy companies in this area is more… Asking the right questions is really important. So what I mean by that is I think a lot of people have looked to develop large scale solar and wind projects in Australia either without understanding or with having a misunderstanding of the regulatory and policy framework that exists in this country. I'm not saying if they're good or bad or whatever, it relates to just a fundamental geography and demography of Australia but we've seen that become quite problematic for large scale renewable projects in recent times and part of it I think was because they got bad advice, part of it was because they didn't get good advice and so forth.
And part of it was I think, you know, to be fair the regulations haven't been keeping up with the developments here and the same thing that apply in the sort of stuff we're talking about here now in relation to how this can move forward. But I think the… understanding what the nature of the opportunity will be and how different companies will have their own model about what their role is, so if it's project development, that's quite a different role from being a generator of electricity or being on the sales side of that. So in the case of green steel for example, if we were seriously to have a manufacturing base for green steel based upon renewable energy, the sort of scale we're talking about (a) it can generate large numbers of jobs and economic opportunity, particularly for export, but (b) it needs a very very significant quantum of renewable energy and ideally, in certain places that are related to where the material is going to be used and possibly export. Now that means that, I think, you can see partnerships because I can envisage dedicate your renewable energy supply going to these sorts of products, projects.
It doesn't mean that you might not favour having renewable energy projects and steel manufacturing in areas which are at least reasonably adjacent to the electricity grid that you may be able to move electricity both ways but I think the fundamentals will be very live scale and to some extent [alone]. Now that means that the companies that are already capable of building these things are slowly becoming important. Steel's a very… The different between steel and aluminium I think here is actually particularly important because what makes steel unusual compared to aluminium and other metals or other manufacturing using renewable energy, is that you are not as affected by or dependent on the intermittency of the wind and solar so the idea is that you can run your electro-lines, the more you run them, the more hours a day you run them obviously the lower the cost, but you can run them in a way that deals with the wind not blowing and the sun not shining and the way you do that of course, to interphase that with the iron making process is through hydrogen as a buffer.
Now you can do that, we think, in a way that looks to be economic. Well obviously the costs of hiring the storage is relevant but it can be done. I mean on the other hand the steel to us seems very challenging because basically you're talking about electricity and I mean there's a big challenge in steel in terms of being able to provide a format of electricity to allow aluminium smelt. Now I know there's a lot of work being done to improve the extent to which aluminium smelters can be broken down in terms of their consumption of electricity but, and there are some important commercial issues here, but to create aluminium smelter to be based upon green electricity I think is still quite challenging and managing the commercial risks associated with that really is fundamentally a technology problem at the moment I don’t think unless someone comes up with a brilliant new way of aluminium making and I know people talk about that. But I think the best of technology we see today, aluminium is quite different and I think there's going to be some quite different challenges in providing renewable energy on a firmed basis to anything that looks like a current aluminium smelter.
NO: OK. And I'm glad you got that point out Tony because that was one of the things that I think hasn't really been teased out in a lot of debates. When we think about how applicable your thinking around green steel might be to similar opportunities, where the subtle differences might become quite important and certainly that's a new point that I learnt, so I'm talking in the last few days, so I'm glad you should manage to get that one out.
I think there's one more question that's come through in relation to green hydrogen investment if that's OK Tony. So it will be our last one – would you be able to comment on the CSIRO invention where hydrogen gas can be safely transported as ammonia and converted for use to hydrogen gas at the point of use? And just to comment here, this must be encouraging for green hydrogen investment.
TW: Sure. Hydrogen is the most widespread molecule in the universe I think. I haven't checked every other part of the universe but that's what I'm told. Certainly it exists in lots of places but not as hydrogen, it exists as mortar, as natural gas and so on, as combined with other atoms and molecules right? Now we do make hydrogen in Australia but it never gets out. Basically, in the middle of the very process of making fertilisers and explosives, we make hydrogen from natural gas and the hydrogen then gets made into something else in the middle of that process.
Now when you think about hydrogen as a carrier of energy, then you have to think about the nature of hydrogen. The trick with hydrogen is this; as a gas it's very low density so that means that in a certain space you don't get much of it in there. The best way to do that as a raw material is to liquefy it. That's what we do with natural gas and that's what we always do with ammonia. The advantage of those products is that whilst they're quite cold, well understood, they're achievable and they already have a lot of commercial space. On a commercial widespread basis there are ammonia ships, there are LNG ships that many people will be familiar with.
Hydrogen you've got to go way down in temperature, -250 degrees. Now, it's possible but it's challenging and one of the reasons we think we're better off using the hydrogen in Australia to convert it to iron and then export the iron is that very point. To transport hydrogen is going to be hard. If the end consumer actually wants hydrogen, then there are two things you can do. One is you can liquefy the hydrogen which is what that brown coal to hydrogen project is looking to do and once you get hydrogen, liquefy it. And you can get an awful lot of it in a tank. Materials are challenging but it can be done. A more interesting possibility is to transport something we know about and that's ammonia. So ammonia is nitrogen and hydrogen so if you manufacture ammonia for the hydrogen which again requires some cost and energy then transporting ammonia is something we know how to do commercially already, it's pretty straightforward. Then you've got two choices, you either use the ammonia as it is and many people would say you convert ammonia in a power station, you can use ammonia as a shipping fuel but more interestingly you can separate it back into hydrogen again. And what CSIRO have done is to build up a really interesting membrane technology which enables you to quite, I won't say trivial, but relatively straightforward to having combine the ammonia, the hydrogen and the nitrogen to make ammonia and then shipping it at a modestly low temperature then at the other end you can convert back into hydrogen again using their membrane technology. So it is potentially although an exciting part of the entire supply chain process of getting hydrogen from renewable energy from water in Australia to an energy project in Japan or Korea or somewhere.
NO: Excellent! Well it looks like we just were talking about hydrogen so thanks for taking that question. I think we're almost up for time but I just want to thank you again Tony for giving us your time and your insights. I think we did get one more question but I think we have, I don't think we can, do you think we can fit one more question in?
No, actually I think I've covered it, sorry. So let me just wrap up. I just wanted to, I think my take outs from today's discussion are really that we think the technology roadmap is a good thing and it's good that it's actually bringing this conversation to life and that we're able to now look back at your paper and your work Tony and engage in discussion around that knowing the context of the government moving forward with the technology roadmap.
I think the key thing from your message is really just that quite a bit of thought needs to go into how we take advantage of the opportunities, how we assess the opportunities, how we assess the technology, the criteria that needs to be applied to really make sure that the Australian government is getting bang for its buck and the tax payer is getting bang for its buck in terms of not necessarily picking winners but the legitimate projects that can be supported that hopefully will lead to some good learnings and outcomes for the future.
I think this is certainly a space that everyone on this call will watch very closely going forward and hopefully there will be more details forthcoming in future statements to take the debate forward but thank you again for your time Tony and thank you to the audience that have joined us this afternoon. We look forward to continuing this conversation on future sessions. Thank you very much.
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