Phase 1 Technical Report

JUNE 2021 AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 2 ISBN: 978-0-9871341-9-6 Transitions InitiativePhase1TechnicalReport Butler, C,Maxwell,R,Graham,P&Hayward,J2021, advice containedherein. the AustralianGovernmentdoesnotacceptresponsibilityforanyinformationor expressed hereinarenotnecessarilytheviewsofAustralianGovernment,and (ARENA) aspartofARENA’sAdvancingRenewablesProgram.Theviews This projectreceivedfundingfromtheAustralianRenewableEnergyAgency Acknowledgements , ClimateWorksAustralia Australian IndustryEnergy PHASE 1 TECHNICAL REPORT | JUNE 2021

3 Phase 1 Technical Report JUNE 2021 Jenny Hayward, CSIRO Paul Graham, CSIRO Cameron Butler, ClimateWorks Australia Roanne Maxwell, ClimateWorks Australia Authors AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 4 List offigures Glossary Appendix References 4. 3. 2. 1. Introduction Contents Energy systemanalysis Supply chaindetail industrial supplychains Overview ofanetzeroemissionstransitionforAustralian 3.3. 3.2. Aluminium 3.1. Box 1:Theimportanceofzeroemissionsenergyandfeedstocks 2.4. 2.3. 2.2. 2.1. 1.4. 1.3. 1.1. Appendix B:Hydrogenproduction costassumptionsandresults Appendix A:Electricitysystemcostassumptions andresults select AustralianIndustryETIsupplychains Box 2:Impactoflow-costrenewableelectricityand hydrogenon 4.4. 4.3. Biomass 4.2. Hydrogen 4.1. 3.5. 3.4. Chemicals in anetzerotransition 1.2.

Other metals Iron andsteel Pillars ofdecarbonisation Sources ofenergyuseandemissions The importanceofAustralianindustrialsupplychains Summary findings Purpose ofthisreport Scope oftheresearchandanalysis Background totheinitiative The criticalroleofregionalenergyandindustryintegration Electricity generation Liquefied NaturalGas Research andanalysisworkstream

94 89 90 62 26 89 69 50 26 62 78 97 22 65 54 10 33 76 10 16 41 15 17 71 6 8 9 6 7

PHASE 1 TECHNICAL REPORT | JUNE 2021 5 AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 6 Figure 1 does notnecessarilyreflecttheindividualpositionsofpartners intheprogram. Australian IndustryETIpartnershavecontributedtotheconclusions, findingsandmessagesofthisreport,butreport convened byClimateWorksAustraliaandClimate-KICAustralia. Mountain Institute,alongwiththeAustralianRenewableEnergyAgency(ARENA)andCSIRO.Theseconsultationswere stakeholders andreceivedsupportfromglobalpartners,includingtheEnergyTransitionsCommissionRocky To producethisreport,theAustralianIndustryETIconsultedwithadiversegroupofoverhundredcross-sectoral economic opportunitiestodriveactiontowardsnetzeroemissions. understanding thecurrentstatusoffactorsinfluencingdecarbonisationinheavyindustryaswelltechnicaland Throughout Phase1,theinitiativehasdrivenresearch,analysis,engagementandimplementation,withafocuson chains by2050. by workingcollaborativelytodeveloppathwaysandactionstowardsachievingnetzeroemissionsincriticalsupply The AustraliaIndustryETIissupportingAustralianindustrytorealisetheopportunitiesofadecarbonisedglobaleconomy including CSIROandtheRockyMountainInstitute. supported bytheAustralianIndustryGroupandGreenhouseNetwork,withresearchpartners initiative’s workhasalsobenefitedfromtheinputofotherparticipantsincludingHSBCAustraliaandRioTinto.Itis Orica; NationalAustraliaBank;SchneiderElectric;WesfarmersChemicals,Energy&Fertilisers;andWoodside.The Group; APAAurecon;AustralianSuper;BHP;BlueScopeSteel;BPAustralia;Cbus;FortescueMetals Australia GasInfrastructure the initiativebroughttogether14industryandbusinesspartners,including: Throughout 2020, address thechallengesassociatedwithmitigatingworstimpactsofclimatechange. The AustralianIndustryETIisavaluedplatformconveningindustryandbusinessleaderstocollectively The initiativefocusesonfivekeyindustrialsupplychains: companies toshareknowledgeandaccelerateactiontowardsachievingnetzeroemissionssupplychainsby2050. The AustralianIndustryEnergyTransitionsInitiative(AustralianETI)bringstogethersomeofAustralia’slargest 1.1 Backgroundtotheinitiative 1.0 Introduction ● ● ● ● ●

Liquified naturalgas(LNG). Chemicals (particularlyfertilisersandexplosives) Other metals(particularlycopper,nickel,andlithium) Aluminium Iron andsteel showstheworkandachievementsofinitiativetodate, alongwithnextsteps. PHASE 1 TECHNICAL REPORT | JUNE 2021 7 1 2 3 Q Q Q 2021 4 3 2 Q Q Q . Synthesis of enabling actions RESEARCH AND ANALYSIS: Synthesis Table 1 RESEARCH AND ANALYSIS: Pathways modelling & analysis IMPLEMENTATION: Develop early action projects, demonstration projects Workshops, Steering Group meetings, regional engagement ENGAGEMENT: Workshops, Steering Group Public announcement, workshops, Steering Group meetings ENGAGEMENT: Public announcement, workshops, 3 4 1 Partner interviews, identify early action projects, system mapping IMPLEMENTATION: Partner interviews, identify Q Q Q ENGAGEMENT: Workshops, Steering Group meetings, end of program communications challenges and enabling conditions for deployment at scale. to Summarise existing knowledge of the potential for affordable, reliable, renewable energy power industry. Validate assumptions and findings with industry partners. Characterise current energy use and emissions in each supply chain. Identify and prioritise the most promising emissions reduction technologies, including key Technology review, identify drivers of change & possible futures Technology review, identify RESEARCH AND ANALYSIS: Develop early action projects, demonstration projects, portfolio insights IMPLEMENTATION: Develop early action projects, demonstration projects,

● ● ● ● Key research and analysis activities Prioritise opportunities, technologies and challenges:

2020 2022 Timeline of Australian Industry ETI activities across Australian Industry Timeline of and workstreams different phases

Key research and analysis activities throughout the AustralianKey research and analysis activities throughout Industry ETI phases

FUTURE POSSIBILITIES FUTURE

ENABLING TRANSITIONS ENABLING PROMISING P PROMISING YS A THW A

TE AND AND TE A ST CURRENT

Phase 3: 3: Phase Phase 2: 2: Phase Phase 1: 1: Phase Phase 1: CURRENT STATE AND FUTURE POSSIBILITIES Phases FIGURE 01: FIGURE 01: TABLE 01: Commission, the Rocky Mountain Institute and CSIRO. This workstream has been designed to provide robust analysis of and CSIRO. This workstream has been designed to provide robust analysis Commission, the Rocky Mountain Institute of supply chains. Key activities for research and analysis across the three phases the transition to net zero in the chosen in the Australian Industry ETI are summarised 1.2 Research and analysis workstream 1.2 Research and analysis and analysis workstream, with support from the Energy Transitions ClimateWorks Australia leads the research AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 8 to reduceemissions doesnotextendbeyond Australia’sborders. Industry ETIresearchdoesconsider theseissues,theidentificationanddetailedquantitative modellingofopportunities steelmaking fromexportediron ore)orinend-use(forexample,thecombustionofexported LNG).WhiletheAustralian are insomecasesfaroutweighed bydownstreamemissionseitherinsubsequentprocessing (forexample,ironand As agloballysignificantexporter inmanyofthesesupplychains,Australia’sdomesticemissions fromproduction LNG –alongwithanumberof‘Othermetals’consideredkey toglobaldecarbonisation,suchascopper,nickelandlithium. considered hard-to-abatesupplychains–Ironandsteel,Aluminium, Chemicals(ammonia,fertilisersandexplosives) The scopeoftheAustralianIndustryETIresearchandanalysis coversfourofAustralia’slargestemittingandtypically 1.3 Scopeoftheresearchandanalysis subsequent phasesoftheinitiative,inparticularforpathways developmentandmodellinginPhase2. Detailed researchandanalysisonglobaldemandhasnotbeen afocusofPhase1butwillformkeyinputto decarbonisation technologies. of theintegrationindustryandenergysystemswillbesubstantial andhasinfluencedtheprioritisationof work hasalsoinvestigatedhowthiscanlowercostsandchange theattractivenessofvarioussolutions.Theimpact Integration acrosssectorsandsupplychainswillbevitaltothedecarbonisationofAustralianindustry,this supply andcosts. developing inputsformodellingofenergyandemissionsbaselines,technologyperformancecosts, decarbonisation, bothoverthelongtermandthroughouttransition.Thesekeytechnologieshavebeenafocuswhen The researchandanalysisaimstoformaviewontechnologiesmostlikelyplaymajorroleinsupplychain significance ofparticularsupplychainstages). characteristics ofAustraliansupplychains(forexample,theenergysystem,geographicalconsiderationsandrelative for theAustraliancontexttoensurethatinitialfindingsreflectneedsofindustry,andtakeintoaccountparticular also beenafocusoftheworkcompletedtodate.Whereverpossible,effortshavemadeadaptglobalresearch to unlockdeploymentatscale.Giventheimportanceofenergysupplysystemsinanetzerotransition,thesehave ETI supplychains,identifyingpromisingdecarbonisationsolutions,andbuildingunderstandingoftheenablingconditions The focusofPhase1hasbeenonunderstandingkeysourcesenergyuseandemissionsintheAustralianIndustry overcoming barrierstothetransitionnetzero. is highlyrelevantandcanbedeeplyembeddedwithinorganisations.Insightsgeneratedareintendedtocontribute assistance fromindustryparticipantstoensurethattheknowledgegeneratedbuildsonexistingbase, Throughout Phase1oftheAustralianIndustryETI,akeypriorityhasbeentoundertakeresearchandanalysiswith TRANSITIONS ENABLING Phase 3: PATHWAYS PROMISING Phase 2: Phases

Perform pathwaysmodellingandanalysis: Identify theactionsneededtoenablenetzeroemissionstransitions: Key researchandanalysisactivities ● ● ● ● ● ● ● ●

options identifiedinPhase1. Develop crediblepathwaysforindustrythroughtechno-economicmodellingofthetransition Incorporate insightsfromotherAustralianIndustryETIactivities. Australian industry. Explore theregionalimplicationsforeconomictransitionandcompetitivenessof net zeroemissions. Identify andprioritisekeyactionstodriveinvestmentindustrydevelopmenttransition pitfalls, andthemagnitudeofinvestmentchallenge. Analyse theeconomicandfinancialimplicationsofpossiblepathwaystoidentifytrade-offs, future outcomes. Identify keyexternalfactors(e.g.globaldemand,governmentaction)thatwillinfluence Validate assumptionsandfindingswithindustrypartners. energy system,whichcanbeusedtounderstandregionalimplicationsofthetransition. Consider severalregionaldynamics,inparticularindustrycompositionandkeyaspectsofthe

PHASE 1 TECHNICAL REPORT | JUNE 2021 9

1 Upstream emissions from imported chemicals use Downstream (scope 3) emissions from fertiliser transport) Processes downstream of liquefaction (e.g. international of exported LNG Downstream (scope 3) emissions from the use Out of scope of crude steel production (e.g. casting, Processes downstream steel pipe and tube manufacturing) exported iron ore Downstream (scope 3) emissions from use of or crude steel production Processes downstream of crude aluminium (e.g. semi-fabrication of cast and rolled products) of exported Downstream (scope 3 emissions) from the use bauxite or alumina Processes downstream of on-site processing

for export extraction through to production of crude aluminium Processes from metal extraction through to on-site processing (e.g. crushing and grinding) Processes from hydrogen production through to production of ammonia derivatives (fertilisers and explosives) Processes from gas production through to gas liquefaction Within scope Processes from iron ore extraction through to production of crude steel Processes from bauxite Scope of research and analysis across the Australian Industry ETI supply chains analysis across the Australian Industry Scope of research and below provides a summary of supply chain boundaries in the Australian Industry ETI research and analysis. Australian Industry ETI research and of supply chain boundaries in the below provides a summary Table 2 While these issues are not within scope in that they are not a focus of detailed research and analysis, they do form part of the overall narrative for While these issues are not within scope in that they are not a focus of detailed research and analysis, Industry ETI will consider the potential a transition of Australia’s industrial supply chains. For example, in subsequent phases of work, the Australian to leverage competitive advantages such as for Australian industry to explore new or greater downstream production where opportunities might exist products (rather than raw materials) would renewable energy. The potential to undertake increased onshore processing and export of value-added economic opportunities for not reduce emissions in Australia but could have a material impact on global emissions and unlock considerable domestic producers. LNG Chemicals Other metals Aluminium Iron and steel Supply chain

1 technologies are involved. Therefore, the analysis presented should not be interpreted as a forecast. Its purpose is technologies are involved. Therefore, the analysis presented should not be interpreted net zero emissions transition to inform further discussion and analysis that can support the development of credible inputs and outputs contained in this report pathways. The Australian Industry ETI welcomes stakeholder feedback on the of the initiative. that can support the next phase of analysis and help achieve the intended outcomes major industrial supply chains, along with energy system analysis relevant to a net zero emissions transition. The major industrial supply chains, along with energy system analysis relevant to a Australia, CSIRO and Rocky forward looking analysis in this report is based on detailed modelling by the ClimateWorks uncertain, particularly when emerging Mountain Institute. It is important to note that long-term projections are inherently 1.4. Purpose of this report technologies in Australia’s This report discusses the current status and future potential for low and zero emissions of carbon credits over time and limits to nature-based sequestration solutions such as afforestation. As detailed in the of carbon credits over time and limits to nature-based sequestration solutions such chains vary. Complete elimination of remainder of this report, the prospects for near or absolute zero emissions supply require offsets. non-energy emissions is particularly challenging in certain processes and will potentially themselves wherever possible, rather than relying extensively on negative emissions technologies or offsets. Australian themselves wherever possible, rather than relying extensively on negative emissions in Australian supply chains can be Industry ETI analysis undertaken to date provides confidence that most emissions in the context of declining availability eliminated with demonstrated or mature technologies. This is particularly important As covered above, the purpose of the initiative is to accelerate informed action towards net zero – rather than absolute is to accelerate informed action towards net zero – rather than absolute As covered above, the purpose of the initiative chains. While this implies a potential role for offsets, the intention of the zero – emissions by 2050 in the focus supply investigate opportunities for zero emissions solutions within supply chains research and analysis workstream is to TABLE 02: to other parts of the supply chain. On the other hand, the ‘Other metals’ supply chain was included given Australia’s included given Australia’s supply chain was the ‘Other metals’ On the other hand, of the supply chain. to other parts others such as iron from these metal sources relative to markets, despite immaterial emissions prominence in multiple ore. or Australia’s prominence in global production. For example, although there is some Australian industrial activity in industrial activity there is some Australian example, although production. For prominence in global or Australia’s in the this was not included aluminium production), of crude products (downstream of final aluminium the manufacture relative are emissions material products nor producer of these a globally significant Australia is neither analysis given In addition, decisions regarding research scope within supply chains were made based on the level of emissions and/ the level of emissions were made based on supply chains research scope within decisions regarding In addition, AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 10 steel production,areexpected tobeavailableforcommercialproductionaround2035(HYBRIT 2018). technologies arematureand available fordeploymentnow.Othermajorsolutions,such as greenhydrogenforusein vast majorityofemissionsineach ofthefocussupplychains.Encouragingly,analysishas foundthatmostofthese In theAustralianIndustryETIresearchandanalysis,potential technologieshavebeenidentifiedtoeliminatethe although thereareemergingopportunities,suchasusingmining wastetostorecarbon. are mostrelevanttosupplychainswithsignificantnon-energy emissionsthataretypicallymorechallengingtoabate, be eithercapturedandstoredoroffsetthroughothermeans, suchasnegativeemissionstechnologies.Theseoptions For processemissionsthatcannotbeeliminatedthroughother means,anetzerotransitionimpliesthatthesemust through materialorenergysavings,presentingadditionalchallenges comparedtootherdecarbonisationoptions. alternative steelmakingmethodseliminatingtheneedforcoking coal).Often,thesemeasuresderivenoeconomicbenefit technology uptake(forexample,nitrousoxideabatementin Chemicals),orcompleteprocessswitch(forexample, leakages ingasproduction),operationalimprovements(for example,reducingtheneedforventingandflaring),specific hydrogen orbiomassfeedstocksinconventionalsteelmaking),equipmentupgrades(forexample,topreventmethane chains. Opportunitiesincludetheuptakeofzeroemissionsfeedstocksinplacecarbon-basedproducts(forexample, reducing theneedforemissions-intensiveinputs,butinmostcasesmajorabatementsolutionsareuniquetosupply supply chainssuchasIronandsteel,ChemicalsLNG.Thesecanbepartiallyaddressedthroughmaterialefficiency, Non-energy emissions(emissionsthatarenotrelatedtotheuseoffossilfuelsasanenergysource)afeature available technologiesisanothereffectivewayofreducingenergyuseandemissionsinthenearterm. be donebythesectorasawhole(AmericanCouncilforanEnergy-EfficientEconomy,2018).Assuch,deployingbest performs poorlyrelativetoothercountriesinimplementingenergyefficiencytheindustrysector,suggestingmore can is lesssignificantthaninmetalsgiventheabsenceofproductcircularity.InternationalresearchindicatesthatAustralia products suchasfertilisersandexplosiveswouldsimilarlyreduceupstreamemissions,althoughthepotentialimpact supply chains,butislimitedbyscrapavailabilityandcollection.ForChemicals,efficienciesintheuseofdownstream of thesupplychain.Increasedrecyclingpresentsanimmediateandconsiderableopportunityforabatementinmetals decrease overalldemandforproductionofvirginproducts,withflow-oneffectstoenergyuseandemissionsinallstages a netzerotransition.Inmetalssupplychains(Ironandsteel,Aluminium,Othermetals),materialefficiencycanhelp emissions andcanalsoimprovecompetitivenessduetoloweringenergyotherinputcosts,butisnotsufficientfor In allsupplychains,theoptimisationofmaterialandenergyusehasanimportantnear-termroletoplayinreducing uptake ofzeroemissionsenergyandfeedstocksareabletoeliminatethemajorityinallsupplychains. dependent onadequateandcost-effectiveenergysupply.Together,thetechnologicalsolutionsrelatingtosupply coal andgas.Switchingtheseprocessestozeroemissionsfuelssuchashydrogenorbiomassistechnicallypossible, challenges incertainindustrialprocesses,particularlyforhigh-heatapplicationsthatcurrentlyrelypredominantlyon direct fuelcombustion.Whileelectrificationisanincreasinglypromisingdecarbonisationstrategy,therearetechnical an abatementopportunityintheirownrightduetogreaterefficiencyofelectricequipmentcomparedusing supply chains.Moreover,renewablepowerbuildsthecaseforfutureelectrificationofotherprocesses,whichareoften immediate abatementbenefitstoalreadyelectrifiedprocesses,whichareamajorsourceofemissionsinmanyindustrial solutions thatcutacrossallsectorsoftheeconomy.Replacingfossilfuel-basedelectricitywithrenewablesprovides The supplyanduptakeofzeroemissionsenergyisarguablythemostcriticalaspectanettransition,with highlighting thepotentialsolutionstodriveemissionsreductionsoverlongterm. towards zero. and emissionsinthefocussupplychainsidentifymostprospectivelong-termopportunitiestoreduce Research andanalysisforPhase1oftheAustralianIndustryETIhassoughttounderstandmajorsourcesenergy 2.1 Summaryfindings supply chains transition forAustralianindustrial 2.0 Overviewofanetzeroemissions Table 3 providesanoverviewoftherelevancedifferentdecarbonisationpillarstoeachsupplychain, PHASE 1 TECHNICAL REPORT | JUNE 2021 11 Reduction in venting, flaring and leaks Blue hydrogen production CCS of reservoir gas LNG Electrified liquefaction Blue hydrogen production Long term, zero or near-zero emissions potential

2 Nitrous oxide abatement Green hydrogen use in ammonia production CCS of SMR emissions CO feedstock from NETs* Chemicals Green hydrogen production Electrified process heat Mineral carbonation (waste rock)* Other metals Decarbonise existing electricity use (comminution) Additional electrification opportunities Process heat in metals refining* Important role in near term abatement but insufficient for net zero emissions

Inert anode for smelting* Mineral carbonation (mine tailings)* Aluminium Decarbonise existing electricity use (smelting) Process heat for alumina refining* Process heat for alumina refining*

CCS* BF-BOF with Mineral carbonation (waste rock)* production* Ore electrolysis* Iron ore haulage Green hydrogen use in DRI-EAF process* Increased recycling is another major opportunity, particularly for metals supply chains, with another major opportunity, particularly for metals Increased recycling is or demand reductions also processes. Downstream efficiencies impacts throughout multiple downstream energy energy use and emissions. For example, greatly impact supply chain gas use in certain sectors. could reduce and potentially replace efficiency and electrification Iron ore haulage Decarbonise existing electricity use EAF run on scrap or DRI Green hydrogen Iron and steel alongside uptake to optimise mine sites and plants which, There are multiple measures material and energy use. can drive significant reductions in of best available technologies Potential role in transition to zero or near-zero emissions options CCS of process emissions Negative emissions technologies Other zero emissions fuels Process improvements Zero emissions feedstocks Energy efficiency Zero emissions electricity Material efficiency Abatement opportunities across decarbonisation pillars for the Australian Industry ETI supply chains Industry ETI supply pillars for the Australian decarbonisation opportunities across Abatement Immaterial or uncertain role * These technologies are currently classified as having a technology readiness level (TRL) of 1-6 and require further research, development and * These technologies are currently classified as having a technology readiness level (TRL) of 1-6 and demonstration (ARENA 2019a). iron; EAF: electric arc furnace; LNG: liquified BF: blast furnace; BOF: basic oxygen furnace; CSS: carbon capture and storage; DRI: direct reduced natural gas; NETs: negative emission technologies; SMR; steam methane reforming. offset residual emissions Pillar 4b: Capture or Pillar 4a: Non-energy emissions abatement and other fuel switching Pillar 3: Electrification energy and feedstocks supply Pillar 2: Zero emissions service efficiency Pillar 1: Material, energy and TABLE 03: TABLE 03: AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 12 2 Australian IndustryETIsupplychains TABLE 04: concept ordemonstrationatscale. emissions inthesupplychains,thereisagreatershort-termneedforresearchanddevelopmenttoprovideproofof term throughlearning-by-doingandeconomiesofscale.Forthoseemergingtechnologiesthatcouldaddressresidual wide factors.Accelerateddemonstrationanddeploymentofthesesolutionscanhelpdrivecostsdowninthenear enable deepdecarbonisationandthatbarrierstouptakearemorerelatedeconomic,policy,capital,orothersystem- reductions, asshownin In allsupplychains,deploymentofthesematureanddemonstratedtechnologiescanachievemorethan85%emissions Supply chain Chemicals Other metals Aluminium Iron andsteel Commercial readiness categoriesarebasedonFigure2 ofARENA’s‘CommercialReadiness Index’ (ARENA2014) Major abatement opportunities, technological and commercial readiness, andresidualemissionsinthe readiness, Major abatementopportunities,technologicalandcommercial (blue shadingindicatescommercialreadiness) Major abatementopportunities Electrification orotherfuelswitching(biomass Additional electrificationofminesiteoperations electrified processes Renewable electricityforcurrently process optimisation Uptake ofbestavailabletechnologiesand Carbon anodealternatives temp heatinaluminarefining Electrification orconcentratedsolarthermalforhigh (particularly smelting) Renewable electricityforcurrentlyelectrifiedprocesses in aluminarefining Other fuelswitching(biomassorhydrogen)forhigh-heat alumina refining Electrification orotherfuelswitchingforlowtempheatin process optimisation Uptake ofbestavailabletechnologiesand CCS forblastfurnacesteelproduction Breakthrough technologiesfororeelectrolysis Battery-electric orfuel-cellpoweredtrucks Green hydrogenforDRI-EAFsteelproduction Renewable electricityforcurrentlyelectrifiedprocesses process optimisation Uptake ofbestavailabletechnologiesand urea-based fertilisers) (to offseteventualemissionsreleased from CO Nitrous oxideabatement CCS forSMRhydrogenproduction Electrification ofprocessheat Renewable electrolysisforhydrogenproduction process optimisation Uptake ofbestavailabletechnologiesand metals processing hydrogen) forhigh-heatapplicationsin 2 feedstockfromnegativeemissions technologies Table 4 . Thismeansthatthetechnicalcapabilityexists,oriscurrentlybeingexplored,to

2

technologies and ‘Deployment’ from ‘Demonstration’ Abatement potential ~100% ~92% ~85% ~95% areas ( Residual emissions mining of explosivesinironore Emissions fromtheuse emissions technologies feedstock fromnegative absence ofusingCO based fertilisers,inthe application ofurea- Emissions from oxide emissions Residual nitrous None orimmaterial technologies viability ofalternative pending commercial Carbon anodeuse, TRL<7 )

2

PHASE 1 TECHNICAL REPORT | JUNE 2021 13

Operational emissions Operational captured unable to be and stored from Scope 3 emissions use of exported LNG (not included within scope but a significant issue for the supply chain) Deployment TRL 9, supported or competitive commercial >90% from other sectors of the Australian economy. 2

Demonstration TRL 7-9, pilot or commercial scale-up stage through mineral carbonation, which could offset residual emissions from within the iron 2

– Uptake of zero emissions electricity presents immediate benefits for existing electricity use while – Uptake of zero emissions electricity presents – Many processes in metals extraction and processing are already electrified but powered by grid – Many processes in metals extraction and processing are already electrified Renewable-powered electric liquefaction Renewable-powered electric CCS for reservoir gas CCS for reservoir and removal Leak detection to eliminate venting Operational improvements and flaring – There are three main emissions sources in the aluminium supply chain: process heat for alumina – There are three main emissions sources in the aluminium supply chain: process Other metals therefore emissions-intensive. electricity or on-site generation, both of which are dominated by fossil fuels and are the major opportunity, Switching to ‘hybrid’ generation arrangements of wind and solar power with storage for electrification such as in both to decarbonise existing electricity use as well as unlock additional opportunities operators greater ability to dynamically manage energy use for longer periods of time in response to grid demand, operators greater ability to dynamically manage energy use for longer periods However, these technologies improving energy system flexibility and supporting the transition to renewables. market signals to incentivise are yet to be proven commercially viable at scale and there are currently limited installation. Alternatives to carbon anodes used in smelting have also been developed but are not yet commercially in the near term, may require viable. These emissions are therefore considered especially hard to abate and, of waste bauxite residue is one some form of offsetting to achieve a net zero supply chain. Mineral carbonation emerging opportunity for the aluminium supply chain to store CO is likely more suitable for greenfield developments due to land requirements. Given aluminium smelting is is likely more suitable for greenfield developments due to land requirements. electricity has the potential to already electrified, switching supply from a coal-dominated grid to renewable to enable this transition; reduce emissions from this process entirely. Technically, the technologies exist supply and sensitivity however, the magnitude of energy used in smelting, requirements for near-continuous of variable renewable energy. to energy prices are major challenges in managing the transition to high shares which would provide smelter Innovations to improve the thermal insulation of electrolytic pots are being trialled, no viable zero emissions alternative. Aluminium electrolysis. For alumina refining, refining, electricity use for aluminium smelting and the use of carbon anodes in technically feasible but may be zero emissions alternatives for process heat such as hydrogen and biomass are process heat are improving constrained by costs and availability in the near term. The prospects for electrified is another area of interest but but may face challenges at higher temperatures, while concentrated solar thermal emissions from current iron and steelmaking methods, although there are uncertainties regarding potential scale emissions from current iron and steelmaking Continued development of more nascent technologies such as iron ore and commercial viability of this solution. alternative zero emissions iron and steelmaking option without some of electrolysis could in the future provide an is also an emerging opportunity to use the waste rock from iron ore the barriers facing other frontrunners. There mining to sequester CO emissions from the use of explosives in iron ore production have and steel supply chain or elsewhere. Currently, be more challenging) or in the production of direct reduced iron that can then be coupled with an electric arc be more challenging) or in the production Switching from blast furnace-basic oxygen furnace (BF-BOF) to electric furnace (also powered by renewables). the need for coking coal and associated non-energy emissions. arc furnace (EAF) steelmaking also eliminates fuel-cell trucks, direct reduced iron, electric arc furnaces) are either at These technologies (battery-electric and the timing of their deployment will be largely determined by the capacity or approaching commercial maturity, but reliable, zero emissions electricity and hydrogen (likely around to expand energy systems to deliver affordable, and storage (CCS) technologies may have a role to play in addressing 2030). In the meantime, carbon capture Iron and steel iron ore haulage using battery-electric trucks. Renewable electricity also opening opportunities for decarbonised hydrogen for potential use in haulage (where electrification might also enables the production of zero emissions TRL 1-6, pre-commercial stage Research and development

● ● ● DRI: direct reduced iron; EAF: electric arc furnace; CSS: carbon capture and storage; LNG: liquified natural gas; SMR; steam methane reforming; storage; LNG: liquified natural gas; SMR; steam EAF: electric arc furnace; CSS: carbon capture and DRI: direct reduced iron; level. TRL: technology readiness LNG

AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 14 ● ●

chain, someofwhichwillbeinvestigatedinPhase2theAustralianIndustryETI. mean thereissignificantuncertaintyaboutthelong-andmedium-termimpactsofdecarbonisationonsupply significantly reducingthedownstreamemissionsfromgas.Therangeofeconomic,socialandgeopoliticalfactors emissions –ifdomesticofftakeandexportmarketsforthisfueldevelopaspartofthetransitiontodecarbonisation, hydrogen –thatis,producedfromthesteammethanereformingofnaturalgaswithCCSusedfor and energysources.ExistingassetsgasresourcesfromLNGproducersmaybeusedtoproduceblue of performance,costandabilitytoscale,particularlyinthefaceever-decliningcostsalternativetechnologies and providealongertermroleforLNGinglobalenergymarkets,butthisfacesconsiderableuncertaintyterms capture andutilisationorstorage(CCUS)fortheuseofgasinexportcountriescouldmitigatesometheserisks significant long-termtransitionriskstogasproducers(IPCC,2018,ETC,2020).Widespreaduptakeofcarbon would decreaseAustralia’sdomesticemissionsthroughreducedproductionandexportofLNGbutalsopresent scenarios alignedto1.5degreesgenerallyseedemandforgaspeakinganddecliningbefore2050,which chain, atapproximatelysixtimesthelevelofscope1and2emissions.Inacontextglobaldecarbonisation, emissions (scope3forAustralia)fromtheuseofexportedgasareparticularlysignificantLNGsupply unsuitable givenlimitedspaceinmostbrownfieldsitesanddiluteexhauststreamsfromturbines.Downstream gas inturbines,althoughthiswouldalsolikelyrequireretrofitsorupgradestoexistingequipment.CCSissimilarly may facechallengesforbrownfieldapplicationsduetocomplexityretrofits.Hydrogenisanoptionreplace from gasturbinestoelectricdrivescoupledwithrenewablepoweristheprimaryopportunityinliquefactionbut venting, flaringandleakages,whileCCScanalsobeusedforreservoirCO operational improvementsandbest-practicetechnologiesthatcanaddressalargeportionofemissionsfrom and non-energysources,multiplestrategieswillberequiredtodecarbonisetheproductionofLNG.Thereare Liquified naturalgas(LNG) ‘green premium’onlowemissionsproducts. deploy thesetechnologiesgiventheyderivenoeconomicbenefitsintheabsenceofapenaltyonemissionsor reduce morethan95%oftheseemissions,buttherearecurrentlylimitedincentivesforchemicalsproducersto chemical reactionsintheproductionofammoniaderivativessuchasammoniumnitrate.Opportunitiesexistto emissions. Theothermainsourceofsupplychainemissionsisthereleasenitrousoxidedueto carbon captureandstorage(CCS)withsteammethanereformingcouldbeusedtoaddressalargeshareof currently expectedtobethelowestcostformofhydrogenproductionaround2040.Inmeantime,coupling will alsobedeterminedbytheextentandspeedofcostreductionsforelectrolysers.Renewableelectrolysisis term. However,thisisdependentonthecost-effectivesupplyoflargequantitiesrenewableelectricityand electrolysis forhydrogenproductionisthemostpromisingopportunitytoeliminatetheseemissionsoverlong hydrogen asanammoniafeedstock.Switchingfromthedominantsteammethanereformingprocesstorenewable Chemicals emissions withinthissupplychainorinothersectors. (with highmagnesiumandironcontent)producedduringoreextraction.Thiscouldbeusedtooffsetresidual carbonation isalsoanopportunityforsomemetalsduetolargequantitiesofotherwiseworthlessultramaficrock or biomassaretechnicallypossiblebutmaybeconstrainedbycostsandavailabilityinthenearterm.Mineral haulage andrefining.Forhigh-heatapplicationsinmetalsrefining,otherzeroemissionsfuelssuchashydrogen –Themajorsourceofemissionsinthechemicalssupplychainisgas-basedproduction –Givenrelativelylargeemissionsfromdirectfuelcombustion,electricityuse 2 duringgasprocessing.Switching PHASE 1 TECHNICAL REPORT | JUNE 2021 15

. As 5 , new 7

. Alumina refining and aluminium 4 ) Hobson 2021 (USGS 2021d) (USGS 2021c) Lead – Second largest producer, largest reserves (The World Bank 2017) Lithium – Largest producer, fourth largest reserves Australia’s global significance Largest producer and exporter Largest producer, second largest reserves Second largest producer, largest exporter Sixth largest exporter by value Second largest exporter of LNG reserves (USGS 2021b) Copper – Fifth largest producer, third largest reserves Nickel – Fourth largest producer, second largest 3 . 6 87% 91% 71% Production and export quantities are available from DISER (2021) % Production exported 94% 38% The importance of Australian industry in global supplyThe importance of Australian chains . Internal Australian Industry ETI calculation of domestic supply chain emissions. Global downstream emissions based on 2018-19 LNG Internal Australian Industry ETI calculation of domestic supply chain emissions. Global downstream emissions LNG is combusted and does not production from DISER (2020f) and emissions factors from BP (2019). Calculations assume all exported overseas emissions component. consider possible methane emissions from venting or leakages, which would significantly increase the Through drying, beneficiation, agglomeration and pre-reduction ( (DISER 2021, DISER 2020b, Australian Aluminium Council 2021) based on export quantities from Internal Australian Industry ETI calculation of domestic supply chain emissions. Global downstream emissions Efficiency Intelligence 2019) DISER (2021) and emissions intensity of blast furnace production in China, South Korea and Japan (Global based on energy intensity and Internal Australian Industry ETI calculation of domestic supply chain emissions. Global downstream emissions emissions factors from BP (2019) fuel mix for alumina and aluminium production in importing companies (World Aluminium 2020b) and Table 5 Other metals (select examples) Aluminium Gas (LNG) Bauxite Alumina Product Iron ore 7 6 5 3 4 decarbonise relevant processes, for example by leveraging competitive advantages in renewable energy. In the case decarbonise relevant processes, for example by leveraging competitive advantages and storing) emissions that would of blue hydrogen production, this would involve Australia ‘onshoring’ (by capturing otherwise be incurred overseas from the combustion of gas. or increased production of value-added products (for example, retaining bauxite and alumina for additional aluminium or increased production of value-added products (for example, retaining bauxite blue hydrogen rather than natural production and export), or product substitution (for example, producing and exporting on the ability of Australian industry to gas). The potential for these activities to reduce global emissions is contingent production of the LNG itself by engaging in activities that reduce the This provides opportunities for Australian industry to influence global emissions iron ore quality before shipping needs for emissions-intensive processes overseas. Examples include improving smelting are similarly emissions-intensive, with estimated emissions from overseas processing of exported bauxite and with estimated emissions from overseas processing of exported bauxite and smelting are similarly emissions-intensive, emissions from domestic bauxite, alumina, and aluminium production alumina nearly five times Australia’s annual of exported LNG are around six times higher than those incurred from the a fossil fuel, emissions from the combustion technically responsible for) a much larger share of global emissions than is recorded in national or company inventories. share of global emissions than is recorded in national or company inventories. technically responsible for) a much larger use of exported iron ore in blast furnaces are more than 50 times For example, annual emissions from downstream domestic iron and steel supply chain higher than annual emissions in the entire This prominence in global supply chains means that certain Australian industries are indirectly connected to (albeit not means that certain Australian industries are indirectly connected to (albeit not This prominence in global supply chains TABLE 05: Most of the initiative focus areas are heavily export-focused and play a key role in global supply chains, summarised and play a key role in global supply chains, focus areas are heavily export-focused Most of the initiative in This economic importance is amplified in regional areas with a strong focus on these supply chains (or components of a strong focus on these supply chains is amplified in regional areas with This economic importance employment in the ore mining represents a 45.6% share of in the Pilbara, Western Australia, iron them). For example, of total employment. LNG and chemicals represent 11.3% Queensland, alumina, aluminium, region, while in Gladstone, The five supply chains of focus in the Australian Industry ETI make a significant contribution to Australia’s economy. to Australia’s a significant contribution Industry ETI make in the Australian supply chains of focus The five $160 billion exports worth over GDP, generate for 12.3% of Australia’s are responsible these supply chains Collectively, 2021). Bureau of Statistics, workforce (Australian 2.9% of Australia’s and employ to the Australian economy per annum 2.2 The importance of Australian industrial supply chains industrial supply of Australian importance 2.2 The AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 16 8 to domesticemissions. the ChemicalsandOthermetalssupplychainsarerelatively smaller,althoughtogethertheycontributenearly3% to cokeincokingovens,andsubsequentuseoftheproduced asareductantintheblastfurnace.Emissionsfrom while theIronandsteelsupplychainproducessignificant non-energy emissionsfromtheconversionofmetallurgicalcoal Aluminium supplychainemissionsaredominatedbyelectricity useinsmeltingandgascoalaluminarefining, of LNGaremostsignificant,withlargecontributionsfrom direct fuelcombustion,electricity,andnon-energysources. Estimated emissionsfortheAustralianIndustryETIsupply chainsareshownin sources ofvaryingmagnitudeandproportion: diverse fromanenergyandemissionsperspective.TheAustralianIndustryETIsupplychainsfeaturemultiple While thesupplychainsconsideredwithinscopeofinitiativesharecommonalities,theyremaincomplexand FIGURE 02: of domesticemissions( (ClimateWorks Australia2020).Takencollectively,theAustralianIndustryETIsupplychainsrepresentanestimated20% Australian finalenergyuse,41%ofelectricityconsumption(DISER2020c,2020d)andaround42%totalemissions processes anduniquecharacteristics,challenges,opportunities.Miningmanufacturing Industry isabroadtermencompassingnumeroussectorsacrossminingandmanufacturing,eachwithhighlyspecialised 2.3 Sourcesofenergyuseandemissions and globalemissionsbenefitsofAustraliaundertakingdifferentorenhancedrolesinvarioussupplychainprocesses. the abovemeasureshasnotbeencoveredindetail.However,futurephasesofworkwillexplorepotentialeconomic Australian IndustryETIsupplychains.Assuch,thepotentialforchangesinchainparticipationthroughsomeof Phase 1researchandanalysishasfocusedonopportunitiestoreduceexistingemissionsfromproductionwithin ● ● ● Asdefinedinthe ANZSIC classifications

company facilities. Non-energy –emissionsfromleakages,operationalventing andflaringotherindustrialprocessesat Electricity –emissionsassociatedwiththeuseofelectricity, eithergeneratedonsiteorpurchasedelsewhere. turbines, processheat,haulage). Direct fuelcombustion–emissionsfromtheoffossilfuelsatcompanyfacilities(forexample,boilers, Contribution oftheAustralianIndustryETIsupplychaintoAustralia’sdomesticemissions Figure 2 ). Figure 3 . Emissionsfromtheproduction 8

accounts for38%of

PHASE 1 TECHNICAL REPORT | JUNE 2021 17 residual emissions 4b. Capture or offset offsetting of residual emissions 4a. Non-energy 4. Non-energy emissions reductions and emissions abatement switching and other fuel 3. Electrification . energy and feedstock supply 2. Zero emissions Figure 4 Decarbonisation pillars for a net zero transition Emissions by source in the Australian Industry ETI supply chains Industry ETI by source in the Australian Emissions efficiency and service 1. Material, energy FIGURE 04: emissions generated. exploration of key challenges facing the Australian Industry ETI supply chains. The main changes include expanding exploration of key challenges facing the emissions fuels and feedstocks alongside decarbonised electricity and Pillar 2 to include the supply of other zero between non-energy emissions abatement and the capture or offset of separating Pillar 4 into two parts to distinguish will be more specific to particular supply chains. The initiative considers four decarbonisation ‘pillars’ as key to a net zero chains. The initiative considers four decarbonisation ‘pillars’ as key to a net will be more specific to particular supply transition, summarised in typically used by ClimateWorks Australia (2019), to allow more detailed This is a variation on the ‘four pillars approach’ Given the size and diversity of emissions sources in the Australian Industry ETI supply chains, a net zero transition will sources in the Australian Industry ETI supply chains, a net zero transition will Given the size and diversity of emissions Some of these strategies are relevant across all supply chains, while others require multiple decarbonisation strategies. 2.4 Pillars of decarbonisation FIGURE 03: FIGURE 03: and energy efficiency improvements (Pillar 1) can often be achieved through uptake of best available technologies and energy efficiency improvements (Pillar 1) can often be achieved through value through short payback periods. without relying on considerable breakthroughs, in many cases delivering economic any one company, rather than requiring the deployment of a particular technology (as in Pillars 1, 3 or 4, for example). any one company, rather than requiring the deployment of a particular technology sequential, increasing in difficulty (that Although not strictly designed as such, the pillars can be thought of as roughly 4. For example, near-term material is, declining in technological or commercial maturity) from Pillar 1 through to Pillar is critical to the net zero transition of Chemicals and LNG. The capacity for individual companies to pursue a particular is critical to the net zero transition of Chemicals and LNG. The capacity for individual the challenge of zero emissions decarbonisation strategy can also vary widely depending on the pillar. In particular, broader system, beyond the control of energy and feedstocks supply (Pillar 2) may depend on numerous factors in the across and within supply chains. For The significance of the Australian Industry ETI decarbonisation pillars will vary non-energy emissions, whereas it example, Pillar 4a is not applicable to the Other metals supply chain given immaterial AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 18 2016a, 2016b). productivity opportunitiesinthe miningandmanufacturingsectors(AustralianAlliancefor EnergyProductivity periods oninvestmentwhere the costsofupgradeareoffsetbyenergysavings. technology upgradescanineffect freeupenergyuseinotherareasoftheeconomy,often withveryshortpayback and capital.Givenchallengeswithdeployingzeroemissions energyatscale,‘no-regret’actionssuchasenergy-efficient overall burdenofshiftingtozeroemissionsprocessesand technologies inacontextoffiniteresources–bothphysical Although efficiencyimprovementsaloneareinsufficientfor absolutezeroemissions,theyplayavitalroleinreducingthe (ETC 2017). emissions inthemostemissions-intensiveindustrialsectors (suchasaluminiumandsteel)by40%globally2050 For example,recentanalysissuggeststhatthecompounding effectsofmaterialefficiencymeasurescouldreduce numerous smallerprocessesandefficiencysolutionswith the potentialforsignificantenergyreductionswhencombined. whole assetreplacementorveryhighcapitalcosts,material andenergyefficiencyimprovementsareoftentheresultof Whereas otherdecarbonisationpillarsaretypicallydominated byahandfulofmajortechnologiesthatmayinvolve (Henzler etal.2017): that candirectlyimproveenergyefficiency.Examplesofimprovementsfordifferentservicesinclude In additiontoenergyreductionsthroughmaterialefficiency,therearearangeoftechnologicalandprocesschanges Material efficiencyimprovementscanbeachievedinindustrialsupplychainsthrough: processes andarethereforeanimportantpillarofdecarbonisation. quantity ofproductinputsandenergyrequired.Thesemeasuresalsoservetoreducedemandforemissions-intensive In allindustrialsupplychains,materialandenergyefficienciesareacriticalpartofoverallproductivitybyreducingthe Pillar 1:Material,energyandserviceefficiency much aspossibleinthetransitiontonetzeroindustrialsupplychains. supports Pillar1.Thisdemonstratestheimportanceofactionacrossalldecarbonisationpillarstoreduceemissionsas in Pillar2,whileelectrictechnologiesarefrequentlymoreenergyefficientthanthermalcombustionengines,which task ofenergysupplyinPillar2.Electrificationoruptakeotherzeroemissionsfuels3iscontingenton (IDDRI 2015). For example, material and energy efficiency in Pillar 1 lowers overall energy demand, thereby assisting the Although presentedaboveasdiscretecategories,thedecarbonisationpillarsalsointeractandreinforceeachother to achievenetzerointheeventthatotherpillarsareunableeliminateemissions. technologies inPillars3and4acanvarywidelydependingonsupplychain,withPillar4bprovidinga‘balancing’function are othercommercialandscalechallengestoovercome.Thetechnologicalavailabilityviabilityof Similarly, thetechnologiesalreadyexisttoproducezeroemissionsenergyandfeedstocks(Pillar2),althoughthere ● ● ● ● ● ● ● ● ● ● ●

cooling –chillersandsystems,improvedcompressorparts,evaporativecooling. heating –efficientloadmanagement,heatpumps,recoveryanduse compressed airsystems–reducedleaks,optimisedcontrols,andsupply pumping systems–systemcontrolandregulation,optimisedmotors,transmission motor drives–energy-efficientmotors,variablespeeddrives,repairs steam –increasedboilerefficiency,minimisedblowdowns,optimiseddistribution improved assetutilisationthroughsharingeconomiesandnewbusinesspractices. material recoveryandreuseinplaceofprimaryproduction need formoreemissions-intensivematerials aluminium andlowemissionsadvancedhighstrengthsteelinlightweightingpassengervehicles,reducingthe substituting lowemissionsalternativesforemissions-intensivematerials;example,using novel processessuchasadditivemanufacturingtoreduceunnecessaryuseofmaterialsandlossesinproduction cycles) andrecyclability improved designofendproductstorequirelessinputmaterialorincreasedurability(therebyreducingproduction Table 6 providesasummaryofenergy

PHASE 1 TECHNICAL REPORT | JUNE 2021 19

of total electricity use in 9 Manufacturing and equipment Energy-efficient plant benchmarking Metering, reporting, and practices Improved maintenance Lean manufacturing Process changes Waste reduction, recovery, and processing Additive manufacturing Advanced materials Process intensification Truck-less mines Real-time ‘big data’ transformation Opportunities throughout all Opportunities throughout ore mining processes, including characterisation, comminution, data and haulage, ventilation and management practices Smart blasting and target Characterisation of ore mineral size Optimal processing strategy Whole of site operations Autonomous mining Mining Energy productivity opportunities in mining and manufacturing opportunities Energy productivity shows the role of electricity in the current energy mix of the Australian Industry ETI supply chains. The aluminium shows the role of electricity in the current energy mix of the Australian Industry ETI Figures based on Australian Industry ETI calculation of supply chain electricity and Australian Energy Statistics (DISER 2020c, DISER 2020e) Figures based on Australian Industry ETI calculation of supply chain electricity and Australian Energy Business model transformation Systems optimisation Traditional energy management Energy productivity opportunities Energy productivity 9 intensive nature of smelting. LNG production is another major electricity consumer, primarily through on-site generation forintensive nature of smelting. LNG production is another major electricity consumer, a relatively large amount offacilities and liquefaction equipment. The Iron and steel supply chain also consumes Figure 5 for 9% supply chain is by far the largest electricity consumer in aggregate terms, responsible chain energy use, driven by the electricity- Australia (DISER, 2020e). This accounts for around a third of aluminium supply zero emissions energy and feedstocks through investments in distributed renewable energy or other arrangements such zero emissions energy and feedstocks through investments in distributed renewable feasibility of off-grid power generation at as power purchase agreements. However, numerous factors will determine the brownfield and greenfield sites (covered more in the Section 3.3 – Other metals). Other industries such as metal ores or LNG production may be grid-connected or, due to their often remote location, Other industries such as metal ores or LNG production may be grid-connected through ‘hybrid’ renewable energy may generate off-grid power on-site through fossil-fuel powered equipment or with greater ability to access arrangements of wind and solar PV. Technically, off-grid power use provides companies that time to comprise 12% of total electricity produced (DISER, 2020e). This trend is expected to improve with declining that time to comprise 12% of total electricity produced (DISER, 2020e). This trend 4.1 – Electricity generation. costs of renewable energy technologies, covered in more detail in the Section For heavy industry such as aluminium smelting and steelmaking, the need for continuous power requires that electricity For heavy industry such as aluminium smelting and steelmaking, the need for processes is contingent is sourced from the grid. As such, the decarbonisation trajectory of these grid-connected electricity in Australia’s power on developments in the broader energy system. Since 2010, the share of renewable which have increased six-fold during generation has more than doubled to 20%, predominantly driven by wind and solar electricity makes up more than one-third of all energy use. Together, these sectors account for slightly over half of all electricity makes up more than one-third of all energy use. Together, these sectors H). industrial electricity consumption in Australia (DISER 2020 – Table F and Table ‘green’ hydrogen produced via zero emissions electrolysis, and biomass products such as biodiesel and biogas. ‘green’ hydrogen produced via zero emissions of industrial energy use, comprising just over one-fifth of all energy use. Electricity is already a relatively large source metals manufacturing (predominantly aluminium) and metals mining, For certain industrial sectors such as non-ferrous of the economy. This acts as a direct decarbonisation option for those processes already using a particular energy type option for those processes already using a particular energy type of the economy. This acts as a direct decarbonisation opportunities for fuel switching to capitalise on zero emissions inputs (see (for example, electricity), as well as unlocking and feedstock sources considered in the initiative are renewable electricity, Pillar 3 below). The zero emissions energy Pillar 2: Zero emissions energy and feedstocks supply Pillar 2: Zero emissions energy and feedstocks is a vital pillar of decarbonisation in industry, as in most areas The production of zero emissions energy over time, up to an identified potential saving. Exceptions to this are individually significant or easily separated solutions saving. Exceptions to this are individually significant or easily separated solutions over time, up to an identified potential be directly modelled through impacts on demand for certain products. such as widespread recycling, which can Rather than explore multiple material and energy efficiency technologies in individual detail, the Australian Industry ETI energy efficiency technologies in individual detail, the Australian Industry Rather than explore multiple material and a ‘suite’ of efficiency solutions that incrementally reduce demand for energy analysis and modelling will generally assess TABLE 06: TABLE 06: AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 20 Concentrated solarthermaltechnologies arealsoemergingtosupplyheatat800–1000°C (NSWChiefScientist2020). For veryhigh-heatprocesses whereelectrificationisnotpossible,hydrogenandbioenergy areoftenviablealternatives. boilers andheatpumpsareavailable cost-competitiveoptionsforheatproduction. already availabletechnologies, servicingdemanduptoapproximately400°C(Roelofsen 2020).Forexample,electric alternative fuels.Recentestimates suggestthatalmosthalfofallfuelconsumedforindustrial heatcanbeelectrifiedwith There areanumberofemergingandmaturetechnologies enabling theswitchingofindustrialprocessestoelectricityor covered inPillar2above. Practically, thisallowsindustrialprocessestobenefitfrom the expandedproductionofzeroemissionsenergysources these fossilfuelswithzeroemissionsalternativesthroughelectrification andotherfuelswitching,asexaminedinBox1. remains primarilybasedonfossilfuelssuchascoalandgas. Implicitinanetzerotransitionistheneedtoreplace Although someindustrialprocessesconsumelargeamounts ofelectricity,energyuseinAustraliansupplychains Pillar 3:Electrificationandotherfuelswitching covered inSection4.2–Hydrogen. approximately 9MtCO produced throughthesteammethanereforming(SMR)process,whichusesnaturalgasasafeedstockandemits in petroleumrefiningandchemicalproductssuchasfertilisersexplosives.Currently,Australia’shydrogenis the economysuchasindustry.Australia’shydrogenconsumptionisverysmallrelativetootherfuels,usedpredominantly Hydrogen isanotherfuelthatreleaseszeroemissionswhenused,withpotentialapplicationsinhard-to-abateareasof for theproductionofbioenergyresourcesisdiscussedinSection4.3–Biomass. ETI supplychains,useofbio-basedenergyorfeedstocksiscurrentlynon-existentnegligible.Themodellingapproach processing thatutiliseproximatewastestreams(DISER2020c)–andaround4%nationally.IntheAustralianIndustry accounting forjust6%ofindustryenergyuse–almostentirelyinmanufacturingindustriessuchasfoodorwood Consumption ofzeroemissionsenergysourcessuchaswoodwasteandbagasseiscurrentlylimitedinAustralia, FIGURE 05: Section 3–Supplychaindetail). 80% ofenergyfromelectricity–formuchhigherrateselectrificationinmanykeyindustrialprocesses(discussed Australian IndustryETIsupplychains,thereissignificantscope–withtheexceptionofOthermetalswhichderivesaround only representsaround11%oftotalsupplychainenergyuse.Despitelargequantitieselectricityconsumptioninthe electricity, roughlysplitbetweenminingprocessesandsteelmaking(particularlyscrap-basedproduction),althoughthis Current electricity use in the Australian Industry ETI supplychains Current electricityuseintheAustralianIndustryETI 2 e per Mt of hydrogen. The various hydrogen production methods andemissionsimplicationsare productionmethods e perMtofhydrogen.Thevarioushydrogen

PHASE 1 TECHNICAL REPORT | JUNE 2021 21

demand response capabilities can play a vital role in helping to manage energy demand and supply for to manage energy demand and supply can play a vital role in helping demand response capabilities energy-intensive industries. At high rates of electrification and variable renewable energy production, measures to enhance process flexibility production, measures to enhance process and variable renewable energy At high rates of electrification flow production industries requiring continuous important, particularly in energy-intensive will become increasingly (Pillar 1) and and energy efficiency improvements to intermittent energy supply. Material that are not well-suited renewable electricity and hydrogen would therefore considerably improve the economics of associated technologies. improve the economics of associated and hydrogen would therefore considerably renewable electricity the relative cost on emissions that further increases more pronounced in the context of a penalty This would be even of fossil fuels. Capital costs of available alternative heat technologies are roughly comparable with conventional industrial equipment roughly comparable with conventional alternative heat technologies are Capital costs of available will be the primary or setting up a new site, energy costs when replacing old equipment (Roelofsen 2020). Therefore, in the cost of and fuel switching. Expected reductions attractiveness of electrification determinant of the financial recycling to improve the overall efficiency of services. Several processes in the Australian Industry ETI supply chains Industry ETI supply in the Australian Several processes efficiency of services. improve the overall recycling to electrification of blend a require likely will so temperatures, high very require steelmaking and production alumina as such in a net zero transition. fuel switching solutions and other Electric boilers and heat pumps could also be utilised in high-heat processes for pre-heating or alongside waste heat or alongside waste for pre-heating in high-heat processes could also be utilised and heat pumps Electric boilers AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 22 11 10 with highersharesofnon-energyemissions,targetedenergy solutionsremainakeycomponentofnetzerotransition. or hydrogen-basedprocesses(seeSection3.1–Ironand steel forfurtherdiscussion).Eveninnon-metalssupplychains have considerablenon-energyemissions,althoughthesewould beeliminatedthroughachangetorenewableelectricity other supplychainssuchasLNGandChemicals.Thecurrent processthatdominatesAustraliansteelproductiondoes supply chaindecarbonisation.Thisistheresultoflowshares ofnon-energyemissionsinmetalsproductionrelativeto In metalsproduction,energysolutionssuchasrenewableelectricity andhydrogenalonecanachievemorethan90% Australian IndustryETIsupplychains TABLE 07: covered indetailrelevantsupplychainsections,asshown Australian industrialsupplychains.Thisassessmentisbasedontheidentifiedabatementpotentialoftechnologies uptake throughelectrificationandotherfuelswitching(Pillar3)arethemostcriticalaspectsofanetzerotransitionfor Preliminary analysisfortheAustralianIndustryETIsuggeststhatsupplyofzeroemissionsenergy(Pillar2)and The importanceofzeroemissionsenergyandfeedstocksinanettransition BOX 01: LNG Chemicals Other metals Aluminium Iron andsteel Supply chain

Thisrefersspecificallytotheuseof hydrogen intheLNGsupplychain.Thepotentialnear-termroleforuse of gaswithCCS Switchfromgas-basedsteammethane reformingintheproductionofhydrogenfeedstockforammonia (>90%capturetoproduce)lowemissions hydrogeniscoveredelsewhereinthisreport Preliminary assessmentofpotentialabatementfromzeroemissionsenergyandfeedstocksinthe

Electrified liquefaction Process heat Process heat operations Renewable-powered mine Battery-electric trucks Trolley assist Process heatinaluminarefining Battery-electric trucks Trolley assist Electrolytic steelproduction Electric arcfurnace Battery-electric trucks Trolley assist Electricity net zerotransition Plausible roleofzeroemissionsenergyandfeedstocksin Direct reducediron Hydrogen fuel-celltrucks Hydrogen reducing LNGproductionemissions Uncertain roleforhydrogenin electrolysis Hydrogen producedviarenewable Hydrogen fuel-celltrucks Process heatinaluminarefining Hydrogen fuel-celltrucks Hydrogen injectioninblastfurnace production Table 7 10 .

11 ~95% solutions only by 2050fromenergy reduction potential Estimated emissions ~65% ~65% ~100% ~92%

PHASE 1 TECHNICAL REPORT | JUNE 2021 23

. Industrial Table 8 Vented gas can be captured and re-injected, or alternatively venting equipment can be replaced with alternatives that do not require venting Flaring is often necessary for operational safety, however emissions can be reduced through optimising process control, and ensuring good function of flares to prevent methane emissions Abatement potential available to There are no commercially proven technologies eliminate emissions from the use of explosives Switching away from BF-BOF steelmaking would eliminate the need for coking coal and associated emissions Inert anodes could eliminate non-energy emissions in smelting, although this technology is still at an early stage of development Switching to green hydrogen instead of hydrogen produced natural gas would eliminate upstream ammonia emissions from Primary, secondary or tertiary technologies exist to eliminate emissions from chemical reactions Regular leak detection and repair can eliminate 80% of leakage emissions

12 e, share of supply chain emissions) 2 CO Gas feedstock in SMR hydrogen production for ammonia (2.4, 30%) Chemical reactions during production of ammonia derivatives (1.8, 23%) Venting (7.1, 20%) Flaring (4.6, 13%) Leakages (0.1, <1%) Non-energy emissions source (Mt Explosives in iron ore mining (0.6, 3%) Coking coal feedstock in ironmaking (8.2, 36%) Carbon anodes (2.9, 8%) Immaterial emissions from use of explosives Estimated non-energy emissions in the Australian Industry ETI supply chains Estimated non-energy emissions in the Flaring – emissions from the controlled burning of gas during extraction to reduce the risk of ignition or to eliminate extraction to reduce the risk of ignition from the controlled burning of gas during Flaring – emissions use. product unsuitable for valves, seals, and tanks. emissions from equipment such as Leakages – unintentional Industrial process emissions – resulting from the use of carbon-based feedstocks in the production of industrial feedstocks in the production – resulting from the use of carbon-based Industrial process emissions use of coal as a reductant in ironmaking. materials, such as the of or operational practices in the production resulting from process or equipment design Venting – emissions natural gas.

classifies emissions from the use of coking coal as non-energy emissions. Coking coal is used as both a reductant (non-energy) and energy source in BF-BOF iron and steelmaking. The Australian Industry ETI analysis Coking coal is used as both a reductant (non-energy) and energy source in BF-BOF iron and steelmaking. ● ● ● ●

LNG Chemicals Other metals Aluminium Iron and steel Supply chain 12 TABLE 08: of operations, while venting will increase alongside projected growth in production to 2030. Technologies and process alongside projected growth in production to 2030. Technologies and process of operations, while venting will increase in the LNG supply chain are covered in Section 3.5 – Liquified natural gas. improvements to address fugitive emissions Fugitive emissions comprise nearly a third of emissions in the LNG supply chain produced in Australia, rapidly growing of emissions in the LNG supply chain produced in Australia, rapidly growing Fugitive emissions comprise nearly a third and high flaring activity associated with the initial years of LNG projects since 2015 reflecting increases in production to stabilise in coming years as LNG facilities move to a steady state (DISER 2020a). Flaring emissions are expected emissions from carbon anodes or other chemical reactions in producing ammonia derivatives, specific abatement emissions from carbon anodes or other – such as inert anodes or abatement catalysts (covered in detail in Section 3.2 technologies would need to be deployed, Aluminium and Section 3.4 – Chemicals). bioenergy (covered in Pillar 2). For example, green hydrogen produced via renewable electrolysis could bypass the need green hydrogen produced via renewable electrolysis could bypass the need bioenergy (covered in Pillar 2). For example, as an input to ammonia production, thereby eliminating process emissions. for gas-based steam methane reforming require wholesale process or technology change, such as in the Other applications of zero emissions feedstocks reductant in ironmaking (see Section 3.1 – Iron and steel). In the case of process replacement of coal with hydrogen as a process emissions occur in numerous industries dependent on carbon-based feedstocks such as aluminium (carbon on carbon-based feedstocks such as in numerous industries dependent process emissions occur for steel and chemicals (natural gas-based hydrogen input). Many of anodes), iron (coking coal) as the precursor replacement, or ‘drop-in’, of zero emissions feedstocks such as hydrogen or these could be eliminated through straight Sources of non-energy emissions in the Australian Industry ETI supply chains are presented in emissions in the Australian Industry Sources of non-energy As discussed above, non-energy emissions are a feature of industrial supply chains – particularly those in the initiative those in the supply chains – particularly feature of industrial emissions are a above, non-energy As discussed to abate. being considered hard supply chains reason for these – and are a primary of Other metals) (with the exception or fugitives, as follows: industrial processes classified as emissions are generally Non-energy Pillar 4a: Non-energy emissions abatement Non-energy emissions Pillar 4a: AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE in Australia;forexample,mineralcarbonation(Azadi2019). related tothesupplychainsthatmakeupAustralianIndustryETI,andinsomeareasarealreadybeinginvestigated will likelyrequirefurthersupportorincentivesforwidespreaddeployment.Someoftheseoptionsare,however,closely These aresummarisedin sequestration, bioenergywithCCS(BECCS),directaircapture(DAC),mineralcarbonationandenhancedweathering. a geological,biologicalormineralmedium(Cook&Arranz2019).ExamplesofNETsincludeafforestation,soilcarbon Negative emissionstechnologies(NETs)aimtodecreaseconcentrationsofCO materials andconcreteallowamorepermanentstorageoftheCO be re-released,dependingontheformationtypeorspecificchemicalproduct.Otherapplicationssuchasuseinbuilding 13 TABLE 09: 24 for –applicationssuchasenhancedoilrecoveryorproductionofCO would alsogreatlyassisttheeconomicsofCCU).AkeyconsiderationislengthtimecapturedCO carbon dioxide,therebyreducingdependenceonotherincentivessuchasafinancialpenaltyemissions(althoughthis as plasticsorconcrete.CCUovercomessomeofthecostchallengesCCSbyestablishingamarketandvaluefor Carbon captureanduse(CCU)referstotheutilisationofCO and establishinginfrastructureforthecapture,transportstorageofcarbon(NSWChiefScientist2020). financial incentives,theeconomicsofCCSarealsochallengingasemittersbearcostsecuringstoragelocations assessed developmentasoff-trackinbothpowergenerationandindustry(IRENA2019a).Intheabsenceofstrong of emissions.TheIEAconsidersscaledupdemonstrationanddeploymentCCSascriticalforuptake,butrecently CCS projectinWesternAustralia)haveledtoquestionsabouttheabilitycost-effectivelystoresignificantamounts encountered byrecentlarge-scaledevelopments(forexample,delaysandunderperformanceofChevron’sGorgon major uncertaintieswithregardstostoragecapacity,ongoingcostreductionsandsociallicence.Inaddition,difficulties particularly hard-to-abateprocessessuchasironandsteelmakingchemicals(ETC2017).Thereare,however,some technically viablewithindustrial-scaleprojectsgloballyandisapotentiallycost-effectivewaytoeliminateemissionsin Carbon captureandstorage(CCS)referstothepermanentgeologicalofcarbondioxide.CCSis and scalabilitywithinindustrialsupplychains. several matureandemergingtechnologiestocaptureordrawdownCO these becapturedthroughothermeansoroffsetagainst‘negativeemissions’elsewhereintheeconomy.Thereare Where thereareresidualemissionsnotabletobeeliminatedthroughPillars14a,anetzerotransitionrequiresthat Pillar 4b:Captureoroffsetresidualemissions (BECCS) capture andstorage Bioenergy withcarbon Biochar reforestation Afforestation/ technique Technology or Ocean alkalinity Ocean (iron)fertilisation practices Modified agricultural (mineral carbonation) Enhanced weathering Direct aircapture(DAC)

( Herzog 2018) Examplesofnegativeemissionstechnologies Table 9 atmosphere viachemicalreactions Adding alkalinitytotheoceans pullcarbonfromthe pull carbonfromtheatmosphere into theocean Fertilising theoceantoincreasebiological activityto increase carbonstorageinsoils Adopting agriculturalpracticessuchasno-tillfarmingto carbonate rocks the atmospherereactswithsilicatemineralstoform Enhancing theweatheringofminerals,whereCO engineered systems Removal ofCO which iscaptured combustion ofthebiomasstoproduceenergyandCO Removal ofCO as asoilamendment Converting biomasstobiocharandusingthe biomass andsoils The plantingoftreestofixatmosphericcarbonin Description . MostNETsarecurrentlyexpensive,withmanystillunderdevelopment,andthey 2 2 fromtheairbyplantsintobiomass, fromambientairby 13

2 (Hepburn2019). 2 basedfuelsandchemicalscouldallowtheCO 2 in 2 emissions,withvaryinglevelsofapplicability 2 asaninputtomorevaluableproductssuch 2

Biological Biological C Chemical Biological Biological Geochemical Physical/chemical Biological O 2 intheatmospherethroughtransferto 2 removalmechanism Soils Soils/vegetation medium C Ocean Ocean Soils Rocks formations Deep geologic formations Deep geologic O 2 2 storage isutilised 2 to PHASE 1 TECHNICAL REPORT | JUNE 2021 25 in the mineral carbonation 2 14 and mine site wastes (Azadi 2019). 2 which has to be separated from the rest of the process stream which has to be separated from the rest again shortly after use. Sourcing the feedstock via NETs – for again shortly after use. Sourcing the feedstock 2 2 stream is much cheaper to capture). stream is much cheaper solutions for The longer-term emissions sources these 2 as a feedstock and emit the CO 2 for reforestation) All natural ecosystems tend eventually towards a carbon-neutral balance of emissions and absorption after the build-up period (30 to 40 years All natural ecosystems tend eventually towards a carbon-neutral balance of emissions and absorption

14 emissions are technologically mature and relatively well understood. Continued development of CCS and NET solutions emissions are technologically mature and relatively well understood. Continued chain abatement. should therefore occur alongside, rather than at the expense of, targeted supply As such, the initiative adopts the position that every effort should be made to move as close to zero emissions within As such, the initiative adopts the position that every effort should be made to move breakthroughs. Although supply chains as possible, thereby reducing dependence on highly uncertain technological solutions to address a large share of there are also considerable challenges with decarbonising industrial supply chains, factors that may constrain uptake (for example, suitable geological reservoirs or land availability for afforestation). factors that may constrain uptake (for example, suitable geological reservoirs or over time due to declining carbon credits Moreover, the ability for offsets to substitute for direct abatement will diminish 2020). and the non-permanence of negative emissions from nature-based solutions (ETC Advisory Council 2018). Given their centrality to these outcomes and theoretical potential, NETs are worthy of continued to these outcomes and theoretical potential, NETs are worthy of continued Advisory Council 2018). Given their centrality where possible. However, as with CCS technologies, there are numerous research, development, and deployment performance, availability and environmental impacts, as well other limiting uncertainties regarding technology cost, NETs feature prominently in IPCC scenarios limiting global warming to below 2°C, with successful and large-scale NETs feature prominently in IPCC scenarios in 86% of emissions scenarios modelled (European Academies Science deployment of some form of NET assumed Urea-based fertilisers are another application that will require the use of NETs for complete decarbonisation. These Urea-based fertilisers are another application fertilisers require CO – would allow these products to be net zero emissions (de Pee et al. 2018). example, direct air capture (DAC) or BECCS process to produce environmentally benign materials that can be used in a number of applications, from mine site fill to materials that can be used in a number of applications, from mine site fill process to produce environmentally benign as plasterboard and paving stones. The economic value of the product can help building and construction materials such to dealing with both the CO overcome some of the financial barriers and there is research into enhancing this process (Wilson et al. 2014) and investigation into other mine site wastes and there is research into enhancing this such as red mud produced from bauxite mines (Azadi 2019) or iron ore mine that will also allow mineral carbonation, or calcium are chemically bound with CO site waste. Mineral wastes containing magnesium the supply chain. in each of the Australian Industry ETI metal supply chains, due to the materials NETs have some potential applications Enhanced weathering of tailings at nickel mines is already naturally occurring, being produced as waste at mine sites. There are some emissions sources that may require ongoing CCU/S, however, especially within the gas supply chain. CCU/S, however, especially within the sources that may require ongoing There are some emissions stream of CO Gas extraction produces a concentrated so CCU/S is seen as a long-term solution to reduce emissions from this area of and is often vented to the atmosphere, sources (a concentrated CO sources (a concentrated using zero emissions sources and alternative processes or alternative renewable heat involve the use of electrification sections in this report. upon in specific supply chain hydrogen, and are expanded provide heat (for example, blast furnace emissions in Iron and steel, process heating emissions in Aluminium and Other steel, process heating emissions in blast furnace emissions in Iron and provide heat (for example, methane reforming in reactions (for example, steam from using fossil fuel feedstocks in chemical metals) and emissions of the emissions cost, due to the more or less dilute nature applications of CCS would vary in capture Chemicals). These Within the Australian Industry ETI supply chains, the majority of emissions can be eliminated through current or emerging of emissions can be eliminated through Industry ETI supply chains, the majority Within the Australian reduction while transitional options for emissions such, CCU/S are generally seen as potential technologies and, as fossil fuels to This is the case for emissions from using and become commercially viable. other technologies develop storage as a service (Northern Lights 2021). NETs could also be deployed in a more cost-effective way when developed way when in a more cost-effective could also be deployed Lights 2021). NETs a service (Northern storage as & Arranz 2020). regional needs (Cook tailored to meet industrial hub, and for a zero emissions specifically The cost-effectiveness of CCS, CCU and NETs can be expected to improve with scale, and this could be facilitated by be facilitated could and this with scale, to improve expected can be and NETs CCS, CCU of The cost-effectiveness storage shared transport and all users by enabling individual costs for and reduce models that group demand hub-style carbon itself as delivering which describes Lights CCS hub in Sweden, this is the Northern An example of infrastructure. AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 26 17 16 15 wind andsolar(Forrest2021). for acommercialplantinthePilbaranextfewyearspowered entirelybyvariablerenewableenergysuchas In addition,Fortescuehasrecentlyannouncedplanstostart buildingagreensteelpilotplantthisyear,withambitions for aneventualtransitionfromgastogreenhydrogen(forthe DRIprocess)intheearly2020s(GFGAlliance2020). a verticallyintegrated (Victoria) in2018(GFGAlliance2018).In2020,GFG revealedplanstotransformitsWhyallaSteelworksinto locally producedhematiteandmagnetite),acombined 1.2MtfromitsEAFfacilitiesinSydney(NSW)andLaverton Australian steelfacilities,producingaround1.1MtatitsWhyalla SteelworksinSouthAustralia(BF-BOFoperationrunon of approximately3MtatitsintegratedBF-BOFsteelmaking operations(BlueScope,2021).GFGAllianceoperatesthree Steelworks inNewSouthWalesisthelargestmanufacturer offlatsteelinAustralia,withanannualproductioncapacity Australia’s steelindustryisveryconcentrated,withproduction dominatedbytwocompanies.BlueScope’sPortKembla scrap-based processusingelectricarcfurnaces(EAF),accountingforremainingproduction(WorldsteelAssociation2020). using blastfurnaces-basicoxygenfurnaces(BF-BOF),whichproducesaround73%ofAustralia’scrudesteel;andthe produces steelforthelocalmarket,viatwodifferentproductionmethods:integratedore-basedsteelmakingprocess supply chain,producingaround5.5Mtofsteelin2019–just0.3%globalcrudeproduction.Australiamostly Given suchahighshareofironoreproductionisexported,Australiaminorplayerinlaterstagestheandsteel Iron andsteelmaking Australian IndustryETI. role intheglobalironandsteelsupplychain.Thisisakeyareaofinteresttoexploresubsequentphases the potentialtoproducedirect-reducedironfrommoreprevalenthematiteoresandimplicationsforAustralia’s increased demandforhighergradeoresmaybecomeacriticalchallenge.Furtherworkisrequiredtobetterunderstand based on2020productionlevels(Summerfield2020).Ifdirect-reductionfacilitiesbecomemorewidespreadglobally, 37% ofAustralia’stotalEconomicDemonstratedResources, content of65–70%,increasingproductioncosts.Althoughasmallsharecurrentexports,magnetiteoresrepresent direct-reduction facilities,additionalprocessingoftheconcentrate requires asecondstageofprocessingtoextractthemagnetiteandproduceconcentrate.Foruseinblastfurnaces or While puremagnetitecontainsahigherironcontentthanhematite,thepresenceofimpuritiesdecreasesoregradeand furnace ironandsteelmaking(Summerfield2020). ‘direct shippingores’–thatdonotrequireextensiveprocessingbeyondinitialcrushingandscreeningbeforeuseinblast ore exportsarehigh-gradehematite(56–62%ironcontent)fromthePilbararegioninWesternAustralia–knownas Australia’s reservesincludebothhematiteandmagnetiteironore.Thevastmajority(96%)ofAustraliancurrent New SouthWalesandTasmania(Summerfield2020). Australia’s ironorereservesoccurinWesternAustralia(92%),witharound5%Southandminoramounts was exported,withChina(82%),Japan(7%)andSouthKorea(6%)theprimarymarkets(DISER202 (17%) andChina(14%)(USGeologicalSurvey2021a).Inthatyear,morethan90%ofAustralia’sironoreproduction of ironore.Australiaproduced919Mtorein2019,accountingfor38%globalproduction,followedbyBrazil Australia isamajorplayerintheglobalironandsteelsupplychain,primarilyasworld’slargestproducerexporter Iron oreproduction 3.1.1 Supplychainstructureandcontext 3.1 Ironandsteel 3.0 Supplychaindetail

A verticallyintegrated businessmodelisonethatconsolidates multiplesupplychainstepsunder onecompany’sownershipandcontrol. Forexample, Economic DemonstratedResources(EDR) isameasureoftheresourcesthatareestablished,analyticallydemonstrated orassumedwithreasonable Agglomeration andthermaltreatment a steelproducermight verticallyintegrateitsoperationsby alsoproducingupstreaminputssuch asrawmaterial(ironore)andenergy. degree ofcertaintyastothesizeand quality oftheresourceanditseconomicviability(ABS2010). certainty tobeprofitableforextraction orproductionunderdefinedinvestmentassumptions.Classifyingamineral resourceasEDRreflectsahigh 17 ‘GREENSTEEL’facility,withnewdirectreducediron(DRI) andEAFprocessesinpreparation 16 equivalenttomorethan18,000Mtor20resourceyears 15 isrequiredtoproducemagnetitepelletswithaniron 1 ). Mostof

PHASE 1 TECHNICAL REPORT | JUNE 2021 27

e for EAF production, with 2 ). Emissions from the mining and ). Emissions from the Figure 6 e, compared to 0.9 MtCO 2 e in 2019–2020. This is due to the energy-intensive nature of dominant is due to the energy-intensive nature e in 2019–2020. This e in 2019–2020, accounting for around 50% of all domestic supply chain for around 50% of all domestic e in 2019–2020, accounting 2 2 Emissions sources in the Iron and steel supply chainEmissions sources in the Iron and steel summarises the major abatement opportunities within the Iron and steel supply chain, described in more detail summarises the major abatement opportunities within the Iron and steel supply both iron ore production and steelmaking. Given challenges in cost effectively deploying key technologies in the near both iron ore production and steelmaking. Given challenges in cost effectively of other transition options to help term, there is also the potential for optimisation of existing processes and uptake reduce emissions, although these are unlikely to be sufficient for a net zero outcome. Table 10 of zero emissions energy and feedstocks below for specific supply chain stages and processes. The uptake and supply of electricity and hydrogen in is a critical component of a net zero transition, in particular for the long-term application 3.1.3 Decarbonisation options and challenges FIGURE 06: 2.0 MtCO2e and 0.4 MtCO2e for BF-BOF and EAF respectively (Ellis & Bao 2020). 2.0 MtCO2e and 0.4 MtCO2e for BF-BOF Energy use for process heat – around a third of iron and steelmaking emissions – is currently dominated by fossil fuels, third of iron and steelmaking emissions – is currently dominated by fossil fuels, Energy use for process heat – around a or EAF production powered by largely coal-based grid electricity. For both either through gas and coal in blast furnaces of of Australian production is considerably higher than the global average steelmaking processes, the emissions intensity BF-BOF processes and considerable non-energy emissions from the use of coking coal as a reductant. Per tonne of from the use of coking coal as a reductant. and considerable non-energy emissions BF-BOF processes an estimated 2.3 MtCO steel, BF-BOF facilities in Australia emit source (as electricity comprises 85% of energy use in EAF production). the latter largely determined by the electricity Iron and steelmaking Iron approximately emissions from iron and steelmaking represent levels of Australian activity, domestic Despite relatively low emissions at 10.2 MtCO half of the supply chain emissions. These are primarily (68%) from the use of diesel in vehicles and machinery, followed by electrified mining in vehicles and machinery, followed by primarily (68%) from the use of diesel emissions. These are the use of explosives (6%). processes (26%) and stages of iron and steel production, the composition of Australia’s iron and steel supply chain (high iron ore production, iron and steel supply chain (high production, the composition of Australia’s stages of iron and steel of processes ( drives significant emissions from a number limited steelmaking) are estimated at 10.4 MtCO haulage of iron ore Iron ore production ore Iron in later than those and emissions-intensive are far less energy- in iron ore production processes involved Although the 3.1.2 Energy use and emissions 3.1.2 Energy AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 28 haulage, summarisedbelow: alternatives isaprimarychallenge.Therearehandfulof technologies thatofferprospectsofdecarbonisingminesite With diesel-basedhaulageaccountingformorethanhalfof emissionsinironoreproduction,findingzero electrification andotherfuelswitchingarethemostcriticalpathwaystonetzeroemissions. As emissionsinironoreproductionminingandhaulagearepredominantlyenergy-based,decarbonisedenergysupply, Iron oreproduction TABLE 10: CCS: carboncaptureandstorage;EAF:electricarcfurnace;DRI:directreducediron;BF-BOF:blastfurnacebasicoxygenfurnace. * ThesetechnologiesarecurrentlyclassifiedashavingaTRLof1-6andrequirefurtherresearch,developmentdemonstration. emissions offset residual Capture or Pillar 4b: emissions Non-energy Pillar4a: switching and fuel Electrification Pillar 3: supply feedstocks energy and emissions Pillar 2:Zero efficiency and energy Pillar 1:Material ● ●

Immaterial oruncertainrole design andbuildabattery-electric mininghaultruckalongsideafastchargingunit,with a viewtodecarbonising being testedinminesitesglobally. Forexample,FortescueMetalsGrouphasrecentlyannounced plansto currently nocommerciallyavailable electricminehaulersforopen-pitapplications,there areseveralvehicles are lessemissions-intensivethan dieselatjust25%renewablegeneration(Muralidharan 2019).Whilethereare available. Battery-electrictrucks producenooperationalemissionsifchargedusingrenewable electricityand vehicles haveimprovedconsiderably inrecentyears,withseveralundergroundvehicles nowcommercially Battery-electric trucks trolley assistshavethepotentialtoincreasesignificantly. zero emissionshaulagetechnologies(suchasbattery-electric vehicles),theflexibilityandemissionsbenefitsof fleets orelectricitysource(Muralidharan2019).Athigher shares ofrenewableelectricityandifcoupledwithother vehicles hasthepotentialtoreducedieseluseandemissions byupto30%withoutrequiringchangestrucking Trolley assists

Abatement opportunities across decarbonisation pillars fortheIronandsteelsupplychain Abatement opportunitiesacrossdecarbonisationpillars Material technologies emissions Negative emissions CCS ofprocess feedstocks Zero emissions improvements Process emissions fuels Other zero electricity emissions Zero efficiency Energy efficiency –Alreadyacommerciallymaturetechnology,theuseofoverhead electriclinestopowerhaulage

–Theprospectsforbattery-electricvehicletechnology(BEV) applicationsinheavy emissions options to zeroornear-zero Potential roleintransition Mineral carbonation(wasterock)* Iron orehaulage(hydrogen) Iron orehaulage(biomass)* Iron orehaulage Iron oreproduction

Increased scrap-basedproductioninEAF Uptake ofbestavailabletechnologies Mine siteandplantoptimisation for netzeroemissions abatement butinsufficient Important roleinnearterm Green hydrogenuseinDRI-EAFprocess* Biomass orhydrogenuseinBF-BOFprocess Green hydrogenuseinDRI-EAFprocess* Biomass orhydrogenuseinBF-BOFprocess Ore electrolysis* Green hydrogenproduction* EAF runonscraporDRI Decarbonise existingelectricityuse Steelmaking BF-BOF withCCS* emissions potential Long term,zeroornear-zero

PHASE 1 TECHNICAL REPORT | JUNE 2021 29 , due to 2.4 ). Anglo American is ). Anglo American is 4.2 and 4.1 (IEA 2019b), without considering other plant 18 emissions. 2 – Hydrogen fuel-cell electric vehicles (FCEVs) are an alternative option to fully electric vehicles (FCEVs) are an alternative – Hydrogen fuel-cell e from electricity use – around a quarter of total emissions from iron ore mining and haulage. More e from electricity use – around a quarter 2 – While BEV and FCEV technology and energy costs decline to become more competitive, drop-in – While BEV and FCEV technology and term given potential costs of transportation and competing needs in other sectors for finite sustainable supply term given potential costs of transportation used blend of biodiesel is B20, which replaces 20% of diesel with (see Section 4.3). The most commonly to a proportionate reduction in emissions. Blends such as B20 naturally derived, zero emissions fuel, leading in existing engines with no modifications, allowing immediate uptake are advantageous in that they can be used higher blends of biodiesel may require some equipment and vehicle once the fuel is sourced. Incorporating emissions reductions if managed. modifications but could lead to considerable planning to pilot a hydrogen-powered large mining truck in South Africa in the second half of 2021 by converting a planning to pilot a hydrogen-powered large ion battery-powered prototype. This will be the first and largest full power Komatsu 930E to a fuel-cell and lithium 2020). FCEV mining truck in the world (Moore Biodiesel for mine haulage. Although readily deployable with low CAPEX biodiesel could represent a transition option unlikely to feature prominently in mine haulage over the long requirements, the initiative considers biodiesel increasingly being used in heavier applications such as trains and trucks, suggesting promise for mining haul and trucks, suggesting promise for mining in heavier applications such as trains increasingly being used of heavy ability to meet the power requirements advantage of FCEVs is their theoretical trucks. The primary could BEVs (although combining with trolley systems battery weight when compared to machinery with reduced to the cost the uptake of FCEVs in haulage relate for BEVs). Major uncertainties regarding reduce battery needs cost trajectories which will be largely determined by production – particularly green hydrogen outlook for hydrogen (see Section generation and electrolyser technologies of variable renewable vehicles to be considered a zero-emissions haulage option. Given these challenges, battery-electric trucks are not trucks are challenges, battery-electric option. Given these haulage be considered a zero-emissions vehicles to could with trolley assists trucks 2025. Combining battery-electric available until after to be commercially expected earlier some of these challenges and driving charged during operation, thereby mitigating allow vehicles to be deployment at scale. trucks Hydrogen fuel-cell but are available in the light vehicle market haulage. FCEVs are already commercially decarbonise mining haulage fleets in the Pilbara, Western Australia (Fortescue 2021). Major barriers to uptake of BEVs for mine of BEVs for mine barriers to uptake 2021). Major Western Australia (Fortescue in the Pilbara, haulage fleets due to idling while adjustments and operational charging infrastructure battery size requirements, haulage are these be required for below) would also generation (discussed renewable electricity A complete shift to charging.

Assuming capital cost of AU$770 per tonne of steel and 2.6 Mt based on annual capacity at BlueScope’s Port Kembla facility Assuming capital cost of AU$770 per tonne of steel and 2.6 Mt based on annual capacity at BlueScope’s ● ●

18 chain – covering iron ore (with suitable grade for direct reduction), renewable electricity, and green hydrogen production chain – covering iron ore (with suitable grade for direct reduction), renewable electricity, through to zero emissions steelmaking. while major process changes may introduce uncertainty regarding raw materials and energy supply driven by while major process changes may introduce uncertainty regarding raw materials ambition through strategies and regional variability (Keys et al. 2019). To date, the companies demonstrating greatest operations across the entire supply investments in decarbonising steel production are those aiming to vertically integrate existing furnaces with periodic relines has capital costs in the order of AU$700–800 million (BlueScope 2021) while existing furnaces with periodic relines has capital costs in the order of AU$700–800 new steelmaking facilities cost upwards of AU$1,900 million alone levels of infrastructure change, infrastructure. Additionally, different decarbonisation technologies require varying and deployment of more costly technologies to capture future emissions benefits from anticipated developments in and deployment of more costly technologies to capture future emissions benefits market, this is a major commercial renewable electricity and hydrogen. For steelmakers in a highly competitive global retire blast furnaces early. Maintaining and strategic decision. Currently, there are limited incentives for steelmakers to There are numerous opportunities to reduce emissions in steelmaking, each with varying abatement potential, There are numerous opportunities to reduce emissions in steelmaking, each with for alternative iron and steelmaking technological readiness, and commercial feasibility. Although the technical prospects to deployment at scale in the next technologies are improving, high capital and operating costs are the key barrier early retirement of existing assets decade. A transition towards zero emissions steelmaking will likely require the Iron and steelmaking is at the prototype and pilot stage, but when developed the process will provide a mechanism for carbon capture and is at the prototype and pilot stage, but when developed the process will provide materials with economic value that can use (CCU), and production of environmentally benign building and construction reduce the cost of dealing with CO in Section 3.3.3, with more general discussion on the transition of Australia’s electricity system covered in Section 4.1. in Section 3.3.3, with more general discussion for mineral carbonation, as introduced in ‘Pillar 4b’ of Section Iron ore mine site waste is also a candidate (Ramli et al. 2021). Research into mineral carbonation of the waste rock the presence of silicate minerals and magnetite metals per tonne of ore produced. However, the considerable quantity of Australian iron ore production results in an metals per tonne of ore produced. However, estimated 2.7 MtCO decarbonised power generation at Australian mine sites will be covered further detailed discussion of the opportunity for Relative to other metals such as nickel, copper and gold that are typically processed at mine sites, hematite iron ore Relative to other metals such as nickel, extraction. As such, iron ore is typically less electricity-intensive than other requires very little on-site processing after AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 19 iron orereductionthatbypasstheuseofblastfurnaces: in steelmakingwillrequireeithertheextensivecaptureofCO barriers intheAustraliancontext(forexample,supplyofbiomass orscrapsteel).Achievingnear-zerozeroemissions long-term solutionsduetotechnicallimits(forexample,process optimisationreducingbutnoteliminatingemissions)or Each oftheabovesolutionshaveapotentialroletoplayin anetzerotransitionofsteelmaking,butareinsufficientas 30 Some ofthenearertermandtransitionoptionsforsteelmakingaresummarisedbelow: transformational zeroemissionstechnologiesandenergywhenavailable. a combinationofoptimisingexistingprocesses,utilisingtransitionoptionssuchasbioenergyandCCS,investmentin Given thesechallengesandcurrentproductionmethodsinAustralia,apathwaytonetzeroemissionsislikelyrequire

● ● ● ● ● ● Process offusingparticles togetherusingacombination of pressureandheatwithoutmelting the materials

over 80%ifcombinedwithabiomass-based blastfurnace(Toktarovaetal.2020). existing plantswithoutmajormodifications,removing50–60% ofemissionsifcombinedwithtopgasrecycling,or Carbon captureanduse/storage cooling effectsofhydrogen(RFCAmbrianLimited2021). heat sourcetopartiallyreplacesomeofthecoalused.However, injectionratesarelimitedtoaround20%due Hydrogen injectioninBF-BOFprocess supply andbyextensionassumesaminorroleforbiomassinsteelmakingprocesses. – Biomass,theAustralianIndustryETIanalysisassumesthereislimitedscopeformeaningfulincreasesinbiomass sustainable supply,particularlygivencompetingneedsinotherareasoftheeconomy.AsdiscussedSection & Bao2020).Aswithotherenergy-intensiveindustries,aprimaryconcernregardingtheuseofbiomassisensuring in integratedsteelmaking,althoughpracticethefeasiblereductionpotentialislikelytobeconsiderablylower(Ellis (Toktarova etal.2020).Widespreaduptakeofbiomasshasthetechnicalpotentialtoreduceemissionsbyup50% can alsobeusedtoreplacefossilfuelsinsintering sources. Themostfeasibleapplicationforbiomassisasanalternativefueltocoalinblastfurnaces,althoughit in BF-BOFsteelmaking,representingasignificantemissionsreductionopportunityifderivedfromrenewable Biomass inBF-BOFprocess significant increasesinlocalsecondaryproductionoverthelongterm. 2019). Australia’srelativelysmallpopulationandlowannualsteelproductionislikelytoconstrainthescopefor by highprices,limitedavailability,andcontaminationfromelementssuchascoppertin(Venkataramanetal. and high-qualityscrap,thelatterofwhichisparticularlychallenginginahighlycompetitivemarketcharacterised The mainchallengestoharnessinglowemissionsEAFproductionaretheneedforaffordableelectricitysupply purchasing agreementsormorefavourableeconomicsforon-siterenewablegenerationatsteelmakingfacilities. shares ofrenewableelectricitygeneration–whetherthroughagradualgridtransition,renewable-basedpower significant emissionsbenefitsofscrap-basedsteelproductionwillonlyimprovewithprogresstowardsveryhigh uses theloweremissionsEAFprocess.Aselectricityismainenergysourceforanfacility,already could alsoreducesteelmakingemissionsinAustraliaasitdisplacestheneedforprimarysteelproductionand Increased scrap-basedsecondaryproductionusingEAF Iron andsteelsupplychain. emissions. Australia-wide,decarbonisingexistingelectricityusewouldremovearound19%ofemissionsfromthe this electricityawayfromafossilfuelbasedgridtorenewableswouldeliminatearound9%ofBlueScope’scurrent to steelmakingplants,eventhosethatdonotuseanEAFsuchasBlueScope’sPortKemblasteelworks.Switching Switching existingelectricityusetorenewables ArcelorMittal hasraisedconcernsabouttheprospectsforscalingthistechnology(Keysetal.2019). installation wouldinvolveconsiderableoutageperiods,andtherecentclosureofapilotplantoperatedby waste stream)(Toktarovaetal.2020).TGR-BFhasthebenefitofutilisingallcurrentsiteprocesses;however, reducing demandforcokeandprovidinganopportunityCO achieved throughmodifyingblastfurnacestoremoveCO measures istheiruseofexistingBF-BOFfacilities.Forexample,emissionsreductions5–10%couldbe a combinationofhigh-qualityinputs(ironore,coal,scrap)andprocessoptimisation.Acostadvantagethese material andenergyefficiencies,withBHP(Ellis&Bao2020)estimatingpotentialreductionsofupto20%from Material andenergyefficiencies – As an alternative fuel and feedstock, biomass has numerous potential applications –Asanalternativefuelandfeedstock,biomasshasnumerouspotentialapplications –Post-combustionCCSforblastfurnacescouldreduceCO – Thereareimmediateopportunitiesforabatementinsteelmakingthrough –Hydrogencanbeusedinblastfurnacesasareducingagent and 19 and pelletising, or as a substitute for coke or coal-based char andpelletising,orasasubstituteforcokecoal-basedchar –Electricityprovidesareasonableamountofexistingenergy 2 fromcurrentproductionmethodsoralternativemeansof 2 fromtopgasandreinjectremaining(TGR-BF), –Increasedrecyclingandscrap-basedproduction 2 storage(bycreatingamoreconcentratedCO 2 emissionsfrom 4.3 2

PHASE 1 TECHNICAL REPORT | JUNE 2021 31

20 , including Table 11 e per tonne of steel, a reduction of 50% of steel, a reduction e per tonne 2 – Molten oxide electrolysis (MOE), also known as – Molten oxide electrolysis (MOE), also – An alternative to both the BF-BOF and DRI-EAF production – An alternative to both the BF-BOF and – Hydrogen. – The conversion of iron ore into direct reduced iron (DRI) using natural iron (DRI) using natural into direct reduced of iron ore – The conversion 4.2 – A DRI-EAF production pathway using pure hydrogen as a reductant (H2-DRI- pathway using pure hydrogen as – A DRI-EAF production e/PJ. Emission intensity if reduced by a further 35% if renewable energy is used (Bartlett & Krupnick, 2021) e/PJ. Emission intensity if reduced by a further 35% if renewable energy is used (Bartlett & Krupnick, 2 such as electrowinning but faces a number of technical challenges in reaching the commercial stage and is not such as electrowinning but faces a number of technical challenges in reaching patented an inert anode and is likely to be available until after 2030. Boston Metal, an American company, has from a number of companies aiming to demonstrate MOE technology at industrial scale, with funding support including BHP (Mining Magazine 2021). Electrolytic steel production (molten oxide electrolysis) Electrolytic steel production (molten used in the Hall-Héroult process pyro-electrolysis, is another emerging technology for steelmaking, similar to that high temperatures (around for producing aluminium from alumina. MOE involves dissolving iron ore at very produce liquid iron, which is then 1600℃) and passing an electrical current through a liquid electrolyte solution to (West 2020). This technology coupled with scrap metal or another carbon input in an EAF to create liquid steel electrolysis routes could be emissions-free and is expected to require less energy compared to low-temperature ores using electricity and is already widely used in producing lead, copper, and rare-earth elements. A method of ores using electricity and is already widely via low-temperature electrolysis (IEA 2020d) has been demonstrated electrowinning steel directly from iron ore initiative led by ArcelorMittal developing the technology and at laboratory scale, with the European SIDERWIN (Venkataraman et al. 2019). Early studies suggest this technology could aiming for validation at pilot scale by 2022 and reduce energy use by 31% relative to conventional production eliminate process emissions in steelmaking (SIDERWIN 2021). to compete with conventional production methods (Ellis & Bao 2020). More detail on the outlook for hydrogen to compete with conventional production production costs is discussed in Section Electrolytic steel production (electrowinning) into steel using electrolytic processes. These processes are attractive routes is the reduction of iron ore directly the possibility of sustained uncompetitive costs for hydrogen, on which as they offer a potential ‘hedge’ against is a mature process for extracting certain metals from their the viability of a H2-DRI route hinges. Electrowinning process. Although a H2-DRI-EAF approach is currently considered the most viable option for zero emissions process. Although a H2-DRI-EAF approach until around 2035 (HYBRIT 2018). Hydrogen already comprises the steelmaking, market entries are not expected processes (Ellis & Bao 2020) and it is expected that existing facilities majority of reducing agents within NG-DRI or no modification (Wood & Dundas 2020). The major challenges and could be run on pure hydrogen with little H2-DRI are the economics of securing required quantities of green uncertainties regarding zero emissions energy (Hoffman et al. 2020). Estimates suggest that in the absence hydrogen and running an EAF on renewable green hydrogen costs in the range of $1–2/kg would be required of a ‘green premium’ or emissions penalties, significantly higher electricity supply and infrastructure requirements to support EAF facilities, high electricity to support EAF facilities, high electricity supply and infrastructure requirements significantly higher quantities of and challenges in procuring necessary renewable electricity in key jurisdictions prices, low levels of infrastructure in relevant regions. due to both high prices and limited pipeline gas on the east coast iron Hydrogen direct reduced the hydrogen decarbonising steel production. If both the most promising long-term option for EAF) is emerging as the steelmaking would nearly eliminate emissions from are based entirely on renewables, this input and electricity EAF). The emissions intensity of NG-DRI-EAF is around 0.864 MtCO of NG-DRI-EAF is emissions intensity EAF). The a major opportunity therefore provides 2021). NG-DRI-EAF (Bartlett & Krupnick, to BF-BOF production compared through for zero emissions production in the short-term, while also opening opportunities to reduce emissions several major barriers to adoption of NG-DRI-EAF green hydrogen. However, there are an eventual switch to EAF facilities for DRI facilities, an absence of the considerable capital requirements in Australia. These include of hematite ores for direct reduction, Port Kembla operations), the unsuitability (in the case of BlueScope’s Natural gas-based direct reduced iron direct reduced Natural gas-based iron In this process, East and North America. used in the Middle is a proven process (NG-DRI) gas as a reductant steel in an EAF (NG-DRI- processed into DRI that can be further reaction, producing via a gas-solid ore is reduced

Data from International Energy Agency (2019), US Energy Information Administration (2020), assumes grid emissions intensity of 0.1827 Mt Data from International Energy Agency (2019), US Energy Information Administration (2020), assumes ● ● ● ●

CO 20 The key technologies that can allow Iron and steel supply chain decarbonisation are shown in The key technologies that can allow Iron and steel supply chain decarbonisation potential for emission abatement. indicative timelines for deployment, technology readiness level and maximum AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 32 21 TABLE 11: production Iron ore Process Steelmaking

Based onTechnology ReadinessLevelandCommercial ReadinessIndex(ARENA2019b,ARENA 2014) Summary ofabatementtechnologiesintheIronandsteelsupplychain mining equipment Diesel-powered generation electricity powered Diesel orgas- process technology/ Incumbent (BF-BOF) production route blast furnace Conventional electricity use Grid-powered waste rock Production of trucks Diesel-powered

Electrowinning via EAF based production Increased scrap- DRI-EAF Hydrogen DRI-EAF Natural gas retrofit BF-BOF withCCS optimisation and process technologies best available Uptake of generation electricity Renewable waste rock carbonation using Mineral trucks Fuel-cell electric trucks Battery-electric Trolley assist equipment Electric-powered generation electricity Renewable electricity Grid-connected process technology/ Abatement electrolysis Molten oxide

development Research and Demonstration Demonstration Demonstration Deployment Deployment Deployment status Technology development Research and development Research and Deployment Demonstration Deployment Demonstration Deployment Deployment 21 After 2025 After 2025 After 2025 2020 2020 2020 2020 deployable Year 2030 2030 2020 2035 2020 2025 2020 2020 NET, dependentonwastespecifics 100% ifpoweredwithgreenhydrogen electricity 100% ifpoweredwithrenewable haulage technologies Supports deploymentofalternative 30% withexistinghaulagefleet. 100%, dependent on electricity source 100% reductioninindirectemissions Dependent ongridgenerationmix Maximum abatementpotential 100% 87% source andavailabilityofscrap potential willdependonelectricity compared toBF-BOF.Abatement 56% reductioninenergyuse hydrogen 98% ifpoweredwithrenewable renewable electricity 68% reductionifusing gas recycling 50–60% ifcombinedwithtop emissions 30% reductioninenergyuseand 100% reductioninindirectemissions

PHASE 1 TECHNICAL REPORT | JUNE 2021 33

22 . There are currently five large bauxite mines in Australia operated by three five large bauxite mines in Australia . There are currently Figure 7 : Export quantity and value of Australian bauxite, alumina,: Export quantity and value of Australian and aluminium in 2019–20 Calculated from DISER (2021)

22 (41%), which are both based on the use of fossil fuels – either through direct combustion for heat or electricity generation (41%), which are both based on the use of fossil fuels – either through direct combustion 3.2.2 Energy use and emissions responsible for around 4% of national The Aluminium supply chain is one of the largest sources of emissions in Australia, smelting (58%) and alumina refining emissions in 2020 (DISER 2020a). The majority of emissions are due to aluminium FIGURE 07 Australia’s smelters tend to be based on the availability and proximity to historically low-cost electricity sources. Australia’s smelters tend to be based on $3.7 billion (DISER 2021). Major export markets are Japan, South Korea and the US. There are four aluminium smelters markets are Japan, South Korea and the US. There are four aluminium smelters $3.7 billion (DISER 2021). Major export Rio Tinto operations in Tasmania and Queensland, and a joint venture in Australia: Alcoa’s operations in Victoria, of Aluminium operating Tomago Aluminium in New South Wales. The location between Rio Tinto Alcan, CSR and Hydro Australia is the sixth largest exporter of crude aluminium by value, accounting for around 5% of global exports in Australia is the sixth largest exporter of 91% of Australia’s 1.57 Mt of aluminium was exported, with a value of 2018 (Rusmet 2019). In 2019–20, around Queensland, one of which is a joint venture with RUSAL) and South32 (one refinery in Western Australia). Alumina Queensland, one of which is a joint venture coastlines to facilitate export of alumina or transport to aluminium smelters. refineries are generally located on or near Aluminium smelting exported. Together, China (63%) and Australia (15%) account for most of the global output. In 2019–20, Australia for most of the global output. In 2019–20, China (63%) and Australia (15%) account exported. Together, billion (DISER 2021). There are six alumina refineries operated by the same exported 17.9 Mt of alumina worth $7.4 Alcoa (three refineries in Western Australia), Rio Tinto (two refineries in three companies as for bauxite mining: Alumina refining production of alumina globally, with 87% of domestic largest producer and largest exporter Australia is the second billion (DISER 2021), as shown in billion (DISER 2021), one in Queensland) (one mine in the Northern Territory, mines in Western Australia), Rio Tinto companies: Alcoa (two in Western Australia). and South32 (one mine Australia is the world’s largest producer of bauxite and home to the second largest reserves (approximately 22%, to the second largest reserves (approximately largest producer of bauxite and home Australia is the world’s a value of $1.7 2019–20, with 41 Mt (38%) exported at produced 107 Mt of bauxite in World Bank 2017). Australia 3.2.1 Supply chain structure and context chain structure 3.2.1 Supply Bauxite mining 3.2 Aluminium AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 34 23 a ‘continuousflow’operation thatisnotwell-suitedtointerruption alumina pertonneofcrudealuminium produced(AustralianAluminiumCouncil2021).As aluminiumsmeltingis through whichanelectriccurrent isthenpassed.Thisprocessusesaround14.4MWhof electricityandtwotonnesof This isahighlyenergy-intensiveprocessinwhichnear-pure aluminaisdissolvedataround950°Cinamoltensaltbath, Crude aluminiumisproducedfromaluminathroughelectrolysis, otherwiseknownastheHall-Héroultsmeltingprocess. Aluminium smelting facilities whichusecoal,gas,orbiomassfuels. fluidised bedcalcination.AllofAustralia’saluminarefineries havecombinedheatandpowergeneration(cogeneration) through theproductionofheatabove800°Cfromgas,generally usingeithergassuspensioncalcinationorcirculating thermal energyrequiredinaluminarefining(ARENA2019a). Calcinationusestheremainingone-thirdofthermalenergy steam attemperaturesrangingfrom145–265°C(Donoghue etal.2014)whichconsumesaroundtwo-thirdsofthe digestion andcalcination,bothofwhichuseprocessheatthat iscurrentlyderivedfromfossilfuels.Digestionrequires of bauxitepertonnealuminaproducedthroughtheBayerprocess.Thetwomajorstepsinrefiningare The processofrefiningaluminafrombauxiteoreisenergyintensive,requiringaround10.3GJandtwotonnes Alumina refining supply chain. resulted inemissionsofaround0.43MtCO the useofdieselinmining(2.3PJ)andhaulage(1.5PJ),withremainder(0.8fromelectricitymining.This Energy usefrombauxiteminingandhaulagetotalledanestimated4.7PJin2019–2020.Mostofthisenergywas mining andhaulageprocesses. bauxite oretoconcentrateminerals).Assuch,energyuseandemissionsintheproductionofareentirelyfrom the majorityofbauxitecanbeminedandprocessedwithoutbeneficiation(crushing,grindingfurthertreatment Most bauxiteoccursclosetothesurfaceandwithrelativelysmallquantitiesofoverburden(wasterock).Thismeansthat Bauxite mining FIGURE 08: Regulator 2021a). use intheNationalElectricityMarket(NEM)2019–2020(AustralianAluminiumCouncil2021,AustralianEnergy ( Figure 8

Power supplyinterruptionsfortwotothree hourscanbemanagedbythesmelter,butcauseinstabilityinprocess. Longerpowerlosses with costsintheorder of$50to70millionforanaverage smelter(AustralianAluminiumCouncil 2005) cause thecellstocoolsubstantiallyand eventually‘freeze’,causinglossofcapacityandrequiringsignificantremediation toresumeoperation, ). Aluminiumsmeltinginparticularisamajorconsumerofelectricity,accountingforaround11%electricity Emissions sourcesintheAluminiumsupplychain 2 e, whicharefaroutweighedbyemissionsinotherareasoftheAluminium 23 , itrequiresaconstantsupply ofpower,whichis

PHASE 1 TECHNICAL REPORT | JUNE 2021 35 e 2

from scrap Demand response, improved cell design Decarbonise existing electricity use Carbon anode alternatives* Aluminium smelting Secondary production Long term, zero or near-zero emissions potential 1), or 13% of total emissions 1), or 13% of total emissions

Electrified Bayer process* Biomass use in Bayer process heat Green hydrogen use in Bayer process heat* Bayer process with CCS* Alumina refining Important role in near-term abatement but insufficient for net zero emissions Australian Aluminium Council 202 Australian Aluminium

Mine site and plant optimisation Uptake of best available technologies Upstream impacts from increased secondary production Upstream impacts from increased secondary Mineral carbonation (mine tailings)* Biodiesel truck haulage Hydrogen truck haulage Bauxite mining Trolley assist, battery- electric trucks Potential role in transition to zero or near-zero emissions options e per tonne of aluminium ( e per tonne of aluminium 2 process emissions Negative emissions technologies electricity Other zero emissions fuels Process improvements Zero emissions feedstocks CCS of Material efficiency Energy efficiency Zero emissions Abatement opportunities across decarbonisation pillarsAbatement opportunities across decarbonisation for the Aluminium supply chain

summarises the major abatement opportunities within the Aluminium supply chain, described in more detail Aluminium supply chain, described in more abatement opportunities within the summarises the major Immaterial or uncertain role *These technologies are currently classified as having a TRL of 1-6 and require further research, development and demonstration. *These technologies are currently classified as having a TRL of 1-6 and require further research, development CCS: carbon capture and storage Capture or offset residual emissions Pillar 4b: Pillar 4a: Non-energy emissions switching Pillar 3: Electrification and fuel Zero emissions energy and feedstocks supply and energy efficiency Pillar 2: Pillar 1: Material TABLE 12: handful of processes, involving direct fuel combustion, electricity and non-energy sources. As such, there are important and non-energy sources. As such, involving direct fuel combustion, electricity handful of processes, decarbonisation, with the supply and uptake of zero emissions energy of abatement options across most pillars of particular significance. 3.2.3 Decarbonisation options and challenges 3.2.3 Decarbonisation Table 12 from a in the Aluminium supply chain originate chain stages and processes. Emissions below for specific supply responsible for around 1.6 tCO responsible for around from smelting. raw ore. consuming electricity and improve overall efficiency, also uses carbon anodes to conduct The Hall-Héroult process carbon anodes This produces carbon dioxide, with of aluminium produced (Rivedal 2018). around 450 kg per tonne of electricity-related emissions per tonne of crude aluminium (Australian Aluminium Council 2021), although this would 2021), although Aluminium Council aluminium (Australian per tonne of crude emissions of electricity-related require aluminium does not grids. Recycled intensity of nearby and the emissions on smelter location vary depending from to produce aluminium the energy required using only 5% of is simply re-melted, Instead, the metal electrolysis. currently provided entirely through grid electricity produced predominantly from coal. This results in around 10.8 tCO results in around from coal. This produced predominantly grid electricity entirely through currently provided AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 36 24 technologies andenergysourcesareoutlinedbelow: step isreplacingthefossilfuels(gasandcoal)currentlyusedforheatingindigestioncalcination.Alternative not besufficientforanetzeroemissionspathway.Thekeyopportunitytoeliminateinthealuminaprocessing While theabovetechnologiescouldplayanimportantroleinreducingemissionsshort-to-mediumterm,theywill scope inAustralia.Theseincludethefollowing: technologies. However,manyofthesetechnologiesaremoresuitedtogreenfieldbuildsforwhichtheremaybelimited there arenear-termopportunitiestounlockfurtherenergyandemissionsbenefitsthroughdeploymentofmature Although theenergyintensityofAustralia’saluminarefineriesarearoundglobalaverage(WorldAluminium2020a), Alumina refining decarbonisation optionsforironoreproductionpresentedinSection Given energyuseandemissionsinbauxiteproductionareentirelyfromminingprocesseshaulage,the Bauxite mining

● ● ● ● ● A combinedcyclepower plantusesbothagasandsteam turbinetoproduceup50%more electricityfromthesamefuelthana traditional simple cycleplant. The wasteheatfromthegasturbineis senttothesteamturbine,whichgenerates extrapower(GE2021).

(IRENA 2015)comparedtocombined cycleplantsintherangeof30–50%(Colley2010). During 2017,apre- through theuseofbiomassas afuel.Biomasscogenerationplantscanachieveoverallefficiencies ofupto70–90% that aremoreefficientthancombined cycleplants Biomass cogenerationforsteam land requirementsarelikelytobeamajorbarrieruptake. in eithergoodorverysolarresourceareas(~2100–2500 kWh/m2/year)(ARENA2020),butconsiderable calcination –replacinguptohalftheheatrequirement(Kraemer 2020).AlloftherefineriesinAustraliaarelocated expected todeclineasscaleincreases.Thistechnologyis being developedinAustraliaforapplicationtoalumina calcination process,anewCSTinstallationwouldbeconsiderably moreexpensive,butperunitcostscanbe as digestion,newCSTisalreadycostcompetitivewithexisting gas.Atthehighertemperaturesrequiredby scale thanwouldberequiredforanaluminaplant.Analysis suggeststhatforlow-temperatureprocessessuch 2019a). CSTforpowerandheatingisalreadyusedinAustralia (Sundrop2016),althoughthisisatasmaller concentrated solarthermal(CST)isapromisingopportunity currentlybeinginvestigatedinAustralia(ARENA Concentrated solarthermalforprocessheat and ischallengingduetothespacerequiredforinstallation(Chatfield2020). are predictedtobecompetitiveforgreenfieldsites,butretrofitrequiressignificantcapitalinvestments($2–5billion) systems costcanbeashighUS$1150/kW(Bantleetal.2018).TheeconomicsforMVRinAustralia cost-effectiveness –estimatesarethatcostmustbebelowUS$115–230/kWtocompetitive,andforsmall of usingMVRpoweredbyrenewableenergytoproduceprocessheat(ARENA2021).Scalestronglyimpacts there isatrialunderwayatrefineryinWesternAustraliatoinvestigatethetechnicalandcommercialfeasibility alumina refineriesglobally;however,itiswidelyusedinotherindustries,includingpulpandpaperprocessing renewable energy.Thisisadevelopingtechnologyforaluminaprocessingwithonlyfewsmallinstallationsin (Martin 2005).Toeliminateemissionscompletely,steamrequiredatstart-upwouldalsoneedtobeprovidedby pumps, ituseselectricitytorecompresssteamandreducetheheatingload,loweringoperatingfuelcosts by upto100%ifpoweredrenewableenergy(Chatfield2020).Similarlywasteheatoptimisationand for digestionbyupgradingwastesteam(ARENA2019a),withthepotentialtoreduceemissionsfromthisprocess Mechanical vapourrecompression(MVR) powered energysources(eitherelectricityorhydrogen)(Nathan2021). allow theeliminationoffossilfuel-basedemissions,butthereisresearchunderwaytoretrofitrenewable performance, intermsofbothaluminaqualityandenergyuse(Brough2020).Thesetechnologiesdonotcurrently rotary kilns(Chanetal.2019).Botharematuretechnologies,butthereisongoingresearchtooptimise the bestavailabletechnologiesforcalcination,offeringenergysavingsofaround60%comparedtoconventional Optimising calcinationenergyuse plant rebuild(Chanetal.2019). viable forgreenfieldsitesonly,asconversionfromexistingdigesterdesignwouldrequirecompleteredesignand decreased equipmentcomplexityandmaintenance(Kellyetal.2016).Thistechnologyislikelytobeeconomically reduce theenergyintensityofdigestionprocessesbyupto15%(Hatch2020),whilealsosavingcostsdue and tubeheatexchangerswhichusebundlesofseveralhundredsmalldiameterthin-walledpipes.Thiscan Tube digestion –Tubedigestionconsistsofjust3or4tubeswithinalargerpipe,asopposedtotraditionalshell – Combined heat and power (CHP) plants are a mature technology used globally –Combinedheatandpower(CHP) plantsareamaturetechnologyusedglobally –Fluidisedbedcalcinationandgassuspensionareconsidered –MVRreducestheamountofgas-firedsteamgenerationrequired –Replacingaportionofthegasusedinaluminaproduction with 24 and enable further reductions in steam generation emissions andenablefurtherreductions insteamgenerationemissions 3.1.3 alsoapplyhere. PHASE 1 TECHNICAL REPORT | JUNE 2021

37

2 25 from industrial gas streams that reduces from industrial gas streams that reduces 2 , the need for reliable renewable energy supply – typically 4.4 e per year, equivalent of supply chain emissions. to 2% 2 – Electric boilers can be used to generate steam and provide the low heat be used to generate steam and provide – Electric boilers can – Hydrogen is able to replace gas firing in boilers for the production of low- to replace gas firing in boilers for the production – Hydrogen is able 1000°C), but there is research underway (TRL 2–3) to allow retrofits to current systems to use electricity (Nathan 1000°C), but there is research underway refineries combined with demand response could further supplement 2021). Increased electrification of alumina Council 2020b). electricity reliability (Australian Aluminium calcination, but research in this area is still at an early stage (TRL 2–3) (Nathan 2021). As hydrogen emits zero (TRL 2–3) (Nathan 2021). As hydrogen in this area is still at an early stage calcination, but research on technical calcination emissions, depending this solution has the potential to eliminate emissions when used, and retrofit considerations. process heat Electrification of technology available. There are currently limited refineries and are already commercially demand for alumina heat requirement for calcination (needing temperatures of around options for electrification of the high temperature by limited feedstock availability and the considerable heat requirements for alumina plants (ARENA 2019a). for alumina plants heat requirements and the considerable feedstock availability by limited heat Hydrogen for process and boiler technology is available but expensive, the digestion process. Hydrogen-ready temperature heat in there may As boilers require semi-regular replacement, costs (Worcester-Bosch 2020). retrofit may incur additional will be of asset life. The economics of this substitution new equipment installation at the end be an opportunity for use in alumina may also be an alternative for gas the cost trajectory for hydrogen. Hydrogen highly dependent on feasibility trial of a 30% biomass fuel load was completed at the South32 Worsley alumina operation in Western Worsley alumina at the South32 fuel load was completed of a 30% biomass feasibility trial fossil fuel based compared to an entirely in emissions a proportionate reduction 2020), driving Australia (South32 may be constrained for steam generation adoption of biomass future widespread technical feasibility, load. Despite

Internal Australian Industry ETI analysis – Electricity generation). As competitors and customers decarbonise, the basis of competitiveness will need to shift – Electricity generation). As competitors and customers decarbonise, the basis ● ●

25 system developments. As detailed further in Section far the largest driver of electricity costs. achieved through energy storage including batteries and pumped hydro – is by as coal-fired generation exits the system and is replaced by variable renewable energy generation (covered in Section as coal-fired generation exits the system and is replaced by variable renewable 4.1 facilities are located near identified to diverse and high-quality renewable resources. All of Australia’s current smelter dependent upon other potential parallel Renewable Energy Zones, with the delivered cost of electricity from these areas competitive advantage of Australia’s smelters was based on an ability to contract directly with the lowest cost energy competitive advantage of Australia’s smelters was based on an ability to contract were able to provide cheap energy to supplier, typically coal-fired power plants that had run down capital costs and of Australia’s electricity grid cover operational costs only. This arrangement is challenged by the ongoing transformation Costs are another major barrier to uptake of zero emissions electricity in aluminium smelting. Energy is a very significant Costs are another major barrier to uptake of zero emissions electricity in aluminium Aluminium Council, 2020a), with component of overall aluminium costs (estimated in the range of 30-40%) (Australian expensive power. Historically, the the viability of Australian smelters already threatened by globally uncompetitive, represents a 70% increase in the total amount of Australia’s variable renewable generation (wind and solar PV) in represents a 70% increase in the total amount of Australia’s variable renewable system and demands coordination 2018–19 (DISER 2020e). Clearly, this is a significant shift in the scale of the energy and planning between the electricity system and the aluminium sector. further complicated by the fact that most Australian smelters, unlike for global competitors such as Norway and Russia, further complicated by the fact that most Australian smelters, unlike for global constant electricity. Switching the are not located in proximity to hydro resources that could provide zero emissions, by smelters in 2019 to renewables entire 22.6 TWh (Australian Aluminium Council 2021) of grid electricity consumed reasons. First, as discussed above, aluminium smelting is highly energy intensive and requires near-constant power. reasons. First, as discussed above, aluminium renewables would require a significant expansion of the electricity sector to Converting existing electricity demand to is of storage or other flexibility measures to guarantee energy reliability. This meet demand and considerable amounts Energy use in aluminium smelting is already completely electrified. As such, sourcing zero emissions supply of electricity completely electrified. As such, sourcing zero emissions supply of electricity Energy use in aluminium smelting is already facing this stage of the supply chain. This is a major challenge for several is the primary decarbonisation challenge the alkalinity of red mud for use in cement and road construction (Tran 2016). Application of this process across all the alkalinity of red mud for use in cement MtCO Australian facilities could store around 0.6 Aluminium smelting silicon. While red mud is currently mostly stacked and stockpiled, there are opportunities to extract metallic constituents stacked and stockpiled, there are opportunities to extract metallic constituents silicon. While red mud is currently mostly in the cement industry (Gleeson 2020) or use the residue to sequester CO (Ujaczki et al. 2018) and reuse the waste process of direct carbonation using CO (Stanford 2016). Alcoa has developed a resulting from a loss of iron from the bauxite ore. Approximately 1.0–1.5 tonnes of red mud are produced per tonne of ore. Approximately 1.0–1.5 tonnes of red mud are produced per tonne of resulting from a loss of iron from the bauxite due to fine particle size, alkalinity and toxicity (Stanford 2016). Red mud alumina, presenting an environmental issue metallic constituents such as iron, aluminium, titanium, sodium, and also contains significant quantities of untapped The Bayer process of converting bauxite ore into alumina also creates a significant amount of waste known as red mud, ore into alumina also creates a significant amount of waste known as red mud, The Bayer process of converting bauxite AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE year (19%) 27 26 been furtherdeveloped: emissions andtheconsensusisacombinationofthesewillbemosteffectivesolutiononcetechnologieshave approximately 13%ofanode-relatedemissions.Therearearangesolutionsproposedforthedecarbonisationthese Smelting canalsoreleaseperfluorocarbons(PFCs)ifthereareprocessupsets,calledanodeeffects,whichaccount for in themanufactureofanodesandemissionsproducedduringuseanodes,mainlycarbondioxide. of thesmelter’selectricitysource.Theseemissionscomefromusefossilfuels(includingcoalcokeandpitch) emissions fromthesmeltingprocess(AustralianAluminiumCouncil,2021),dependingonintensity aluminium smeltingprocessisfromtheproductionanduseofcarbonanodes,whichcancontributeupto15% Other thanemissionsfromthegenerationofelectricityusedforsmelting,otherkeysourcein Energy 2020). et al.2004,Chan2019,DeYoung2011,USDepartmentofEnergy,EnergyEfficiencyandRenewable further improvetheefficiencyandreduceenergyusefromrecyclingbuthavenotyetbeencommercialised(Kadolkar 38 shifted tosecondaryproduction(inlinewiththeglobalaverage),thiswouldreduceemissionsbyanestimated7MtCO small amountofaluminiumthatiscapturedforreusecurrentlyexported.Ifone-thirdAustralia’ssupply limited inAustraliadueparttoinsufficientscaleofaluminiumproductionanduncompetitivelyhighlabourcosts.The Secondary productionalsotendstocostless,withscrapavailabilitythekeyconstraint.However,recyclingiscurrently The energyintensityofprimaryaluminiumproductionisaroundtentimeshigherthanfromreusingnewandoldscrap. global aluminiumsupplychain,withnewandoldscrap production asitbypassestheneedforenergy-andemissions-intensiveelectrolysis.Recyclingisakeypartof Increased secondaryproductionthroughrecyclingisanothermajoropportunitytoreduceemissionsfromaluminium limited pricesignalstoincentiviseinstallationintheAustraliancontext. over twoyears(Wongetal.2020).However,thisisyettobeprovencommerciallyviableatscaleandtherearecurrently a 20%modulationofpowerinAustraliansmelters(atanassumedcost$50Mpersmelter)wouldpayitselfoffjust demand forlongerperiodsoftime(IEA2020b).Onepieceanalysissuggeststhatretrofittingsuchtechnologytoallow trialled, whichwouldprovidesmelteroperatorsgreaterabilitytodynamicallymanageenergyuseinresponsegrid production wasrestored(Judd2016).Innovationstoimprovethethermalinsulationofelectrolyticcells(pots)arebeing at thePortlandsmelterinVictoria2016thatcurtailedproductionto27%ofplantcapacityandtookmonthsbeforefull to sustainproductiondowntimeformorethanafewhours.Thisinflexibilitywasevidencedbyfive-hourpoweroutage depending onthedurationofenergymodulation(AustralianAluminiumCouncil2017).Currently,smeltersarenotable DSR hasbeenprovidedbysmeltersinthepastbutiscurrentlylimitedduetoassociatedcostsandrisksfor providing DSRduringcriticalshortfallsinenergyreserves(AEMO2020b). losses. AEMO’sReliabilityandEmergencyReserveTrader(RERT)mechanismallowslargeenergyuserstobepaidfor of supportivemarketmechanismsandsufficientlyhighpaymentfordemandsideresponsetocompensateproduction supply. DSRisahigh-valueopportunity,theeconomicsofwhichwillbedrivenby,amongotherfactors,existence demand sideresponse(DSR),adjustingtheiroperations–orloadsheddingattimeswhereenergyexceeds As majorconsumersofenergy,aluminiumsmelterscouldtheoreticallyplayakeyroleinenergysystemflexibilitythrough flexibility throughdemandmanagementreducestheneedforstorage,andaluminiumsmeltersareonepotentialsource. using firmed renewables. However, it will be important to find every opportunity to minimise storage costs. Energy system In aglobalcontextwhereallsmeltersareusinglowemissionselectricity,Australianmaybeabletocompete

● InternalAustralian IndustryETIanalysis New scrapisthatarisingduringtheproduction ofaluminiumproductsbeforebeingsoldtothefinaluser,whileold scrapresultsfromthe collection and/ortreatmentofproducts afteruse(InternationalAluminiumInstitute2009).

Johansson 2018). required. Theanodeproducesoxygenduringoperation,which couldbecapturedandsold(Haraldsson& costs wouldbespreadovertimeastheanodesincrementally installed,withsomecellmodifications is notused.Theoperatingcostestimatedtobereduced, butthereisverylimitedinformationavailable.Retrofit Renewable Energy2007),whichhasthepotentialtooutweigh thebenefitsoftechnologyifrenewableenergy a slightlyhigherenergyuseduetothevoltagerequired (U.S.DepartmentofEnergy, EnergyEfficiency& have asignificantlylongerlifetimethancarbonanodeswhich arereplacedeachmonth.However,theywouldhave called ELYSIS(ELYSIS2021),bothaimingforcommercialisation before2025.Inertanodesarenotconsumed,so projects beingundertaken,onebyRusal(Rusal2021)and theotherajointventurebetweenRioTintoandAlcoa developed, buttherehavebeenlimitedsuccessestodate in findingsuitablematerials.Therearetwolarge-scale Inert anodes 27 throughavoidedaluminaproductionandsmelting.Anumberoftechnologiesarebeinginvestigatedto –Inertanodeshavebeenunderinvestigationsincethecurrent aluminiumrefiningprocesswasfirst 26 providing33%ofproductionin2018(WorldAluminium2019).

2 e/ PHASE 1 TECHNICAL REPORT | JUNE 2021 39

, including indicative Table 13 – The concept of using kaolin clay as a raw material (rather than bauxite) predates – The concept of using kaolin clay as a – This process reacts alumina with carbon at high temperatures to form aluminium and – This process reacts alumina with carbon (combinations of other developments) – There are a number of novel cell designs proposed to developments) – There are a number (combinations of other – Wettable cathodes are a technology that replaces the smelting reaction cell with a new cell with a new the smelting reaction that replaces cathodes are a technology – Wettable electrodes in a vertical arrangement with a different electrolyte which allows lower temperatures in the cells. electrodes in a vertical arrangement with in energy usage, increased productivity per cell, and the elimination of There is a predicted 25–30% reduction 2018). There have been a number of trials of this technology, but high anode effects (Haraldsson & Johansson (U.S. Department of Energy, Energy Efficiency & Renewable costs or closures of sites have halted progress Energy 2007). to be offset by energy efficiencies provided by the wettable cathode (U.S. Department of Energy, Energy cathode (U.S. Department of Energy, efficiencies provided by the wettable to be offset by energy Energy 2007). Efficiency & Renewable cell by using greatly increase the productivity of the electrode configurations could Multipolar cells – Multipolar only be would require a stable ACD, and could in a single reactor, but this arrangement multiple electrodes applied with inert anodes. on the multipolar cell and use several alternating anode/cathode Vertical electrode cells – These cells build Combined inert anodes and wettable cathodes – this could allow the increased energy use of the inert anode allow the increased energy use of the and wettable cathodes – this could Combined inert anodes

- - - Energy Efficiency & Renewable Energy 2007). Benefits of this process include the ability to use a new source Energy Efficiency & Renewable Energy and a faster and more efficient conversion process. In addition, smaller of inexpensive and widely available ore, continuous operation (like electrolytic cells could be used, and these would not have the limitations of needing response cycling to the current process requires). This allows producers to take advantage of demand reduce electricity costs. have suggested that both of these emissions sources could be abated through the use of concentrated solar have suggested that both of these emissions reductants (Balomenos et al. 2011). The technology readiness level is thermal for heating, and biomass-based expected to be available before 2050 (DEEDS 2019). currently considered as TRL 2–3, and not Production from kaolin clay TRL 1–2 (DEEDS 2019). The process involves the chlorination the Hall-Héroult process, but is still considered is estimated to be 12–46% more efficient (U.S. Department of Energy, and electrolytic reduction of the clay, and Carbothermic reduction more energy efficient (Dialogue on European Decarbonisation carbon monoxide. It is estimated to be 20–30% costs 50% lower (Balomenos et al. 2011) than the Hall-Héroult Strategies [DEEDS] 2019) and have capital produce substantial emissions due to reductant use and high-heat process. However, the process would still increasing capital and operational costs (White et al. 2012). Studies requirements that would have to be mitigated, Renewable Energy 2007). Wettable cathodes have been trialled at industrial scale but are not yet commercial, not yet commercial, scale but are been trialled at industrial cathodes have Energy 2007). Wettable Renewable (Pawlek 2010). costs are unavailable and estimated Novel cell designs being: energy use in smelting, with key concepts reduce emissions and Wettable cathodes Wettable and cathode (ACD), between the anode a reduced distance diboride) that allows material (titanium design and Efficiency & of Energy, Energy to 20% (U.S. Department consumption of up reduction in energy allowing a

● ● ● ● The key technologies that can allow Aluminium supply chain decarbonisation are shown in The key technologies that can allow Aluminium supply chain decarbonisation are emission abatement. timelines for deployment, technology readiness level and maximum potential for Other alternatives to conventional aluminium production are at an early stage of development: Other alternatives to conventional aluminium AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 40 28 TABLE 13: smelting Aluminium refining Alumina mining Bauxite Process

Based onTechnology ReadinessLevelandCommercial ReadinessIndex(ARENA2019b,ARENA 2014) Summary of abatement technologies in the Aluminium supplychain Summary ofabatementtechnologiesintheAluminium for digestion process heat Low temp digestion Conventional trucks Diesel-powered equipment mining Diesel-powered generation electricity gas-powered Diesel or process technology/ Incumbent production Inflexible process Hall-Héroult production via Conventional Carbon anodes electricity Grid-connected mud Disposal ofred for calcination process heat High temp response greater demandside New celldesignallowing Scrap-based production novel cellsdesigns Inert anodesandother generation Renewable electricity Reuse ofredmud: Hydrogen forcalcination thermal forcalcination Concentrated solar calcination Electrification of generation Hydrogen forsteam generation Biomass forsteam generation Electrification forsteam recompression Mechanical vapour Tube digestion Fuel-cell electrictrucks Battery-electric trucks Trolley assist equipment Electric-powered generation Renewable electricity electricity Grid-connected technology/process Abatement ● ●

CO cement feedstock 2 sequestration Demonstration Deployment Demonstration Demonstration Demonstration Deployment Deployment Deployment status Technology Demonstration Deployment development Research and Deployment development Research and Demonstration development Research and development Research and development Research and Demonstration Demonstration Deployment 28 2022 2020 2022 2030 2020 2020 2020 2020 deployable Year 2022 2020 2024 2020 uncertain Highly 2020 2025 uncertain Highly uncertain Highly 2020 2020 2020 100% ofsteamgeneration renewable electricity emissions, ifpoweredwith 100% ofsteamgenerationrelated 15% reductioninenergyuse 100% ifpoweredwithgreenhydrogen electricity 100% ifpoweredwithrenewable haulage technologies Supports deploymentofalternative 30% withexistinghaulagefleet. 100%, dependentonelectricitysource 100% reductioninelectricityemissions generation mix 100%, dependentongrid Maximum abatementpotential emissions, reliableelectricity and assiststhetransitiontozero provides greatersystemflexibility No directabatementimpact,butthis compared toprimaryproduction 95% reductioninenergyuse from smelting 100% ofnon-energyemissions emissions 100% reductioninelectricity NET, dependentonwastespecifics if greenhydrogenused 100% ofcalcinationemissions, increase astechnologydevelops) 50% ofcalcinationemissions(could if poweredwithrenewableelectricity 100% ofcalcinationemissions, if greenhydrogenisused 100% ofsteamgenerationemissions, technology develops) (demonstrated, couldincreaseas can bereplacedbybiomass 30% ofsteamgenerationemissions with renewableelectricity related emissions,ifpowered

PHASE 1 TECHNICAL REPORT | JUNE 2021

41

29 these results provide a sense of the magnitude of material being produced and these results provide a sense of the magnitude of material being produced and 30 provides a summary of key metals for different decarbonisation technologies and Australia’s provides a summary of key metals for different Figure 9 Australian production of key metals and possible end Australian production of key metals and use technologies , which shows annual exports and unit values in 2019–20 for a selection of Other metals: copper, nickel, lead , which shows annual exports and unit values in 2019–20 for a selection of Other widely for different metals: non-refined nickel, lead and zinc exported in 2019-20 had concentrations of 15%, 80% and 45% respectively. widely for different metals: non-refined nickel, lead and zinc exported in 2019-20 had concentrations products, refined copper, copper powder and flakes) was 928 kt, 392 kt of which was refined copper (typically 99.99% purity). This leaves the products, refined copper, copper powder and flakes) was 928 kt, 392 kt of which was refined copper concentration of around 28%. This ranges remaining 536 kt of exported copper content distributed among 1,914 kt of ores and concentrates – a Adapted from The World Bank (2017) and the IEA (2021) slags, residues, intermediate For example, the copper content of all copper products exported in 2019-20 (includes ores and concentrates,

29 30 variations in the metal content of ores and concentrates makes comparisons with refined metal (typically above 99.5% variations in the metal content of ores and concentrates makes comparisons with purity) inadequate on tonnage alone, owing to their far greater concentration. exported. Of note is the considerably higher per-unit value of refined metals, A characteristic of Other metals is their relatively low production quantities and high unit values. This is demonstrated by A characteristic of Other metals is their relatively low production quantities and Figure 10 and as refined metals. Although wide and zinc. Australia exports each of these metals in both ore and concentrate form, (Geoscience Australia 2021c). Lithium resources in Australia are nearly all located in Western Australia, with >99% of (Geoscience Australia 2021c). Lithium resources in Australia are nearly all located five main deposits, including the largest Economic Demonstrated Resources. The majority of these resources are within producing spodumene deposit globally (Geoscience Australia 2021d). deposits (69%); however, the large majority of nickel production is from nickel sulphide ores due to the historic deposits (69%); however, the large majority of nickel production is from nickel Zinc ores commonly also contain lead, complexity and cost of processing laterite ores (Geoscience Australia 2021b). a co-product with these other metals silver and, in some cases, copper, and zinc is often extracted and processed as deposits in Australia (and globally) Copper is extracted from either sulphide or oxide ores, with the majority of mined are predominantly located in laterite being sulphide ores (Geoscience Australia 2021a). Nickel resources in Australia FIGURE 9: relative share of global reserves. As an input to renewable energy and other low carbon technologies, Other metals will play a primary role in a global net low carbon technologies, Other metals will play a primary role in a global net As an input to renewable energy and other zero transition. to increase under global decarbonisation amid greater focus on supply chain transparency and product provenance. on supply chain transparency and product decarbonisation amid greater focus to increase under global mining, refining and waste management processes are meeting the It will therefore be vital to ensure that metals expectations of consumers and investors. Growing focus on environmental, social, and corporate governance is likely to be a key consideration in future metals is likely to be a key consideration social, and corporate governance Growing focus on environmental, use, deforestation to concerns around emissions, water and mining sector is increasingly exposed supply. The metals and consumer have been under recent shareholder communities. In particular, mining companies and impacts on local production is likely and environmentally conscious metals scope 3 emissions. This push for socially pressure to address carbon transition, and Australia is an important part of global supply chains both in terms of current production quantities supply chains both in terms of current Australia is an important part of global carbon transition, and for future extraction. and identified resources (excluding iron ore, covered under Section 3.1 – Iron and steel, and bauxite, covered under Section 3.2 – Aluminium). and bauxite, covered under Section covered under Section 3.1 – Iron and steel, (excluding iron ore, to abate in the Although not typically considered hard nickel, lithium, and zinc, among others. These include copper, in a global low metals are expected to feature prominently Australian Industry ETI sectors, these same manner as other 3.3.1 Supply chain structure and context chain structure 3.3.1 Supply in Australia a range of metals produced ETI covers in the Australian Industry metals supply chain The Other 3.3 Other metals 3.3 Other AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 42 31 include (TheWarrenCentre2020): in energyintensitywithinOthermetals,withemissionsthendeterminedbytheavailablesources.Thesefactors metals types,dependingonspecificminesiteandorecharacteristics.Therearenumerousfactorsthatdrivevariations The methodsusedthroughoutdifferentstagesoftheOthermetalssupplychaincanvarywidelybothacrossandwithin over $10billion,farhigherthanbauxiteandaroundatenththevalueofexportedironore. of Othermetalsoresandconcentrates(thatis,excludinghighervaluerefinedmetalexports)theamountstojust metals, thisfactordeclinedtojustoverfivewhencomparingthevalueofexports.Evenlookingatexported of Othermetalsisevidencedbythefactthatalthoughironoreexportsweremorethan136timeshigherthese around $19billion,comparedto$2billionforbauxiteand$102ironore.Theconsiderablyhigherper-unitvalue 6 Mtforcopper,nickel,leadandzinc(DISER2021).However,thecombinedexportvalueofthesefourmetalstotalled Exports ofbauxiteandironorein2019–20were41Mt860respectively,comparedtoacombinedtotaljust FIGURE 10:

● ● ● ● ● ● DISER 2021

processing methodandoutput (forexample,pyrometallurgicalvshydrometallurgicalprocessing). underground mining(forexample,ventilation,lighting,haulage) mining methodandequipmentrequirements–differingenergy intensityandequipmentusedinopencut material movementmethods–equipmentreliabilityandefficiency, haulagedistances,levelofelectrification waste tooreratios–largeamountsofrockmustbe transported, currentlybasedondieselhaulage geographic location–transportrequirements,accesstoenergy sources amount ofmaterialminedandprocessedtoproduceagiven quantityoffinalproduct variations indeposittype,oregradeandcomposition–for example, decliningoregradesincreasethedepthand

Quantity and per-unit value of exported copper, nickel, lead and zinc in2019–20 leadandzinc Quantity andper-unitvalueofexportedcopper,nickel, 31

PHASE 1 TECHNICAL REPORT | JUNE 2021 43

Underground mining has significantly less impact on the surface environment than open cut mining and surface environment than open cut mining has significantly less impact on the Underground mining 32 producing a higher-grade product (ore concentrate) and waste streams known as tailings. Beneficiation can producing a higher-grade product (ore 33 to produce mineral concentrates. 34 For example, open cut operations are the most economical way of mining highly disseminated, low grade ores. For example, open cut operations are the most economical way of mining highly disseminated, low grade deposit. Commercially worthless material that surrounds, or is closely mixed with, a wanted mineral in an ore Processes include gravity concentration, magnetic separation, electrostatic separation and flotation

34 32 33 intensity, fuel use and emissions will be made for specific metals where possible on the basis of available literature, intensity, fuel use and emissions will be made for specific metals where possible driving variances in the energy and emissions intensities of different metals. To individually model each metal considered driving variances in the energy and emissions intensities of different metals. To be a major undertaking, and not within Other metals and capture this richness at multiple supply chain stages would generalisations regarding energy within scope of the Australian Industry ETI research and analysis. As such, imperfect 3.3.2 Energy use and emissions between and within metal types, As discussed, the processes used to produce Other metals can differ considerably electrowinning, while nickel laterite ores are often dried and partially reduced in a rotary kiln furnace and then smelted electrowinning, while nickel laterite ores are often dried and partially reduced in processes, such as high pressure using a submerged electric arc furnace, or processed through hydrometallurgical acid leaching (HPAL). concentrated through froth flotation, then further concentrated through pyrometallurgy (smelting and refining); the concentrated through froth flotation, then further concentrated through pyrometallurgy extraction and electrowinning). Similarly latter is concentrated through hydrometallurgy (through leaching, then solvent leaching, solvent extraction and nickel sulphide ores are generally processed in a flash furnace, and refined through undertaken away from mine sites at refining plants or smelters. The Australian Industry ETI analysis considers all undertaken away from mine sites at refining plants or smelters. The Australian across the metals considered in this domestic operations downstream of beneficiation as ‘processing’. The variability differ within a metal type. As an example, supply chain leads to a wide range of processing techniques, which can even the former of which is crushed and copper processing methods depend on whether the ore is a sulphide or an oxide, hydrometallurgical (for example, digestion, leaching) or electrometallurgical (for example, electrolytic refining). hydrometallurgical (for example, digestion, lower grade ores, and electrometallurgy is usually the last stage in metal Hydrometallurgy is often better suited to or hydrometallurgical operations. These processes are usually production and is preceded by either pyrometallurgical as concentrates (DISER 2021, Department of Mines, Industry Regulation and Safety 2020). as concentrates (DISER 2021, Department classified as pyrometallurgical (for example, smelting, roasting, reduction), There are multiple processing operations, Following beneficiation, the concentrate is either exported or processed further to prepare the metal for final use in Following beneficiation, the concentrate majority of Other metals are not processed beyond the mineral concentrate product manufacturing. In Australia the of nickel, nearly 100% of lithium and 65% of zinc production are exported stage – approximately 52% of copper, 48% steps Processing or in proximity to mine sites to reduce transportation costs. Comminution involves reducing ore size through crushing and costs. Comminution involves reducing ore size through crushing or in proximity to mine sites to reduce transportation from the rest of the ore, with energy use closely tied to ore grade (lower grinding to physically liberate valuable minerals Once these minerals have been liberated, they undergo a series of separation grades ores require more energy input). After mining, metal ores undergo a process of ‘beneficiation’ to improve their economic value by removing gangue After mining, metal ores undergo a process minerals, at of comminution, and then separation, both of which are typically undertaken be achieved through the milling process the Australian Industry ETI analysis. the Australian Industry Beneficiation cost-effective. cave methods be removed. Shafts, tunnels and block quantities of non-ore materials that must produces much lower machinery. All of the resources for personnel, trucks and mining to allow access to underground are all used in metals ‘mining’ processes in – including haulage – are classified as with open cut and underground mining activities associated Open cut mining involves drilling, blasting and digging deposits before removing and transporting ores with heavy before removing and transporting drilling, blasting and digging deposits Open cut mining involves or waste rock produces large amounts of ‘overburden’ draglines, shovels and trucks. This method machinery such as overburden grade, size, location) make removing ore deposit characteristics (for example, and is preferable when (Geoscience Australia 2020e). Lithium can be mined through either type of mining, but the majority of lithium mines either type of mining, but the majority 2020e). Lithium can be mined through (Geoscience Australia cut. in Australia are open Both open cut and underground mining methods are used within the Other metals supply chain, due to the range chain, due to the range Other metals supply are used within the mining methods cut and underground Both open mostly extracted through copper and zinc are In Australia, both in types of deposits. mined and variability of metals on the deposit mining depending open cut or underground nickel mines use either mining, whereas underground Mining AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 44 36 35 mines aloneaccountingforaround1.3%ofAustralia’stotal electricityconsumption(Ballantyne&Powell2014). Energy 2017).Electricityuseinbeneficiationisalsonationally significant,withcomminutioninAustraliancopperandgold or gasgeneration,withassociatedemissionsintensitiesof 0.05 and0.07MtCO mines (Ballantyne&Powell2014).Duetotheremotenature ofmostmines,thiselectricityisprovidedbyon-sitediesel electricity-intensive minesiteprocess,estimatedtocontribute upto36%ofminesiteenergydemandatgoldandcopper Processes withinthebeneficiationstagearehighlyelectrified, withcomminution(crushingandgrinding)themost Beneficiation run predominantlyonelectricityanddiesel. In undergroundmining,thedrillingenergyuseisproportionatelyhigherthanopencut(Norgate&Haque2010), metals mining, are notrequiredatanopencutmine.Diesel-basedhaulagerepresentsthelargestshareofenergyuseinOther Underground mininghasanadditionalneedforelectric-poweredfansandpumpsventilationdewateringthat distinguishing thesupplychainfromironoreandbauxitemining,whicharetypicallybasedonopencutminingmethods. Other metalsmininginAustraliarequirespredominantlyundergroundminesites,withnon-haulageenergyuses Mining nickel andzinc FIGURE 11: and dewatering,wherethoseprocessesarerequiredintheproductionexportofvariousmetals. in Othermetalssupplychains.Electricityisalsotheprimaryenergysourcemineventilation(forundergroundmining) of beneficiation–inparticularcrushingandgrindingprocessesthataccountformorethanhalfelectricityconsumption mining (predominantlyhaulage)andprocessingstagessuchasrefining,whileelectricitydominatesintermediary beneficiation andprocessingsupplychainsteps.Asageneralisation, Figure 11 specific metalswillbeaddressedindividuallyintext,ratherthanmodelledseparately. which willbynecessityrepresentanaverageofnumerousminesites.Whereappropriate,theissuesorchallengesfacing

For example,whilegeneralisationsacross metaltypesarechallenging,loadingandhaulagerepresents42%ofenergy usefrommining Per dataforcopperlifecycleanalysis in operations incopper (allprocessesbeforebeneficiation) perNorgateandHaque(2010) belowshowsthemagnitudeandcompositionofenergyuseforaselectionOthermetals,mining, Energy intensityformining,beneficiationandprocessinginselectOthermetals–copper,lithium, 36 withventilation(forundergroundmining),drillinganddewateringalsoreasonablyenergy-intensive. Norgate andHaque( 2010) 35 fossilfuelsareassumedtobeusedmostlyin 2 e/PJ (DepartmentofEnvironmentand

PHASE 1 TECHNICAL REPORT | JUNE 2021 45

Electrification of process heat Biomass for high-heat processes Hydrogen for high-heat processes Processing Secondary production from recycled materials Decarbonise existing electricity use Direct electrolysis* Plant optimisation Uptake of best available technologies

Further electrification options Beneficiation Decarbonise existing electricity use Mine site and plant optimisation Uptake of best available technologies Electric equipment Trolley assist Battery-electric trucks Biodiesel truck haulage Hydrogen truck haulage Mining Energy efficiency Zero emissions electricity Other zero emissions fuels Material efficiency Abatement opportunities across decarbonisation pillars for the Other metals supply chain Abatement opportunities across decarbonisation pillars for the Other metals supply switching Pillar 3: Electrification and fuel and feedstocks supply Pillar 2: Zero emissions energy Pillar 1: Material and energy efficiency TABLE 14: be specific to individual deposits with tailored process engineering, but there are a range of high-level technologies and process engineering, but there are a range of high-level technologies and be specific to individual deposits with tailored the broad context for these diverse mine sites. strategies discussed below that can set Table 14 summarises the major abatement opportunities within the Other metals supply chain, described in more detail opportunities within the Other metals supply chain, described in more detail Table 14 summarises the major abatement and processes. Considerable variability in production characteristics makes it below for specific supply chain stages to pathways for Other metals. The optimal paths to decarbonisation are likely challenging to generalise decarbonisation process, as well as the type of solvent and leach process required (solvents include sulphuric acid, cyanide and ammonia).process, as well as the type of solvent and challenges 3.3.3 Decarbonisation options and vary depending on the ore to be liberated), and on average contributes to approximately 22% of mine site energy usagevary depending on the ore to be liberated), the metal 2021), as gas and electricity consumption. Similarly to beneficiation, (Coalition for Energy Efficiency Comminution emissions from the of the mine sites heavily influence the final energy usage and being extracted, ore grade and specifics aim to reduce emissions, hydrometallurgy is predicted to become more widely used due to the increased energy aim to reduce emissions, hydrometallurgy of the process (Wyns & Khandekar 2019). efficiency and highly electrified nature metallic compounds from ores through selective dissolution in solvents (whichThe leaching process allows extraction of method of electrometallurgy). The entire process is performed at significantly lower temperatures than pyrometallurgical process is performed at significantly lower temperatures than pyrometallurgical method of electrometallurgy). The entire and eliminates the formation of sulphur dioxide emissions, but does processes, which reduces fossil fuel consumption (Chan et al. 2019). Over the long term as ore grades decline and producers generate effluent which needs to be treated metal being extracted and leaves the remainder of the ore-containing material as a residue. The leach solution then material as a residue. The leach and leaves the remainder of the ore-containing metal being extracted undergoes solvent the extraction process, which removes impurities, and concentrates content. This is followed the metal current to deposit the metal at a cathode (which can also be considered a by electrowinning, which uses an electric considered a method of electrometallurgy). There is a significant amount of electricity required for these two process amount of electricity required for of electrometallurgy). There is a significant considered a method processing site. directly linked to the power source for the emissions intensity of the process is steps, and hence the dissolves the are mixed with a leaching solution which a process in which crushed ores Hydrometallurgy describes The next stages of pyrometallurgical processing include using air to drive off further impurities to produce ‘blister’ metal air to drive off further impurities to produce processing include using The next stages of pyrometallurgical (which can also be process to achieve >99.5% purity converting, and then an electrolytic refining (>98% purity), called oxygen flash smelting process is up to 30% less energy intensive and has lower fuel consumption than the reverberatory and has lower fuel consumption process is up to 30% less energy intensive oxygen flash smelting slag residue is either the 1970s (Kulczycka et al. 2017). The gradually phased out globally since smelter, which has been building material component (Dietz 2014). on the materials, can be used as a discarded, or depending Pyrometallurgy involves heating at high temperatures, which is generally achieved through use of fossil fuels such as use of fossil fuels achieved through which is generally at high temperatures, involves heating Pyrometallurgy purity a ‘matte’ of about 65% which achieves oxygen flash smelter, smelter or in either a reverberatory gas or diesel, the input of oxygen, requiring the additional materials. While formed from the waste 2019) and a slag (Chan et al. Processing AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 46 38 37 commercial agreementmodelsexisttoovercomesomeof these limitations,including: legacy contractsorinfrastructurethatmightlimitoptions increasecostsofintegration)andlifemine. off-grid hybridpowergeneration.Theseincludelandavailability, accesstofinance,brownfieldconstraints(forexample, Along withproximitytoregionalelectricitymarkets,thereare manyotherfactorsdeterminingtheeconomicviabilityof production processes. for thesesolutionsarelikelytoimprovewithcontinuedcost reductionsandincreasedvalueplacedon‘green’ combined withstoragearebecominganincreasinglyattractive optiononeconomicsalone.Thecommercialprospects cost reductionsinrecentyears,‘hybrid’arrangementsofrenewable generationtechnologiessuchaswindandsolarPV fossil fuelgeneration(predominantlydiesel)ratherthanbeing connectedtoelectricitygrids. As discussedinSection transition forOthermetals. electrification, sourcingzeroemissionsalternativestoon-sitefossilfuelgenerationisacriticalcomponentofthe To decarbonisethoseminingprocessesthatarealreadyelectrified,andtounlockemissionsbenefitsoffutureadditional Beneficiation 11% ofthemine’sannualemissionsandresearchtoincreaserateCO CO 4b’ ofSection The otherkeydevelopmentinemissionsreductionformetalsminesitesismineralcarbonation,asintroduced‘Pillar maintenance (Gleeson2020,Epiroc2021). and healthierenvironmentforoperatorsreducedshaftventilationcoolingrequirements,aswell currently commerciallyavailable.Benefitsextendbeyondemissionsreductionfromdieseluse,andincludeasafer include electricdrilling,largedrillingrigsandshovels,allofwhichareeitherunderdevelopmentor mining equipmentwillplayamajorroleinreducingminesiteemissions.Keytechnologiestoelectrifyprocesses under ‘Beneficiation’below),whileeliminatingtheremainingemissionsthroughelectrificationoffossilfuelbased Zero emissionselectricitysupplyiskeytodecarbonisingalreadyelectrifieddrillingequipment(coveredinmoredetail covered indetailSection remains animportantsourceofemissionstodecarbonise.Thetechnologicalsolutionsfordecarbonisinghaulage Although notassignificantironoreorbauxitemining(duetothelowerquantitiesofmetalsproduced),haulage Mining * ThesetechnologiesarecurrentlyclassifiedashavingaTRLof1-6andrequirefurtherresearch,developmentdemonstration. emissions or offsetresidual Pillar 4b:Capture energy emissions Pillar4a:Non-

● ● ● 2 Asof2017,hybrid powergenerationatscalewasnoteconomically viableforminelifeshorter than3years(ARENA2018) HalfofallAustralianminesthatprocess on-sitearenotconnectedtotheprimaryelectricitymarkets(ARENA2018) viaenhancedweatheringofmineralwaste(Wilson2014).Theminesitetailingsarealreadysequesteringupto

Immaterial oruncertainrole power purchaseagreement– contract betweentwoseparateentitiesregardingthepurchase andsupplyofelectricity. lease agreement–powerplant constructedbythirdparty,infrastructureisleasedandoperated bymine owner builtandoperated–constructed byowner 2.4 . Inparticular,nickelminesitetailingsarebeinginvestigatedinAustraliaforpassivesequestrationof CCS ofprocess feedstocks Zero emissions improvements Process technologies emissions Negative emissions 4.1 , duetotheiroftenremotelocations,manyminesitessourceelectricityfromon-site 3.1.3 alsoapplytoOthermetalsmining. emissions options to zeroornear-zero Potential roleintransition (waste rock)* Mineral carbonation

(mine tailings)* Mineral carbonation for netzeroemissions abatement butinsufficient Important roleinnearterm 2 sequestrationisbeingundertaken.

37 Asaresultofdramatic emissions potential Long term,zeroornear-zero 38 Anumberof

PHASE 1 TECHNICAL REPORT | JUNE 2021 47

emissions by 2 . 3.1.3 , hydrogen could also perform an important energy storage function hydrogen could also perform an important , 4.2 – Depending on the process there are a range of options to replace fossil – Processing of nickel laterite ores through an electric rotary kiln and then electric – Processing of nickel laterite ores through an electric rotary kiln and then electric – There is potential to apply post-combustion CCS to the smelting process; however, as – There is potential to apply post-combustion CCS to the smelting process; however, – Top submerged lance technology is an example of a best available technology for – Top submerged lance technology is an – Waste heat recovery can be applied to smelting, involving the capture and reuse of heat – Waste heat recovery can be applied – A method of direct electrolysis processing for copper has been developed recently (TRL – A method of direct electrolysis processing for copper has been developed recently highly electrified possible future pathway, and while being relatively energy intensive, could allow for emissions highly electrified possible future pathway, and while being relatively energy intensive, reductions when paired with renewable energy (Wei et al. 2020). Post-combustion CCS costs and there are currently discussed previously, the dilute nature of post-combustion exhaust leads to higher limited economic incentives to implement this technology in Other metals. such as sulphur dioxide (Paiste 2017) through the smelting and converting process. Further development of this such as sulphur dioxide (Paiste 2017) through the smelting and converting process. for copper production in the future novel process could enable a significant reduction in emissions and energy use (Wyns & Khandekar 2019). Rotary kiln electric furnace majority of nickel is produced arc furnace is a currently available technology that is not widely used – the large ores. This is, however, a from sulphide deposits due to the relative cost and complexity of processing laterite processes (Wyns & Khandekar 2019). Hydrogen could also be used as a fuel for current smelting/furnace processes (Wyns & Khandekar 2019). Hydrogen could also be used as a fuel or different metals used in processes, but there would likely be a need for retrofits including sensors, burners (RFC Ambrian 2021). equipment. The high cost of hydrogen has hindered hydrogen to heat projects Direct electrolysis process is significantly more energy 2–3), which is similar to the Hall-Héroult smelting process for aluminium. This indirect greenhouse gas emissions efficient and eliminates the use of fossil fuels for heating and the production of to 80%, including oxygen enrichment (where increasing the oxygen input by 2% can reduce CO to 80%, including oxygen enrichment (where improves energy efficiency 40% and lower fuel consumption and off-gas volume) and dry feed injection (which and enables emissions reductions of up to 60%) (Metso:Outotec 2019). Replacing fossil fuel-based heat such as induction furnaces or fuel generated heat, including the use of electricity based high temperature heat boilers and heating in auxiliary plasma arc furnaces (a technology in an early stage of development), and electric Top submerged lance nickel and zinc (Hughes et al. 2008). A stainless-steel lance is smelting a range of metals, including copper, can deliver process gases or fuels/feedstocks to the furnace. The lance submerged in the furnace crucible and smaller scale operations, and provides operational flexibility, lower allows batch type operation, which allows through better process control (Hoang et al. 2009). There are a energy consumption and emissions reductions process that may be used to reduce overall smelting emissions by up number of additional modifications to the Waste heat recovery input required for heating during other steps in the process. from the furnace, further reducing the energy

● ● ● ● ● ● In addition to this, technologies that can be applied to reduce emissions from earlier pyrometallurgical processes In addition to this, technologies that can include the following: electrometallurgy have key decarbonisation technologies that can be applied. Electricity is the primary source of energy technologies that can be applied. Electricity is the primary source of energy electrometallurgy have key decarbonisation in hydrometallurgy. As such, decarbonised electricity is also a major for electrometallurgy and for leaching processes from Other metals processing. opportunity to partially eliminate emissions Processing and each of the major processing methods of pyrometallurgy, hydrometallurgy Despite the variety in specific techniques, Mine’s power requirements (Maisch 2020). The emissions imperative of procuring renewable electricity at mine sites can imperative of procuring renewable electricity (Maisch 2020). The emissions Mine’s power requirements of the trolley electrification through widespread deployment significantly with higher levels of be expected to increase in Section assist, BEV or FCEV technologies discussed Globally, there are several recent examples of mine sites developing or installing large-scale renewables and storage or installing large-scale renewables recent examples of mine sites developing Globally, there are several of the Agnew Gold a 56 MW microgrid project delivering 70% 2018). Examples in Australia include systems (Kirk & Lund PV hours (ARENA 2018). As discussed in Section discussed in Section hours (ARENA 2018). As PV for electricity around a mine site and as a backup fuel to its application in multiple processes for off-grid mines due & Molloy 2018). generation (Jackson can introduce greater flexibility into the system and manage power supply and demand. This involves scheduling This involves scheduling supply and demand. manage power into the system and greater flexibility can introduce instances, this to capitalise on PV output. In some activities during times of high solar irradiance electricity-intensive refinery in Queensland – for example, Sun Metals zinc freedom and overall higher throughput affords greater operational during peak 15% by operating greater smelting capacity production by 5% and reduce OPEX by was able to increase both absolute terms and as a proportion of production costs. This means that where energy costs may be a limiting factor costs may be a that where energy costs. This means proportion of production terms and as a both absolute many mines metals. Currently, processes in Other concern for mining is the primary energy reliability in other industries, producers is a way that metals 2018). Load shifting profile (ARENA fluctuations in load with limited operate continuously For high unit value commodities such as Other metals, CAPEX and OPEX from power generation are relatively low in are relatively from power generation CAPEX and OPEX such as Other metals, value commodities For high unit AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 48 indicative timelinesfordeployment,technologyreadinesslevel andmaximumpotentialforemissionsabatement. The keytechnologiesthatcanallowOthermetalssupplychain decarbonisationareshownin processes haverecentlybeencommercialised(forexample, theSpoke&HubprocessdevelopedbyLi-Cycle[2021]). metal. Lithiumcurrentlyhaslimitedrecyclingpotential,but there issignificantresearchbeingundertakeninthisareaand and increasingrecyclingratessuggestamediumtolonger termsuppressionofdemandduetoavailabilityrecycled increasing levelsofdemand,scrapavailabilityandrecycling. Nickelissimilarlyimportantinenergystoragetechnologies example, copperiseasilyrecycledandusedacrossawiderangeofnewenergytechnologies,whichwillcontributeto The characteristicsofthemetalsthemselvesalsoplayanimportantroleinscalerecyclingachievable.For develops tomeetdemandfromlow-carbontechnologies,inparticularbringingdowncostsandencouraginginnovation. Technological improvementsandpolicysupportwillplaycriticalrolesinhowtheAustralianmetalsrecyclingindustry 67% intheearly2000sto41%2010s–whileexportofscrapincreasedaccordingly(Golev&Corder2016). Australian metalsproductionandexportmarkets.Domesticprocessingofcollectedscrapdecreasedsignificantly–from The increasingcircularityofOthermetalsandscraprecyclingvolumeswillbeimportantdriverstomonitorforthe flows) thenservetoreplacesomeportionofprimarydemand. products willberecycled,dissipatedordisposedofintheenvironment.Themetalsreturnedfromrecycling(secondary lithium willalsobeavailableforrecyclinginunder10years.Attheirendoflife,varyingportionsthemetalsthese lubricants) orlongerlived(forexample,ceramics).However,asthebatteryindustrygeneratesgreaterlevelsofdemand, recycling inlessthan10years.Similarly,traditionallithiumuseswereoftendissipative(forexample,aluminiumsmelting, whereas nickelhastypicallybeenusedinstainlesssteelwithaservicelifeofdecades,batteriesitwillreturnfor Many oftheusesOthermetalsinadecarbonisingworldwillberelativelyshortservicelifeproducts.Forexample, zinc forgalvanicprotection). refrigerators), short-lifeconsumables(forexample,aluminiumpackaging)anddirectdissipationuses power lines,bridges)wheretheyarelockedupfordecades,toconsumerdurables(forexample,cars,computersand widely. Metalproductsareusedinanumberofdifferentapplications,fromlong-livedinfrastructure(forexample, The potentialformaterialrecoveryandreusewillbelargelydeterminedbythelengthofproductlife,whichcanvary supply chainsteps. recycling canserveasanimportantdecarbonisationstrategybyavoidinganumberofenergy-andemissions-intensive Another importantconsiderationforOthermetalsisthepotentialmaterialrecoveryandreuse.Increasedratesof These includethefollowing: ongoing investigationsintoenergyandefficiencyimprovementsinhydrometallurgy,aswellinnovativenewprocesses. of whichwillassistinreducingoverallemissions.Despitebeingarelativelymatureprocessingmethodtherearealso process designchangestousetheleastamountofsolventsandincreaseenergyefficiencyreaction,both For hydrometallurgicalprocessing,anotherkeyincrementalimprovementavailabletominesitesisoptimisationvia ● ●

alternative process(Zhangetal.2019). surfactants thatcanbeusedtoimproveefficiencyintheatmosphericleachingprocess,makingthisamoreuseful leaching; however,itgenerallyhasamuchlowerextractionefficiency.Thereisresearchintoadditivesand ores thatrequiresfewerinputsandmilderconditions(lowertemperaturespressures)thanpressureacid Atmospheric acidleaching how bioleachingcanbecombinedwithotherapproachestoenhancemetalrecoveryrate(Sajjadetal.2019). heap andstirredtankbioleaching.Furtherresearchwillbevitaltoimprovethereactionkineticsunderstand recover metalsfromhigh-gradeoresisverylimitedduetoslowkinetics.Keybioleachingprocessesincludedump, involves theuseofmicroorganismssuchasbacteriaorarchaeatoextractmetals.Todate,bioleaching industrial effluentsformetalextractionandcanbeappliedtocopper,nickelzinc,amongothermetals.It Bioleaching –Bioleachingisanenvironmentallyfriendlyandeconomicmethodtoprocesslow-gradeores –Atmosphericacidleachingisahydrometallurgicalprocessusedfornickellaterite Table 15 below,including

PHASE 1 TECHNICAL REPORT | JUNE 2021 49 42 Dependent on grid generation mix 100% reduction in indirect emissions 16% reduction in energy use by 2050 100% reduction in emissions from heat, dependent on electricity source 100% reduction in emissions from heat and feedstocks, dependent on electricity source, 50% energy savings 100% of furnace fuel emissions, if green hydrogen used Energy and materials efficiency improvements, not currently quantified Maximum abatement potential Maximum abatement fleet. 30% with existing haulage of alternative Supports deployment haulage technologies electricity 100% if powered with renewable green hydrogen 100% if powered with source 100%, dependent on electricity 100%, dependent on electricity source 100%, dependent on electricity source Dependent on grid generation mix 100% reduction in indirect emissions 2020 2020 2020 Highly uncertain Highly uncertain 2025 Uncertain Year deployable 2020 2030 2022 2020 2020 2020 2020 2020 39 Demonstration Deployment Deployment Deployment Research and development Research and development Demonstration Research and development Technology Technology status Demonstration Demonstration Deployment Deployment Deployment Deployment Deployment

41 in bioleaching, atmospheric acid leaching technologies and processes Electrification of heat, e.g. plasma arc furnace Alternative processes (e.g. direct electrolysis of copper) Hydrogen for heat Enhanced metals recovery – developments Grid-connected electricity Renewable electricity generation Grid-connected electricity Renewable electricity generation Advanced material and energy efficiency through best available Trolley assist Battery-electric trucks Fuel-cell electric trucks Electric hydraulic drilling Large electric drilling rigs Electric-hydraulic shovels Abatement Abatement technology/ process

40 BAU metals recovery Fossil fuel for heat or feedstock in metals processing Incremental efficiency improvements fuel-based power) Electrified crushing and grinding (run on fossil fuel- based power) and drilling equipment Electrified mining processes (run on fossil powered trucks Diesel-based digging Incumbent Incumbent technology/ process Diesel- Summary of abatement technologies in the Other metals supply chain in the Other of abatement technologies Summary monitoring and maintenance Based on Technology Readiness Level and Commercial Readiness Index (ARENA 2019b, ARENA 2014) These include electric digging and drilling, mine ventilation and dewatering heat and gas recovery, increased Includes multiple energy saving options such as combustion optimisation, increased recycling, waste 2019) Average of identified economic (13%) and technical (21%) potential savings by 2050 (Wyns & Khandekar

Processing Beneficiation Mining – non haulage Mining – haulage Process 42 41 39 40 TABLE 15: TABLE 15: AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 50 another fertiliser,ureaammonium nitrate(UAN). sourced fromtheammoniaproduction process),andthencanbefurthercombinedwith ammonium nitratetoform Urea isthemostcommonformoffertiliserusedinAustralia, producedthroughreactionofammoniaandCO Urea andothernitrogen-basedfertilisers this processareduetotheenergyuse. balls) inaprillingtower,orleftsolutiontobeusedmanufacture explosiveemulsions.Themajorityofemissionsfrom nitrate solution.Thesolutioncanthenbeusedtogenerate solidammoniumnitrateintheformofprill(small1–3mm Ammonium nitrateissubsequentlyproducedbyreactingvapourised ammoniawithnitricacidtoproduceanammonium supply chainandisakeyareaoffocusforemissionsreduction. discharge totheatmosphere.Thisprocessgenerateslarge majorityofthenon-energyemissionsinexplosives levels ofnitrogenoxides(apotentgreenhousegas)andare generallytreatedtocapturesomeoftheseemissionsbefore reacted withwaterinanabsorptioncolumntoformnitricacid.Thegasesleavingthehavesignificant with compressedairandreactingoveracatalysttoformnitrogenoxides.Theprocessgasthatisformedcooled The productionofammoniumnitraterequiresintermediarynitricacidtobeproducedbymixingvapourisedammonia Ammonia nitrate(explosives) production. CombustionforprocessheatinSMRmakesuptheotherthirdofemissionsfromammonia creates alargeoutputstreamofCO primary andsecondaryreformers,whichisthencombinedwithnitrogenviatheHaber-Boschprocess.Theprocess To produceammonia,hydrogenistraditionallyproducedfromgas(orLPG)viasteammethanereforming(SMR)in Ammonia heat. (DISER 2020b).ThelargemajorityofenergyemissionsintheChemicalssupplychainareduetogasuseforprocess the AustralianIndustryETIChemicalssupplychain,comingfromproductionofammonia(47%)andnitricacid(36%) half ofthetotalemissions(DISER2020b).Themajoritythesenon-energyarecapturedwithinscope of from theproductionofammonia,nitricacidandtitaniumdioxide,aswellothersmallerproducts,makingupnearly Non-energy emissionsareamajorchallengeforchemicalsmanufacturinginAustralia,withthenon-energy energy intensityof0.7PJ/Mt(Kermelietal.2017). reused withintheplanttoreduceenergyconsumptioninotherareasofprocess,leadingamuchloweroverall in ammoniumnitratemanufacturegeneratemoreenergythanisconsumed(calledexothermicreactions),whichthen reasonably highenergyintensityof35PJ/Mt(Bazzanella&Ausfelder2017).Somethechemicalreactionsinvolved The majorityofenergyuseinexplosivesandfertilisermanufactureisduetotheammonia,whichhasa 3.4.2 Energyuseandemissions productivity ofboththeminingandagriculturesectorsinAustralia. to someoftheothersupplychainsfeaturedininitiative,bothexplosivesandfertilisersplayavitalrole (Trendeconomy 2021),whereastheexportmarketforfertilisersisverysmall.Whilesmallinmagnitudewhencompared nitrogen-based fertilisersareimported.Australia’sammoniaexportvaluewasapproximatelyUS$73millionin2019 The largemajorityofammoniumnitrateismanufacturedlocally,whereasapproximately70%Australia’s ammonium nitrate)andfertilisers(asurea,urea-ammoniumnitrateorammoniaapplieddirectly). fertilisers (DISER2020b,FertilizerAustralia2021).Ammoniaistherawmaterialforbothexplosives(informof Australia produced2.6Mtofammoniain2018,approximately1.8ammoniumnitrateand0.4nitrogen-based industries, whichbothrequireammoniaasthekeyinput. processes. FortheAustralianIndustryETI,focusisplacedonammoniaproductionandexplosivesfertiliser The chemicalsindustryisrelativelydiverseandthereforeemissionsenergyusevarywidelybetweendifferent 3.4.1 Supplychainstructureandcontext 3.4 Chemicals Figure 12 illustratesthisbreakdownofemissionsourcesinthesupplychain. 2 which accounts for approximately two-thirds of CO whichaccountsforapproximately ² emissionsfromammonia 2 (often PHASE 1 TECHNICAL REPORT | JUNE 2021 51

Long term, zero or near-zero emissions potential from biomethane based ammonia ² Explosives and fertilisers Reduced demand for primary metals extraction, optimised fertiliser use Optimised waste heat recovery Abatement catalysts for nitric acid production CO production or DAC (considered carbon neutral)* Important role in near term abatement but insufficient for net zero emissions

production process* Hydrogen via 100% renewable electrolysis Biomethane SMR SMR with CCS Haber-Bosch improvements Haber-Bosch process heating Switch from SMR to novel ammonia Ammonia Efficiencies in downstream products Potential role in transition to zero or near-zero emissions options improvements Zero emissions feedstocks CCS of process emissions Negative emissions technologies Energy efficiency Zero emissions electricity Other zero emissions fuels Process Material efficiency Emissions sources in the Chemicals supply chain sources in the Chemicals Emissions Abatement opportunities across decarbonisation pillars for the Chemicals supply chain Abatement opportunities across decarbonisation

summarises the major abatement opportunities within Chemicals, described in more detail below for specific summarises the major abatement opportunities Immaterial or uncertain role *These technologies are currently classified as having a TRL of 1-6 and require further research, development and demonstration. *These technologies are currently classified as having a TRL of 1-6 and require further CCS: carbon capture and storage; DAC: direct air capture; SMR: steam methane reforming Pillar 4b: Capture or offset residual emissions emissions Pillar 4a: Non-energy Pillar 3: Electrification and fuel switching energy and feedstocks supply efficiency Pillar 2: Zero emissions Pillar 1: Material and energy TABLE 16: Table 16 the integral use of ammonia in the later supply chain stages and the energy supply chain stages and processes. Given ammonia manufacturing, decarbonisation of ammonia production is the most and emissions intensity of conventional important step for a net zero transition. 3.4.3 Decarbonisation options and challenges 3.4.3 Decarbonisation options and FIGURE 12: FIGURE 12: AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 52 in thissectionofthesupplychain isnitrogenoxide(NOx)emissionsfromnitricacidproduction, buttherearecurrently lowered emissionsformetals supply chainsduetoreducedprocessingrequirements.The keyemissionsreductionarea through moreeffectiveblasting techniquesonminesitesisanongoingaimofthesector, andcanalsocontributeto been incrementallydeveloped overtime,withtheprocessconsideredtobeatahighlevel ofmaturity.Materialefficiency additional fuelusageandconsequently fewenergy-relatedemissions.Energyintensityand efficiencymeasureshave Due totheexothermicnatureofprocessesinvolvedin the manufactureofammoniumnitrate,thereislimited Ammonium nitrate(explosives) decarbonisation acrossmultiplesectors(seeSection the scalingupofgreenhydrogenproductioncapacitybyproviding additionaldomesticdemand,whichisavitaltoolfor per unitofvolume)(RFCAmbrian2021).Inaddition,producing ammoniathroughgreenhydrogencouldalsohelpde-risk content thanhydrogen,allowingahigherenergyoutputfor thesamevolumetransported(contains70%morehydrogen hydrogen. Ammoniaalreadyhasestablishedtradingandshipping vessels,andthechemicalformhasahigherenergy used. Inthelonger-termammoniacouldformpartofarenewable energyexportindustrywhenproducedfromgreen Ammonia iscurrentlylargelyusedasafeedstockinAustralia butisalsoanenergycarrierandzeroemissionsfuelwhen reduction intheenergyuseandemissionsfromthisprocess. provide promisingopportunitiesforammoniaproductioninthelongterm,however,potentiallyenablingasignificant The abovetechnologiesareyettoreachcommercialisation,andmanystillbeingprovenatlabscale.Theydo research. Someexamplesofemergingtechnologiesinclude: required. Enablingthis,whileusingrenewableenergyandallowingvariableratesofoperation,isthekeygoalfor A keyfocusforinnovativealternativeammoniaproductionmethodsisreducingthescale,temperaturesandpressures production process,asdetailedbelow. hydrogen includeusingbiomethaneforthesourceorcapturingCO ammonia productioniftheelectricitycamefromadecarbonisedsourcesuchasrenewables.Alternativestogreen demand oftheelectrolysisprocess(Bazzanella&Ausfelder2017),sowouldonlyreduceemissionsfrom as feedstockwould,however,increasetheenergyuserequiredforproductionbynearly30%duetohighelectricity significant portionofemissionsduetotheeliminationfossilfuelfeedstockcurrentlyused.Usinggreenhydrogen Converting thehydrogensourceusedinHaber-Boschprocessfromnaturalgastogreenwouldreducea Ammonia ● ● ● ● ● ● ● ●

methane splitting(directlyintohydrogenandsolidcarbonthroughpyrolysis)(Philibert2020). of amembrane,atambientpressure)(Arpa-e2018) membrane reactors(differentcatalystsselectivelycontrollingtheformationofnitrogenandhydrogenoneitherside from atmosphericnitrogen)(Arpa-e2016,Sun2021) plasma electrocatalyticormicrowaveprocesses(usingreactioninwatertogenerateammoniadirectly (Batool, 2019) solid stateammoniasynthesis(directproductionoffromnitrogenandwaterwithoutintermediatesteps) electrified SMR(electrificationofprocessheat)(Rouwenhorst2019) due tothelowerconcentrationofcarbondioxide. ease andatlowcost,butcapturingtheemissionsfromcombustionforprocessheatinSMRismuchmoredifficult CCS forammoniaproduction associated investmentcosts. gasification facilities are also needed for the production of biomethane (either on-site or elsewhere), with significant use ofthissolution(seeSection in theSMRprocess,butchallengesregardingavailabilityandcostofbiomassresourcesmayhinderwidespread Biomethane asagassubstitute green hydrogenproductionviawaterelectrolysisarecoveredindetailSection site orexternal,andaretrofitofpartstheplantwouldbenecessarytochangefeedstock.Theprospectsfor related emissionsfromtheprocess(QueenslandNitratesPtyLtd2020).Hydrogenproductioncouldeitherbeon- use ofelectrolyserswithrenewableelectricity,eliminatingtheneedforfossilfuelfeedstockandcombustion process currentlyreliesonsteammethanereforming(SMR),butthiscouldbedecarbonisedthroughthe Green hydrogenproductionviawaterelectrolysis –CCScouldbeappliedtotheCO 4.3 –Biomethanecouldalsoserveasazeroemissionssubstitutefornaturalgas ). Moreover,biomethanewouldpotentiallyrequiresomeretrofit,whilebiomass 4.2 ). –Thecreationofhydrogenintheammoniaproduction 2 outputfromtheSMRprocesswithrelative 2 producedfromtheconventional 4.2 . PHASE 1 TECHNICAL REPORT | JUNE 2021 53

captured 2 from the 2

from with DAC , including indicative 2 Table 17 – Secondary abatement allows the removal of nitrous – Secondary abatement – Modifications to the process or the catalysts used in or the catalysts used to the process – Modifications – Green ammonia could be combined CO that could be considered net zero (for example, CO 2 . 2.4 – There are two main types of tertiary abatement that can be applied – There are two main types of tertiary abatement captured directly from the air) (de Pee et al. 2018), as detailed below. 2 feedstock 2 – Either wet or dry biomass could be used in the production of ammonia, would be required. 2 O) to nitrogen and oxygen in the high-temperature process gas. Using secondary in the high-temperature process O) to nitrogen and oxygen 2 byproduct (from the SMR process) that is currently used as a feedstock would no longer be byproduct (from the SMR process) that 2 ammonia manufacturing process is then captured and used for urea production. This is a form of BECCS; for more ammonia manufacturing process is then captured and used for urea production. details, see ‘Pillar 4b’ discussion in Section Direct air capture (DAC) for urea CO is still in early stages of to produce decarbonised urea (including the emissions from use). This technology development and is not considered to be cost competitive in the short term. Bio-based feedstocks for fertilisers The CO each of which requires a separate process path to create urea (pyrolysing or gasification). also require expensive retrofit work to achieve appropriate temperatures for the process gas being treated also require expensive retrofit work to (CSBP 2010). Tertiary abatement (on the exhaust flow) oxide and nitrogen oxide abatement (using a zeolite catalyst) or non- to the process exhaust, using either nitrous a platinum, vanadium pentoxide or titanium catalyst). Both of these selective catalytic reduction (typically using of a separate reactor, called a ‘scrubber’, and each has a number of abatement technologies require installation conditions, such as the exhaust concentration, temperature and emissions options depending on the specific plant options have higher capital costs than secondary abatement and may reduction required (Kamphus 2014). These Secondary abatement (from gas after production) Secondary abatement through chemical reaction. This is performed stream immediately following the initial oxide from the process causes the made up of cylindrical base metal pellets) where an additional catalyst (often catalytic decomposition, oxide (N separation of nitrous that is caused, due to the increase in pressure implications for the process conditions catalysts can have technical widespread impact on plant operation, allowing more being developed that have a smaller but new versions are Agency 2010, Kamphus 2014). use (United States Environmental Protection Primary abatement (from production processes) (from production Primary abatement a significant of nitrous oxide. This can enable acid can assist to suppress the formation the production of nitric in this area. Changes could include where the process is not already optimised reduction in emissions example, used in the oxidation catalyst (for size of vessels or the geometry or materials modifications to the Agency 2010). (United States Environmental Protection gauze or non-platinum based catalysts) modified platinum

● ● ● ● ● The key technologies that can allow Chemicals supply chain decarbonisation are shown in The key technologies that can allow Chemicals supply chain decarbonisation are emissions abatement. timelines for deployment, technology readiness level and maximum potential for example, nitrate based) or an alternative source of CO from biogas based ammonia production or CO Regardless of the source of ammonia (green or fossil based), under all production routes urea emits carbon dioxide Regardless of the source of ammonia (green of these emissions would require either a change to an alternative fertiliser (for once applied as a fertiliser. Elimination energy use emissions, this steam demand could be electrified which, if combined with decarbonised ammonia production could be electrified which, if combined with decarbonised ammonia production energy use emissions, this steam demand emissions urea production. However, if urea is produced from green hydrogen- (as the feedstock), would result in zero based ammonia, the CO available and an additional source of CO As urea production is generally highly integrated with ammonia production it is difficult to identify separate energy and with ammonia production it is difficult to identify separate energy and As urea production is generally highly integrated of process is considered on its own, approximately 3.29 GJ of steam per tonne emissions reductions opportunities. If the steam from ammonia production) (Bazzanella & Ausfelder 2017). To reduce urea is required (usually provided by excess Urea and other nitrogen-based fertilisers technologies and the lack of emissions penalties. The three most common abatement solutions involve using catalysts at involve using abatement solutions The three most common penalties. and the lack of emissions technologies detailed below. process, as of the manufacturing different stages limited commercial imperatives to implement changes due to lack of energy savings associated with emissions reduction with emissions energy savings associated due to lack of to implement changes imperatives limited commercial AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 54 43 under ‘Consumptionofexported gas’. of recentworkassessingthis issue indetailthatcanbedrawnon.Thisreportwillinclude someofthisdiscussionbelow Detailed analysisofthefuture globaloutlookforLNGisbeyondthescopeofinitiative, butthereisalargeamount will varyconsiderablybygeographicregion,alongwithnumerous interacting,dynamicanduncertainfactors. A netzerotransitionimpliesaphasingoutoffossilfuelssuch asgas.However,thespeedandscaleofthistransition Korea andJapan. emissions whenconsumedasanenergysourceinoverseas markets,primarilyforpowergenerationinChina,South being alargesourceofbothglobalenergyuseandemissions throughitsproduction,LNGalsoproducesconsiderable As afossilfuel,LNGbringsaddedcomplexityregardingits roleinaglobalnetzeroemissionseconomy.Inadditionto The researchandanalysisincludedintheLiquefiednaturalgas(LNG)supplychainiscategorisedas: 3.5.1 Supplychainstructureandcontext 3.5 Liquefiednaturalgas TABLE 17: Fertilisers nitrate Ammonium Ammonia Process

● ● Based onTechnology ReadinessLevelandCommercial ReadinessIndex(ARENA2019b,ARENA 2014)

Liquefaction andexport–includesliquefaction,storage shiploadingforexport. energy andemissionsfromtheproductiondistribution of gasfordomesticconsumption. specifically forLNGareconsideredwithinthescopeof initiative.Assuch,thissupplychaindoesnotinclude Gas production–includesextractionandprocessing.Onlyenergyemissionsfromthegasproduced Summary of abatement technologies in the Chemicals supplychain Summary ofabatementtechnologiesintheChemicals production from ammonia CO generation steam Fossil based emissions Nitrous oxide Haber-Bosch SMR and process technology/ Incumbent 2 feedstock neutral urea DAC orBECCSforcarbon Utilisation ofCO generation Electrified steam Tertiary abatement Secondary abatement Primary abatement Biomethane SMR SMR withCCS Green hydrogenfeedstock generation Electrified steam process Abatement technology/ 2 from from Deployment Deployment Demonstration Deployment Demonstration Deployment status Technology development Research and Deployment Deployment 43 After 2030 2020 2020 2020 2020 2020 2020 deployable Year 2020 2020 following application 100% reductioninemissions >80% emissionsreduction characteristics depending onplant 70–90% emissionsreduction characteristics depending onplant 30–85% emissionsreduction and processemissions 100% reductioninfeedstock capture rates emissions, dependenton 85–95% reductioninprocess source dependent onelectricity and processemissions, 100% reductioninfeedstock electricity source production, dependenton from fueluseforsteam 100% reductioninemissions potential abatement Maximum electricity source production, dependenton from fueluseforsteam 100% reductioninemissions characteristics depending onplant

PHASE 1 TECHNICAL REPORT | JUNE 2021 55

. Recent analysis of Figure 13 2020g), the majority of which utilise existing infrastructure rather than being greenfield projects. 2020g), the majority of which utilise existing DISER such as bioenergy or hydrogen. However, gas could remain an important interim fuel while these solutions become cost such as bioenergy or hydrogen. However, gas could remain an important interim in Section 3.1 – Iron and steel). competitive (for example, natural gas DRI in preparation for H2-DRI as covered contingent on CCS or offsets. For applications with limited alternatives, the long-term use of gas is likely to be at scale and uncertainty regarding the emissions benefits of gas over coal, once accounting for methane emissions at scale and uncertainty regarding the emissions benefits of gas over coal, once generated during gas production. electrification or zero emissions fuels In end uses (other than power generation), gas can increasingly be replaced by much more limited role, particularly under higher levels of decarbonisation, as shown in much more limited role, particularly under higher levels of decarbonisation, as of up to 88% in global demand for gas by emissions reductions in line with 1.5 degrees of warming indicates reductions of gas replacement options 2050 (ETC 2018). Trends leading to these conclusions include technological development In the longer term, overall demand for gas is expected to decline by 2050, under most global decarbonisation scenarios. In the longer term, overall demand for gas is expected to decline by 2050, under but other research suggests a The IEA does expect global gas demand to increase over the long term (IEA 2018), exported LNG use. Around 40% of exported LNG is used for power generation, and in the short term this demand could exported LNG use. Around 40% of exported LNG is used for power generation, up the majority of remaining LNG use in increase due to increased electrification (BP 2020). Industry demand makes as a lower emissions option than coal and export markets, and in the near term, gas could be further deployed in industry oil. However, this would be competing against mature zero emissions solutions using electricity, bioenergy and hydrogen. Many current gas uses could be replaced by electrification or other fuels, with mature electric technologies available Many current gas uses could be replaced by electrification or other fuels, with contribute up to 30% of Australia’s to replace gas demand in residential, commercial and transport applications, which seen around a 5% decline in the share of fossil fuel (coal and gas), with renewables and nuclear filling the gap. seen around a 5% decline in the share of fossil fuel (coal and gas), with renewables by a combination of gas and South Korea’s transition has been marked by a decline in nuclear share, replaced renewables (BP 2020). In the near term, gas use in overseas electricity generation could increase as coal is displaced, although this will face generation could increase as coal is displaced, although this will face In the near term, gas use in overseas electricity alternatives of renewable and nuclear generation. The nature of this strong competition from the lower emissions example, Japan and South Korea are constrained in their power generation transition may vary widely by region; for energy sources compared to China. In recent years China and Japan have options, with limited access to renewable gas. The speed of this transition and the impact on Australian supply will depend largely on the end uses of gas in each impact on Australian supply will depend largely on the end uses of gas in each gas. The speed of this transition and the zero emissions alternatives. of these markets and the availability of Consumption of exported LNG on global demand. Within the past year, nearly 90% of Australia’s export Australian LNG production is highly dependent as net zero emissions by mid-century, implying phasing out of fossil fuels such markets have signalled ambition towards 2020 the Australian LNG, gas and petroleum industries had over $124 billion of projects in the investment pipeline 2020 the Australian LNG, gas and petroleum ( The market is shared between multiple major operators and has seen significant growth over the past decade, with a major operators and has seen significant growth over the past decade, with a The market is shared between multiple at the time of construction. Key players include Woodside, Chevron, Shell, number of projects considered world-leading delays due to challenging market conditions and COVID-19, as of October ConocoPhillips, Santos and Origin. Despite suggest that despite making up just 3.8% of the world’s gas production, Australia represents 26.3% of the global LNG of the world’s gas production, Australia represents 26.3% of the global LNG suggest that despite making up just 3.8% of these exports are sent to Japan (40%), China (37%) and South Korea (10%) export market (BP 2020). The majority (DISER 2021). In 2019 Australia was the second largest exporter of LNG globally, exporting 104.7 billion cubic metres (77 million In 2019 Australia was the second largest (Department of the Environment and Energy 2019). Recent statistics tonnes), approximately 71% of all gas produced current global oversupply have largely been responsible for the deferral of final investment decisions for new greenfield the deferral of final investment decisions have largely been responsible for current global oversupply proposals (DISER, 2020g). and export Gas liquefaction The majority of large gas projects in the development pipeline are backfill projects, adding new wells to existing LNG are backfill projects, adding new wells gas projects in the development pipeline The majority of large which saw a change of pace to the previous decade, than greenfield developments. This is infrastructure, rather on LNG prices and a infrastructure. The impact of COVID-19 $230 billion largely building new export investments of over gas networks are split into three main regions (Eastern, Western and Northern), aligning with the major production basins and Northern), aligning with the major into three main regions (Eastern, Western gas networks are split and pipeline infrastructure. In Australia around 70% of total gas is produced via conventional extraction, the remainder being largely coal seam gas. being largely coal the remainder via conventional extraction, gas is produced around 70% of total In Australia in north- majority of production Australia, with the in the north of areas are located mostly and exporting Gas producing Domestic and Energy 2019). of the Environment (~30%) (Department and Queensland Australia (~60%) west Western Gas production AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 56 FIGURE 14: also considerable,dueinparticulartoleakages,ventingandflaringduringtheextractionprocessingofgas. liquefaction (suppliedfromoperations)andpowergenerationforgasfieldLNGfacilities.Non-energyemissions are generation. Energyemissionsinthesupplychainaredrivenbyahandfulofprocesses–predominantlyusegas for responsible forapproximatelyone-quarterofAustraliangasconsumptionboththermalandelectricalenergy The processesassociatedwithproductionandexportofLNGarehighlyenergy-intensive,plantsalone Figure 14 production) oftheemissionsupstreamLNGfacilities(thatis,extractionandprocessingrelatedemissions),asshown in energy useandemissionsfromLNGliquefactionexport,inadditiontoaproportionateallocation(basedonoverall around 7%ofnationalemissions.FortheAustralianIndustryETIresearch,LNGsupplychainhasbeendefinedas The productionandliquefactionofgasforexportisoneAustralia’ssinglelargestsourcesemissions,generating 3.5.2 Energyuseandemissions FIGURE 13: . Thisdefinitionexcludesdomesticsupplyandtherelativeportionofupstreamemissionsthatarerelatedtothis. Estimates of future gas demand under global decarbonisation scenarios Estimates offuturegasdemandunderglobaldecarbonisation Emissions sourcesintheLNGsupplychain PHASE 1 TECHNICAL REPORT | JUNE 2021 57 e/ 2 44 e/PJ) and gas processing (4.1 kt CO 2 and other contaminants. A portion of these emissions and other contaminants. A portion of these 2 separated from reservoir gas, which can be up to 15% of 2 emissions instead. There is an additional emissions source 2 . This variability is driven by a number of factors, both natural (for example, variations in quantity variations in both natural (for example, number of factors, is driven by a . This variability e/PJ (Gan et al. 2020), followed by extraction (5.3 kt CO 2

Figure 15 Variation in emissions intensity of different LNG supply chain steps intensity of different LNG supply chain Variation in emissions

intensities across LNG supply chain stages are represented by blue bars, red points represent average value. intensities across LNG supply chain stages are represented by blue bars, red points represent average Chart produced using source data for Australian gas field production supplied to China from Figure 1 of Gan et al. (2020). Range of emissions Chart produced using source data for Australian gas field production supplied to China from Figure

44 Due in large part to energy requirements, the liquefaction process also has the highest emissions intensity, with an Due in large part to energy requirements, the liquefaction process also has the average of 6.6 kt CO venting and flaring generate up to PJ). In addition to energy-related emissions, non-energy emissions such as leaks, 33% of emissions from gas liquefaction and export. 60% for the latest technology). The liquefaction process represents the greatest energy requirement in the supply chain, 60% for the latest technology). The liquefaction process represents the greatest using an average of 9% of total energy throughput (Lewis Grey Advisory 2017). In the liquefaction stage of the LNG supply chain, energy used is generally supplied by gas from the operations itself, In the liquefaction stage of the LNG supply chain, energy used is generally supplied with an energy efficiency of between either directly (for example, using gas turbines for compression requirements, with an energy efficiency of up to 29–43%) or through an on-site power plant (commonly a combined cycle gas turbine, when a well is first developed, with ‘blowback’ gas often being vented to the atmosphere. Gas liquefaction and export a LNG plant’s lifetime emissions (Woodside 2011). Flares are generally installed for safety reasons on higher-pressure a LNG plant’s lifetime emissions (Woodside 2011). Flares are generally installed systems to reduce methane blowdown or emergency pressure relief valves but can also be used on lower-pressure emissions through combustion of the gas, resulting in CO The main cause of fugitive emissions is leakage or unintentional release from gas pipelines or equipment, whereas The main cause of fugitive emissions is leakage or unintentional release from of the plant equipment. In venting is a release of gas by design either during routine operations or maintenance conventional gas production, this includes the stream of CO are mainly from non-energy sources (that is, fugitive emissions and venting or flaring of gas) and occur during extraction is, fugitive emissions and venting or flaring of gas) and occur during extraction are mainly from non-energy sources (that to remove water, CO from wells and during processing stages gas) are considered to be part of the LNG supply chain. (based on a ratio of exported LNG to domestic Gas production the supply chain is in the liquefaction and export stage (see below), gas While the large majority of energy use within for a significant share (over 30%) of supply chain emissions. These emissions extraction and processing is responsible FIGURE 15: emissions-intensive due to large numbers of individual wells and associated higher energy requirements for compression requirements for higher energy wells and associated numbers of individual due to large emissions-intensive (Lafleur et al. 2016). as shown in as shown and plant technologies specific liquefaction (for example, gas) as well as technological of available and composition particularly gas extraction is 2020). Unconventional (Gan et al. of pneumatic controllers) of seals, profiles design, types The emissions intensity of supply chain processes can vary significantly depending on gas field and plant characteristics, gas field and plant depending on can vary significantly chain processes intensity of supply The emissions AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 58 TABLE 18: equipment selection. while greenfieldsiteshaveawiderrangeofoptionsavailabletoreduceemissionsthroughplantandpipingdesign that areoffshore),withmanysectionsoftheplantunabletobealteredwithoutsignificantdowntimeandretrofitcosts, depends heavilyontheapplication(forexample,spacecanbeatapremiuminbrownfieldoperations,especiallythose supply chainstagesandprocesses.Inallofthechain,suitabilitysolutionsforemissionsreduction Table 18 3.5.3 Decarbonisationoptionsandchallenges chain hasvaryingdegreesofscope3emissions,thischallengeisbyfarthegreatestinLNGsupplychain. 200 MtCO global netzerotransition.Theuseofthe77MtAustralianLNGexportsin2019(DISER,2020)amountstoaround with theenduseofexportedgasaregloballysignificantandthereforearelevantissuetoconsiderincontext While nottechnicallyincludedinnationalaccountsorthoseofAustralianLNGproducers,theemissionsassociated Consumption ofexportedLNG CCS: carboncaptureandstorage. ^ Likelysuitableforgreenfieldapplicationsonly. emissions residual or offset Capture Pillar 4b: energy and energy and emissions Zero Pillar 2: efficiency and energy Material Pillar 1: emissions Non-energy Pillar 4a: switching and otherfuel Electrification Pillar 3: supply feedstocks Immaterial oruncertainrole summarisesthemajorabatementopportunitieswithinLNG,describedinmoredetailbelowforspecific

2 e –morethanfivetimestheemissionsincurredduringproduction.WhileeachAustralianIndustryETIsupply Abatement opportunities across decarbonisation pillars fortheLNGsupplychain Abatement opportunitiesacrossdecarbonisationpillars CCS of technologies emissions Negative emissions process feedstocks emissions Zero improvements Process fuels emissions Other zero electricity emissions Zero efficiency Energy efficiency Material CCS forreservoirgas and pumps Electrified valves Gas production emissions options to zeroornear-zero Potential roleintransition LDAR, upgradeexistingdevices,installemissions

control devices

Post-combustion CCS Waste heatrecovery, Gas liquefactionandexport generation orgasturbinefuel Blue hydrogenforpower electrified liquefaction^ Electrified valvesandpumps, aeroderivative turbines^ for netzeroemissions abatement butinsufficient Important roleinnearterm

Energy efficiencyof exported LNG Consumption of Post-combustion CCS downstream gasdemand Bioenergy replacementof downstream gasdemand Blue hydrogenreplacementof gas demand Electrification ofdownstream downstream gasdemand emissions potential Long term,zeroornear-zero

PHASE 1 TECHNICAL REPORT | JUNE 2021 59

, which has and methane 2 2 . The amount of 2 – Complete decarbonisation of LNG production will require transported and stored (IEA 2020c). 2 – Replacement of equipment that regularly vents during operation – Replacement of equipment that regularly

– There are a range of technologies being used for LDAR, ranging from of technologies being used for LDAR, – There are a range – The main pathway to reduce emissions associated with the processing stage – The main pathway to reduce emissions venting 2 – Within the LNG industry, flaring is largely used as a safety measure; for example, when a high-pressure – Within the LNG industry, flaring is largely used as a safety measure; for example, produced from the reservoir gas separation processes and is estimated to be able to capture up to 80% of produced from the reservoir gas separation emissions from the processing stage is dictated by the composition of gas in the basin and, as such, varies emissions from the processing stage is 2 2 emissions from new subsea gas fields; for example, design of subsea pipelines to utilise reservoir gas pressure emissions from new subsea gas fields; for example, design of subsea pipelines Solutions such as this are to deliver raw gas directly to the processing plant and minimise upstream processing. highly dependent on location and any brownfield infrastructure. emissions, but optimising process controls to reduce the number of pressure-release events and subsequent emissions, but optimising process controls to reduce the number of pressure-release flaring is also important in reducing overall emissions. Greenfield well development technology options capture of any CO ‘green completions’ when new wells are developed. This process involves the common in onshore emissions from new wells which would typically be vented. The process is becoming a range of options to reduce Canadian LNG plants chasing emissions reduction opportunities. There are also to reduce this cost as capture mechanisms become better understood and learnings are applied from previous to reduce this cost as capture mechanisms scale, via development of hubs or developments. In addition, costs are predicted to decline through economies of other partnerships to increase the volume of CO Flaring converted into CO event occurs, flaring allows any subsequent methane releases to be burnt and significantly reduce methane a smaller global warming potential than methane. A well-functioning flare can widely. This is one of the cheapest applications of CCS technology currently, due to the concentrated stream of widely. This is one of the cheapest applications CO the absence of a demand driver or penalty on emissions, this solution vented gas at full operation. However, in economic value. In a globally competitive market and in the absence currently has a high cost and delivers no could place Australian LNG producers at considerable disadvantage. of government support, this additional cost are another challenge – typically in the order of 7 to 10 years – meaning Development timelines of CCS projects Technological developments over the next decade are predicted abatement benefits are slow to materialise. shipping), installation of vapour recovery equipment can reduce emissions, but this incurs the added cost of shipping), installation of vapour recovery recompression of the gas. CCS for reservoir CO gas extraction there is a process to separate and purify the of conventional gas extraction is CCS. Following and generating a concentrated waste stream of CO gas, removing water and other impurities CO Replacement of venting/leaking equipment and equipment used during ship loading) will also reduce fugitive or leaks gas (including some valves, pumps leaks and venting, the most suitable decarbonisation technology is emissions and increase productivity. For work is generally already undertaken as part of regular asset upgrade electrification of valves and pumps. This tend to be done to sections of a site at a time, so it takes a number and maintenance processes, but upgrades For boil-off gas (low-pressure gas released during loading and of rounds before all valves/pumps are electrified. Leak detection and repair (LDAR) Leak detection and monitoring. monitoring and infrared emissions to newer drone and satellite fugitive emissions manual inspections, However, detect leaks, especially in remote areas. provide a more effective way to These newer technologies and due to a lack of providers, lack of regulations relatively low uptake in Australia, likely there appears to be operations. are able to access through their own to fuel or energy that LNG producers the low value attributed 2015). by up to 80% (ICF International are estimated to reduce leakage emissions Quarterly inspections

● ● ● ● ● decarbonising liquefaction is the replacement of gas-fired turbines with lower emissions alternatives. This is considered decarbonising liquefaction is the replacement of gas-fired turbines with lower challenge for a brownfield site. best-practice for new LNG sites, but presents a significant technical and commercial A summary of technology options is provided below: Electrification is a key decarbonisation technology across all supply chains and presents a large opportunity in the Electrification is a key decarbonisation technology across all supply chains and electricity, the largest opportunity for energy-intensive liquefaction process. Alongside the implementation of renewable Gas liquefaction and export to the role the flaring plays in plant safety. to the role the flaring of emissions and re-injection of vented gas. These options are generally considered ‘no-regrets’ actions with short are generally considered ‘no-regrets’ actions of vented gas. These options of emissions and re-injection up a reasonable portion and productivity. While flaring makes generate improvements in efficiency paybacks given they measures due source is best reduced through operational in the Australian LNG supply chain, this of fugitive emissions Non-energy sources (such as from leaks, venting and flaring) make up the bulk of emissions in the gas extraction and in the gas extraction up the bulk of emissions and flaring) make from leaks, venting sources (such as Non-energy sites technologies for current reduction main focus for emissions chain. As such, the stages of the supply processing storage capture and equipment, or upgrades for leaking/venting (LDAR), replacement and repair is in leak detection Gas production AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 60 a potentiallyongoing roleforgasinthesemarkets, althoughlarge-scaleuptake ofhydrogen(potentially suppliedby South Koreathatdonothave accesstothesamehigh-qualityrenewableenergyresources asAustralia.Thisimplies play averylimitedroleinAustralia’s futureelectricitysector,theoutlookislessclearincountries suchasJapanand feedstock), hydrogenorbiomass couldtheoreticallyreplacedemandforgas.Similarly,although gasisexpectedto detailed throughoutthisreport). Inhigh-temperatureheatapplications(aswellas usinggasasanindustrial whereas thisisconsideredmore challenginginindustrialprocessesrequiringgasforhigh-temperature heat(as For example,buildingscanbe entirelyelectrifiedwithmatureordemonstratedtechnologies (ClimateWorks2020), negatively impactoveralldemandforgas,althoughtheextent ofthiswillvaryconsiderablybysectorandgeography. under materialandenergyefficiency,electrificationorother fuelswitching.Eachofthesemeasurescanbeexpectedto There areanumberofmeasuresthatcouldreducefutureenergy demandthroughouttheglobaleconomy,falling of CCS–arethosethatreducedemandfortheproductitself insectorssuchaspowergeneration,buildingsandindustry. incurred duringproduction,themostsignificantopportunities toreduceLNGsupplychainemissions–withtheexception Due toLNG’sfunctionasanenergysourceandthefactthat emissionsfromtheenduseofgasfaroutweighthose Consumption ofexportedLNG ● ● ● ● ● ●

also generateanadditionalstreamofCO example, preventinghydrogenembrittlementinsteelequipment).Ifbluewasproducedonsite,itwould retrofits orupgradestoequipmentallowhighlevelsofhydrogenpenetrationindesignedforgas(for significantly reducesiteemissions.Thiswillbecontingentonalow-costsupplyofhydrogenandlikelyrequire there ispotentialtousehydrogenincurrentLNGfacilitieseitherforpowergenerationorasfuelgasturbines Hydrogen asreplacementfuel successfully implementedinNorwayattheSnohvitLNGfacilityandissuitableforbothonshoreoffshoresites. a furtherchallengeintermsofbothcapitalcostandspacerequirementsforrenewables.Thetechnologyhasbeen remote locationofmanyLNGplantsinAustraliameansthaton-sitegenerationisusuallyrequired,whichpresents the decarbonisationofmajorsourceenergy-relatedemissionsfromLNGsupplychain.However, conventional gasturbines(ABB2006).Ifpoweredby100%storage-backedrenewables,thistechnologyenables by anon-sitecombinedcyclegasturbine,theemissionsintensityofplantisreduced30%comparedto greenfield sites.Thepowersourceforthedrivesdictatesdecarbonisationpotential,andevenwhenpowered complexity ofworkstoretrofitthetechnologyissignificantand,assuch,thiswouldmainlybeconsideredfor advantage ofreducedmaintenancerequirements,recirculationlossesanddowntime.However,thescale have ashortpaybackperiodwhenthevalueoffuelgassavedistakenintoaccount.Theplantsalso Electric drives Gladstone, Queensland,in2014usethistechnology. due tothelowerrelativecomplexityofretrofitwhencomparedelectrification.ThethreeLNGplantsbuiltin in newLNGplantsduetoemissionsintensitybutcouldbeasolutionforextendingthelifeofanolderfacility, as theapplicationofpost-combustionCCSisnotregardedeconomic.Thistechnologyunlikelytobeinstalled ~25% inoverallplantemissions(CSIRO2017),butdoesn’tallowforcompletedecarbonisationoftheprocessstep efficient thanconventionalgasturbines,witha13–15%increaseinthermalefficiency.Thisprovidesreductionof Aeroderivative turbines improve theprospectsforthistechnology. size ofcaptureunitsrequiredforthediluteexhauststreamsfromturbines.However,futuredevelopmentsmay decarbonise currentlyinstalledgasturbinesduetothelimitedspaceinmostbrownfieldsitesandcost Post-combustion CCSforgasturbines grid orrenewablegenerationoptions. generation iscurrentlyseenasasolutionforsitesthatwanttoinstallelectricdrivesbuthaveverylimitedaccess the exhauststream,costishigherthaninotherapplications.Despitethis,post-combustionCCSforCCGT on-site usingcombinedcyclegasturbine(CCGT)generators;however,duetothelowCO the electricityuseemissionsfromsite.CCSisalsoapossibilityforapplicationswheregenerated fired powergeneration)throughgenerationorpurchaseofrenewableenergycouldenablesignificantreductionin Decarbonisation ofon-siteelectricitygeneration reduction inLNGplants. operational ventingequipment(see‘Gasproduction’above)arealsohighlyapplicabletoenableemissions in emissions(CSIRO2017)whenappliedtogas-firedpowergeneration.LDARandupgradesleakingor recovery andcryogenicliquidexpanders.Wasteheatoptimisationisestimatedtoenableupa19%reduction reduction (especiallyinbrownfieldplants),withbest-practicetechnologiesavailableincludingwasteheat Energy efficiencyimprovements –Electricliquefactiondriveshavehighercapitalexpenditurerequirementsthangasturbinesbut –Aeroderivativeturbines(forliquefaction)stillconsumegasdirectly,butaremorefuel –IfcostsofblueorgreenhydrogenproductiondropsignificantlyinAustralia, –EnergyefficiencyinLNGplantsisamajoropportunityforemissions 2 –CCSisnotconsideredtobeacost-effectiveoptiondirectly toprovidegreaterscaleforCO –Decarbonisationoftheplantpowersource(generallygas- 2 transportandstorageprojects. 2 concentrationin

PHASE 1 TECHNICAL REPORT | JUNE 2021 61

in flaring emissions equipment emissions 90% reduction in vented emissions Up to 30% reduction in energy use emissions Up to 85–90% reduction in combustion emissions, varying technology readiness levels for different processes 24–27% reduction in energy use emissions 100% of turbine energy use emissions, depending on power source 100% of energy use emissions, when combined with electrification on site 80% reduction in emissions due to leaks 100% reduction of equipment emissions Up to 100% reduction Maximum abatement potential Current Australian examples of up to 40%, estimated potential of up to 80% 80% reduction in emissions due to leaks 100% reduction of , including indicative , including indicative

2020 2020 2020 2020 2020 2020 2020 2020 2020 Year deployable 2020 2020 2020 Table 19 45 Deployment Deployment Deployment Demonstration Deployment Deployment Deployment Deployment Deployment Technology status Demonstration Deployment Deployment 2 LDAR Replacement of venting/ leaking equipment Vapour recovery systems Post-combustion CCS Aeroderivative turbines Electric drives Renewable energy CCS for reservoir CO LDAR Replacement of venting/ leaking equipment Green completions Waste heat recovery Abatement technology/process

2 ). Standard management of leaks Venting during ship loading Gas turbines Gas-fired power generation Venting reservoir CO Standard management of leaks Flow back release in well completions Incumbent technology/ process Summary of abatement technologies in the LNG supply chain Summary of abatement Based on Technology Readiness Level and Commercial Readiness Index (ARENA 2019b, ARENA 2014)

Liquefaction and export Gas production Process Poten & Partners 2020 Poten & Partners 45 TABLE 19: The key technologies that can allow LNG supply chain decarbonisation are shown in that can allow LNG supply chain decarbonisation The key technologies potential for emissions abatement. technology readiness level and maximum timelines for deployment, the scope of Phase 1. However, the above dynamics will be considered as part of Phase 2 modelling to understand how considered as part of Phase 2 modelling 1. However, the above dynamics will be the scope of Phase decarbonisation and competitiveness. the future outlook for Australian industry global trends might impact to reduce emissions, with the use of offsetting to provide ‘carbon neutral’ LNG shipments growing in popularity growing in popularity LNG shipments provide ‘carbon neutral’ use of offsetting to emissions, with the to reduce ( withinproducts was not included ETI supply chain Australian Industry of global demand for and analysis Detailed research Australia) provides a possible zero emissions alternative. CCS and offsetting provides another avenue for customers avenue for customers provides another CCS and offsetting zero emissions alternative. provides a possible Australia) AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 62 50 49 48 47 46 TABLE 20: decades, aswellpoliciessuchrenewableenergytargets.TheCAPEXofgenerationhasbenefitedin technologies, inparticularwindandsolarPVthathaveachievedremarkablesustainedcostreductionsrecent The ongoingtransitionofAustralia’selectricitygridhasbeenlargelydrivenbyglobaldevelopmentsinrenewableenergy led bywind(6.7%),small-scalesolarPV(4.2%)andlarge-scale(1.4%). (DISER 2020e).Nationally,variablerenewables(windandsolarPV)contributedaround12%ofgenerationin2018-19 – Victoria, NewSouthWalesandQueenslandaccountingforacombined18%in2018-19comparedtojust6%2009-10 intensive grid.However,thesestatesarealsotrendinggraduallyawayfromfossilfuels,withrenewablegenerationin coal-based, withVictoria’scurrentrelianceonbrowncoal(71%oftotalgeneration)resultinginaparticularlyemissions- decade. Ontheotherhand,Australia’smostpopulousstates–Victoria,NewSouthWalesandQueenslandarelargely shares ofrenewablegeneration,exceeding50%annuallyforthefirsttimein2018–19,upfromjust15%atturn the supplying 80%ofthestate’sgeneration(DISER2020e).SouthAustralia’selectricitysupplyhasrecentlymovedtohigh Tasmania standsoutasaparticularlylowemissionsgrid,primarilyduetoconsiderablehydroelectricityresources intensity, shownin dominated byfossilfuels.Generationmixvariesconsiderablyregion,whichdrivesdifferencesingridemissions Australia’s electricitygridhasmovedtohighersharesofrenewablegenerationinrecentyears,althoughitremains 4.1.2 Context 4.1 Electricitygeneration energy supplyanddemand,withaparticularfocusonthebenefitsthismightconferkeyindustrialregionsinAustralia. analysis isnotsplitbysupplychain.Thesectionconcludeswithdiscussionontheimportanceofeffectivelyintegrating source orfeedstock. current stateandfutureoutlookfortheproductionofelectricity,hydrogenbiomassinAustraliauseasanenergy feedstocks –inanetzerotransitionforindustrialsupplychains.ThissectionexpandsonPillar2,providinganoverviewof Box 1 4.0 Energysystemanalysis TAS SA WA –NWIS NT –DKIS WA –SWIS NSW &ACT QLD VIC Australia, allgridconnected Region

North-WestInterconnected System Darwin-KatherineInterconnectedSystem South-WestInterconnectedSystem (DISER2020a) Hydrogenandbiomasshavemultiple applicationsasenergysourcesforheatorpowerandafeedstockincertain industrialprocesses andaccompanyingdiscussioninSection 49 Current(2020)gridemissionsintensityinAustralianregions 48 50 Table 20 46 cific to any particular industry, this Asthechallengeofdecarbonisingenergysystemisnotspecifictoanyparticularindustry,this . 0.15 0.30 0.58 0.64 0.66 0.77 0.78 0.87 0.72 Emissions factor(tCO 2.4 establishes the importance of Pillar 2 – zero emissions energy and establishestheimportanceofPillar2–zeroemissionsenergyand 2 e/MWh) 47 PHASE 1 TECHNICAL REPORT | JUNE 2021 63

supply chain efficiencies and economies of scale from market growth (World from market growth economies of scale efficiencies and supply chain 51 presents estimated capacity factors for wind and solar PV generation by Australian region. presents estimated capacity factors for Figure 16 and distance between generation source and demand or use will partly determine transmission and and distance between generation source 52 For example, improved module efficiency for solar PV and larger turbines with greater power output for wind generation For example, improved module efficiency for solar PV and larger turbines with greater power output asset (Tran 2017) Capacity factors refer to the percentage of actual output out of the total possible output of a generation

52 51 and 29% respectively (Leith 2021). reasonable solar potential nearby. In a number of other regions, wind capacity factors are close to 40% and solar PV reasonable solar potential nearby. In a potential for hybrid variable renewable generation arrangements. For capacity is over 30%, suggesting significant wind and solar plants in Australia in 2020 had capacity factors of 45% comparison, the best-performing grid-scale Capacity factors generation costs. and Tasmania, wind power exhibits capacity factors above 50%, with In some regions such as Far North Queensland generation in relative proximity is a key advantage, as it partially addresses issues of natural variation in generation generation in relative proximity is a key reducing (but not eliminating) the need for expensive storage to provide profiles of individual renewable resources, system stability. advantages in renewable energy production (Ueckerdt et al. 2019, WWF 2021). Australia benefits from both abundant 2019, WWF 2021). Australia benefits energy production (Ueckerdt et al. advantages in renewable resources, with some four million square kilometres recently assessed as having solar radiation and strong onshore wind each other (Grattan 2020). This potential to combine wind and solar PV solar and wind resources coexisting alongside and combine it with solar PV to reduce costs and target applications where the energy is required. solar PV to reduce costs and target applications and combine it with competitive Australia’s potential to capitalise on natural of recent attention has focused on A considerable amount For concentrated solar thermal (CST) – which uses sunlight to generate heat – potential cost reductions are anticipated to generate heat – potential cost reductions thermal (CST) – which uses sunlight For concentrated solar driving reduced financing costs and ‘learning-by-doing’ improvements, increased competition, due to supply chain applications for CST also underway to broaden the range of (ARENA 2018). Research is greater technical efficiencies For batteries, their modular scale, wide variety of uses and cost reductions already achieved, suggest a similarly strong cost reductions already achieved, suggest scale, wide variety of uses and For batteries, their modular for electric vehicles battery costs have declined by 90% is likely. Already since 2010, lithium-ion cost reduction pathway with further improvements expected. for stationary applications (IEA 2020a), and around two-thirds Economic Forum 2020). This is a trend expected to continue. Widespread use of reverse auction mechanisms globally auction mechanisms use of reverse to continue. Widespread is a trend expected Forum 2020). This Economic wind levels for solar PV and 17% from 2010 by around 76% and bid prices reducing a key role, with has also played al. 2020). (Martín et projects respectively particular from technological innovation, particular AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 64 53 competitiveness ofdifferentelectricity generationtechnologies. (Graham etal.2020).Keyoutputs ofGenCostanalysisarelevelisedcostselectricity(LCOE) thatshowtherelative GenCost, acollaborationbetween CSIROandAEMOthatupdateselectricitygeneration storagecostsannually To explorethefutureoutlook for theelectricitysystem,AustralianIndustryETIdraws onthelatestdatafrom Electricity Market(Deloitte2019). Hydrogen Strategy,thetotalelectricitygenerationrequired wouldbefivetimesgreaterthanthesizeofNational realise theopportunityofbeingamajorexporterhydrogen asoutlinedinthemostoptimisticscenariosofNational to fourtimesasmuchelectricitygenerationpresentaccording tosomeanalysis(ETC2020).IfAustraliawas With electrificationofindustryalongsidelarge-scaleproduction ofhydrogenfromelectricity,theworldwouldneedthree A netzeroemissionseconomywillrequireavastlydifferent andfarlargerelectricitysystemcomparedtotoday. 4.1.2 Futureoutlook components forcleanenergytechnologies(WWF2020). energy basedproducts(forexample,greenproductionofenergy-intensive metalssuchassteelandaluminium) exports ofrenewableenergyresourcesincludehydrogen,directelectricityviaunderseacables, highly dependentonenergyimports,openingthedoortoanumberofrenewableexportopportunities.Potential presents seriousconstraintsinothercountrieswithintheAsia-PacificregionsuchasJapanandSouthKoreathatare advantage, withamplelandmasstoservicedomesticenergyneedsthroughrenewablegeneration(AERA2019).This Along withitsabundanceofrenewableresources,Australia’spopulationdensityanddistributionisanotherkey FIGURE 16:

CSIROanalysisusing AEMOIntegratedSystemPlan(2020a) inputandassumptionsworkbook –‘medium’values Estimatedcapacityfactorsforsolarandwindgeneration,byAustralianregion 53

PHASE 1 TECHNICAL REPORT | JUNE 2021 65 per tonne of hydrogen 2 ). Figure 17 Calculated LCOE (levelised cost of electricity) by technologyCalculated LCOE (levelised and 2030 category for produced (Muradov 2017). is the major production route for grey hydrogen, in which a natural gas (methane) feedstock is reacted with very high is the major production route for grey hydrogen, in which a natural gas (methane) and in the presence of a catalyst temperature steam (up to 1000°C – also produced using natural gas) under pressure 9 tonnes of CO to produce syngas (hydrogen and carbon monoxide). This process emits around chemicals manufacturing. There are multiple processes for producing hydrogen at varying stages of technological and chemicals manufacturing. There are multiple processes for producing hydrogen as grey hydrogen – represents 96% of commercial maturity. Hydrogen derived from fossil fuels – commonly referred to Steam methane reforming (SMR) global production, nearly half of which is obtained from natural gas (Bethoux 2020). 4.2.1 Context in the production of ammonia in Hydrogen has been used in industrial applications for more than a century, primarily discussed in Section 4.4. 4.2 Hydrogen storage and system security costs need to be added to this variable component to meet electricity demand. This could storage and system security costs need to be added to this variable component energy share unless substantial add up to a maximum $40/MWh increasing non-linearly with the variable renewable demand management source, as demand management is available. Hydrogen is an example of a potential large MWh and wind $40–$55/MWh, depending on the local capacity factor. As such, if an end user only requires variable MWh and wind $40–$55/MWh, depending on the local capacity factor. As such, solar site is $20/MWh. However, for 24/7 renewable energy at least cost then the long run cost at a high capacity factor a reasonable expected average for the reliable electricity solar and wind technologies would be combined. Consequently, might be $30-$48/MWh. Transmission, variable renewable energy component (combined wind and solar without storage) Wind and solar PV costs are projected to continue declining to 2050. Variable solar PV is expected to reach $20–$40/ Wind and solar PV costs are projected to continue declining to 2050. Variable FIGURE 17: in Appendix A data tables for GenCost 2020–21. in Appendix A data is represented in GenCost either through a direct carbon price or a 5% risk premium on borrowing costs. Whatever or a 5% risk premium on borrowing either through a direct carbon price is represented in GenCost in 2050, higher LCOE for coal and gas generation capture this risk, the result is a considerably approach is used to is available lower emissions intensity. Additional information pronounced for gas given its relatively although this is less competitive from 2030 even with additional transmission and storage costs included ( and storage additional transmission from 2030 even with competitive but face risks gas are the next most competitive options, technologies such as coal and Flexible fossil-fuel generation additional risk net zero emissions targets. This states have legislated or aspirational over time given all Australian generation, with costs expected to decline further out to 2050. The most recent GenCost modelling has gone further by modelling has gone recent GenCost out to 2050. The most to decline further with costs expected generation, increasing demand with associated with meeting and storage) (such as transmission the integration costs determining cost- generation will be that new variable data, CSIRO concludes With this new energy shares. variable renewable Wind and solar PV generation without transmission or storage costs are already the lowest cost option for new cost option for new are already the lowest or storage costs without transmission solar PV generation Wind and AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 66 55 54 TABLE 21: of thesevarioushydrogenproductionmethods. coal gasification,SMRandAEPEMelectrolysis.Thefollowingsectionhasadditionaldetailontheoutlookforcosts Table 21 mature thanAE–continuedtechnologicalinnovation. improvements, highervolumeproductionand–particularlyinthecaseofPEMelectrolysersthatareconsideredless 30 years(Sabaetal.2018),particularlyforPEMelectrolysers.Thisisatrendexpectedtocontinuethroughsupplychain Research anddevelopmenteffortshavedrivenimpressivecostreductionsinelectrolysertechnologiesoverthepast although researchisongoingtoimproveoperationalefficiencyandsafetywithvariablerenewableenergy. applications inspace-constrainedareas,suchasbuildings.AEisbettersuitedtoacontinuoussupplyofelectricity, to rampupanddownwithintenthsofasecond.PEMelectrolysersarealsosmallerinsizesomoresuited continue toincrease.PEMelectrolysisisbettersuitedcouplingwithvariablerenewableenergyasithastheability Australian IndustryETIanalysis.Todate,AEhasbeenmorewidelydeployed,butapplicationsforPEMelectrolysis and alkalineelectrolysis(AE)arethetwomostmatureelectrolysertechnologiesbothhavebeenconsideredin decarbonisation iftheelectricitysourceisbasedentirelyonrenewableenergy.Protonexchangemembrane(PEM) Electrolysers useelectricitytoseparatewaterintohydrogenandoxygenusingelectrodes,withthepotentialforcomplete The pushforzeroemissionsfuelsandfeedstocksisdrivingmomentuminhydrogenproducedfromelectrolysis. carbon (IRENA2019). scaled up,thatcaptureratesandefficiencywillgreatlyimprove,itprovidelong-termstorageofthecaptured blue hydrogen.ThepotentialroleforhydrogeninanetzerotransitionhingesonassumptionsthatCCScanbe assumes amaximumcapturerateof90%forCCStechnologies,withlowerratesinsufficienttobeconsidered projects achievingfarlowercaptureratesofaroundathird(IRENA2019).Giventhis,theAustralianIndustryETIanalysis blue hydrogenisnotzeroemissions,withcaptureratesexpectedtoreach85–95%atmostandcurrentflagshipCCS but itmustovercomesimilarchallengestothosefacingCCSandCCU(coveredin‘Pillar4b’ofSection Blue hydrogenhasbeenconsideredapotentialbridgingsolutionwhilethecostsofgreenproductiondecrease, in shipsthatarebeingdesignedforthispurpose.Atfullscale,productionisexpectedtobe770tonnesperday. technology, combiningbrowncoalgasificationwithCCS.Inthisproject,hydrogenwillbeliquefiedforshippingtoJapan commonly referredtoasbluehydrogen.TheHydrogenEnergySupplyChain(HESC)projectinVictoriaisbasedonthis processes, theresultingCO sequestration technologiestocaptureasufficientlyhighportionofemissions.WhenCCSisaddedgreyhydrogen Hydrogen producedfromSMRorcoalgasificationcouldbeconsideredalow-emissionsfuelifcoupledwithcarbon CO the feedstockdownintosyngas.Coalgasificationproducesaround18%ofglobalhydrogen,andemits19–24tonnes brown coalorblackcoal)issubjectedtohightemperatureandpressureinthepresenceofoxygensteambreak Coal gasificationisanothermaturemethodtoproducegreyhydrogen,inwhichacarbonaceousfeedstock(forexample, Electrolysis Thermolysis Process

2 Technology Maturity Levelisamodifiedscalecombining thecommonlyusedTRLtoolandARENA’s CommercialReadinessIndex (Dawood 2020) Adapted fromTable4inDawood(2020) pertonneofhydrogen(Muradov2017). providesasummaryofthehydrogenproductionprocessesconsideredinAustralianIndustryETIanalysis: Hydrogen production processes considered in the Australian Industry ETI Industry Hydrogen productionprocessesconsideredintheAustralian Energy Electricity Heat 2 iscaptured,pressurisedandinjectedintoapipelinetobepermanentlystored.This Brine Gas Water Coal Feedstock membrane (PEM) Proton exchange Alkaline electrolysis(AE) (SMR) Steam methanereforming Coal gasification Technology 7–9 9–10 10 10 T ML 54 55 with renewableelectricity Zero emissionsifpowered >90% capturerate) if coupledwithCCS(with considered lowemissions hydrocarbons, although Emissions duetouseof Emissions 2.4 ). Additionally,

PHASE 1 TECHNICAL REPORT | JUNE 2021 67

cost 2 after 2020 is 2 from SMR with CCS was calculated 2 , which reduces the capital cost due 57 ) was calculated for both electrolyser types using ) was calculated for both electrolyser types 2 , but it does not include costs associated with delivering , but it does not include costs associated 2 of $2.73/kg in 2050. The drop in LCOH 2 of $1.56/kg in 2050 under the Base assumptions. Assuming of AE ranges from $2.94-$3.05/kg, more than twice the cost of 2 2 of brown coal gasification with CCS in 2030 is due to the Hydrogen Energy 2 natural gas cost of production. This is lower than typical Australian east and west coast natural gas cost of production. This is lower 56 of PEM electrolysis with variable electricity is near or below that of the lowest cost SMR with CCS of PEM electrolysis with variable electricity is near or below that of the lowest 2 shows the range of costs for different production methods in 2020, 2030, 2040 and 2050. Hydrogen produced shows the range of costs for different production Base – the IEA (2019b) hydrogen report and Aurecon (2019) were used for the initial cost and performance Base – the IEA (2019b) hydrogen report IEA (2019b). assumptions. Projections were based on from the latest GenCost draft report’s ‘High VRE’ scenario (Graham et al. Alternative – capital costs were sourced based on Aurecon (2020). Also included was Bloomberg New Energy 2020) and performance assumptions were scenario capital cost for AE (BNEF 2019). Finance’s (BNEF) Rest of World optimistic associated transport costs associated transport range and may lie outside the modelled production route) out to 2050 are uncertain Gas costs (for the SMR Discount rates across all technologies have been held constant and may not reflect the differing commercial and may not reflect the differing all technologies have been held constant Discount rates across be applied risk premia which might and may vary significantly by storage fields storage costs are highly uncertain and Carbon capture and

return due to changes in market or regulatory conditions (Climate Alliance Limited 2015) Stranded assets are those that, at some point prior to the end of their economic life, are no longer able to satisfy a company’s internal rate of Stranded assets are those that, at some point prior to the end of their economic life, are no longer able 2028 respectively The HyDEMO project Norway and the H21 project in England are expected to come online in 2025 and ● ● ● ● ●

57 56 powered with variable electricity, reaches a lowest LCOH grid connection (and thus higher electricity costs), LCOH PEM hydrogen production. by 2040, in the range of $1.77-$1.82/kg. PEM reaches the lowest production costs of $1.42/kg in 2050 under the Base by 2040, in the range of $1.77-$1.82/kg. PEM reaches the lowest production costs source, the modelled PEM electrolyser assumptions with variable renewables electricity. Due to the variable electricity production, even if assumed to be route has a lower capacity factor but also a far lower electricity cost. AE hydrogen ranges are driven by the firmed electricity price (which is around $30/MWh higher than the variable cost), rather than ranges are driven by the firmed electricity price (which is around $30/MWh higher capital costs in the Alternative conservative capital cost assumptions. In both scenarios (and despite much higher scenario), the LCOH in production costs over time between PEM electrolysis and AE. In initial years, for both PEM and AE the upper end in production costs over time between PEM electrolysis and AE. In initial years, over time as capital costs in both of the cost range is due to considerably higher capital costs, but this effect lessens 2030, the upper end of LCOH scenarios decline and electricity costs become the more dominant factor. After Supply Chain (HESC) project coming online in Victoria with a scale up in plant capacity (Hydrogen Engineering Supply Chain (HESC) project coming online in Victoria with a scale up in plant Australia 2020). globally, there is considerable uncertainty As the various electrolyser technologies are currently ramping up in production due to plants coming online in Norway and England in 2025 and 2028 respectively declining from $2.78/kg in 2020 to to ‘learning-by-doing’. Brown coal gasification with CCS follows a similar trajectory, $1.84/kg in 2050. The drop in the LCOH via SMR with CCS experiences gradual cost reductions to as low as $1.71/kg in 2050, with gas prices between $3.27/ via SMR with CCS experiences gradual modelled to test the sensitivity of production costs. At the upper bound of GJ (using a stranded gas asset) and $9/GJ with CCS has a LCOH gas prices, hydrogen produced via SMR gas prices. The use of a stranded gas asset means a low LCOH gas prices. The use of a stranded gas asset hydrogen to the end consumer. Figure 18 AE would be better suited to a firmed electricity source. Given that these technologies are scalable, they can be used for electricity source. Given that these technologies are scalable, they can be used AE would be better suited to a firmed close to where it is needed. The LCOH small-scale distributed hydrogen production, using a stranded gas asset, under the Alternative scenario. The levelised cost of hydrogen (LCOH under the Alternative scenario. The levelised and a firmed electricity supply for comparison purposes. However, at this stage a variable renewables electricity supply PEM would be better suited to coupling with variable renewables and using currently available electrolyser technologies, The above studies were chosen as they are, with the exception of BNEF (2019), available in the public domain. Initial are, with the exception of BNEF (2019), available in the public domain. Initial The above studies were chosen as they are higher than the Base scenario, but this is offset by higher efficiency capital costs under the Alternative scenario assumptions for green hydrogen production have also been examined: hydrogen production have also been assumptions for green Given the wide range in current and projected costs and efficiencies of electrolysers, two scenarios with different of electrolysers, two scenarios in current and projected costs and efficiencies Given the wide range key assumptions and limitations: key assumptions and CSIRO has conducted preliminary analysis on the future outlook for different types of hydrogen production in Australia. production in different types of hydrogen future outlook for analysis on the conducted preliminary CSIRO has following and includes the Roadmap modelling, National Hydrogen of the CSIRO is based on an update This analysis 4.2.2 Future outlook 4.2.2 Future AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 68 58 research suggeststhatevenlower greenhydrogenproductioncostscouldbeachieved in regionssuchasAustralia, There isconsiderableuncertainty regardingthefutureoutlookforthesecostcomponents, andotheremerging the LCOH a lowercapitalcostandefficiencyrelativetoPEM.Assuch, electricitycostistheparameterthathasmostimpacton However, asaresultofsignificantcapitalcostreductions, by 2050electricitycostsarethedominantparameter.AEhas over time.Theanalysissuggeststhatin2020,capitalcosts arethemajorcomponentofLCOH proportion ofthesecomponentsrelativetooverallcostscan varyconsiderablybetweenAEandPEMelectrolysis include costsofcapital,fixedoperatingcosts,stackreplacement andwaterusedinelectrolysisprocesses.The These resultsindicatethatthereareanumberoffactorsimpacting theLCOH FIGURE 18: benefits ofcoordinationwithinindustrialprecincts. presence ofalocalbuyersoisnotconsideredcoreresult;however,thisanalysisprovidesanexamplethepotential refining, aswellapplicationsinhealthcare(UIG2016).Thesaleofanoxygenby-productisdependentonthe case withoutoxygensale.Oxygenhasnumeroususesinvariousindustrialprocessessuchassteelmakingandmetals kg inPEMandAErespectively,representingadeclineof22%20%comparedtothe2050variablerenewables assumed priceof$0.04/kg.Thisoffsetsproductioncostsandresultsin2050LCOH In theBasecase,analysisalsoincludedasensitivityforsaleofoxygenproducedduringelectrolysiswithan third thatofthePPAcase,whichisgrid-connected. electricity despitePPAcostsbeinghigher,duetothefactthatvariablehasacapacityaroundone- costs approaching$2/kgin2032and2044respectively.Thisismorethanonetothreeyearsearlierwithvariable 2028. ThisdrivesmoresignificantreductionsinLCOH MWh, whereasbothfirmedandvariablecostsstartoffhigherin2020beforedropbelow$30/MWharound a powerpurchasingagreement(PPA).ProductionusingPPAelectricitywasassumedtohaveconstantcostof$30/ In additiontofirmedandvariableelectricity,theAlternativecasealsoassessedimpactofsupplyingelectricityvia

show theimpactofsellingoxygenasabyproductelectrolysisprocess, whichisdependentonthepresenceofalocalbuyer. differences. DetailedassumptionsandfurtherresultsareavailableinAppendix BoftheTechnicalReport.Theblackmarkersin2040and2050 reaches alowof$1.42/kgin2050,whileAE$1.56/kg,withoperating expenses,stacklifetimesandreplacementcostsdrivingthe (representing thecostofsolarPVwithoutstorageatLeighCreek,SARenewable EnergyZone).Undertheseassumptions,PEMelectrolysis costs forPEMandAEarebothbasedoncapitalof$206/kw,performance of43kWh/kgH2andvariablerenewableelectricitycosts$19.9/MWh $3/GJ and$9/GJrespectively.ForPEMAE,thescenarioscomprisingalowerupperboundvaryovertime.In2050,lowestproduction The dottedboxesdisplaytherangeofcostsforaparticularproductionmethod.ForSMR,lowerandupperboundsarebasedongasprice CSIRO(2021,unpublished) –internalelectricitysystem and hydrogencostmodelling 2 ineveryyearprojectedforAE hydrogenproduction. Projected costsofhydrogenproductionroutes,2020–2050

2 intheearlyyearsforbothPEMandAEusingPPAelectricity,with 58 2 ofdifferentproductionroutes.These 2 aslow$1.10/kgand$1.24/ 2 forPEMelectrolysis.

PHASE 1 TECHNICAL REPORT | JUNE 2021 69 2017) suggests a limited role ETC – Various bio oils are converted to biodiesel through treatment with alcohol and – Various bio oils are converted to biodiesel – Lignocellulosic biomass (plant dry matter) is thermochemically converted to various – Lignocellulosic biomass (plant dry matter) – Lignocellulosic biomass can also be converted into methane by gasification of the – Lignocellulosic biomass can also be – Waste streams are mixed in tanks and the methane mixture released is biogas. Once the – Waste streams are mixed in tanks and – Lignocellulosic biomass is treated to high temperatures and pressures to produce an oil-based – Lignocellulosic biomass is treated to high capital cost and there is also a cost associated with the feedstock. high capital cost and there is also a cost digestate can be removed and used as a fertiliser and more waste added. Depending on the waste stream, some digestate can be removed and used as any toxic bacteria. Clean up can be used to treat the biogas so it can heat treatment may be required to remove approximately 70% methane, 30% carbon dioxide. Biogas digestion is be injected into gas pipelines. Biogas is matter as a feedstock, limiting its potential. inexpensive but relies on waste organic Biogas (gasification) product (syngas) through a methanation process. This technology has a biomass and then putting the gasification fuels via the Fischer-Tropsch process, producing 22% diesel, 46% kerosene, 32% naphtha. fuels via the Fischer-Tropsch process, producing Pyrolysis product of 60% distillate, 40% naphtha. Biogas (digestion) a few days depending on the waste product and tank conditions), the digestion process is complete (generally Fatty acid methyl ester (FAME) Australia for many years to convert used cooking oil into biodiesel. FAME heat. This technology has been used in void some vehicle manufacturer’s warranties whereas other processes products have a shorter shelf life and may This process produces 98.5% biodiesel, 1.5% glycerol. produce fuels to petroleum fuel standards. Biomass to liquids (BTL)

● ● ● ● ● Over the past decade CSIRO has undertaken assessments of the Australian potential for sustainable biomass and Over the past decade CSIRO has undertaken assessments of the Australian potential and land availability. These studies made projections out to 2030 and 2050 based on expected climate change impacts waste available for bioenergy production were used to assess the quantity of lignocellulosic biomass and municipal solid could provide a sustainable source of biomass but may face challenges achieving necessary scale for widespread use. could provide a sustainable source of biomass but may face challenges achieving 4.3.2. Future outlook al. 2016). Third generation feedstocks are derived from specialised energy crops (for example, algae). While these can al. 2016). Third generation feedstocks are derived from specialised energy crops acting as a sequestration option – potentially produce more fuel than other feedstocks – and consume carbon dioxide, (AERA 2019). Municipal or animal waste they currently require large amounts of fertiliser to grow, negating other benefits competition with food supply. Second generation biofuels are non-food feedstocks that are sustainably produced, for competition with food supply. Second generation biofuels are non-food feedstocks grasses and short rotation forests. Second example forest residues, and purpose-grown energy crops such as vegetative yet commercially viable at scale (Alfano et generation feedstocks are still developing as an industry and are generally not A key consideration in the use of converted biomass is managing sustainable supply. Biofuels can be classified as first, A key consideration in the use of converted biomass is managing sustainable biofuels are those produced primarily second or third generation, depending on the biomass source. First generation regarding feedstock sustainability or from food crops (for example, grains and oil seeds), and these face challenges decarbonisation such as electrification or hydrogen. Recent analysis (CSIRO 2019, decarbonisation such as electrification or hydrogen. Recent analysis (CSIRO transport sectors such as aviation where for biomass in power generation or industry, but significant potential in non-road electrification or other fuel switching options may be limited. The use of biomass as a fuel or feedstock is currently very limited in Australia, accounting for less than 0.5% of the The use of biomass as a fuel or feedstock is currently very limited in Australia, are numerous technical applications total energy consumed in Australia in 2018–19 (DISER 2020c). Although there lacking alternatives for for biomass products throughout the economy, its main role is likely to be in applications this biogas able to be combusted for electricity and heat or upgraded into biomethane (DELWP 2017). The biomass upgraded into biomethane (DELWP 2017). combusted for electricity and heat or this biogas able to be Industry ETI analysis are as follows: conversion routes considered in the Australian convert biomass into higher grade fuels depending on the source, with different biomass types better suited to particular with different biomass types better higher grade fuels depending on the source, convert biomass into as ethanol and can produce liquid biofuels such agricultural crops such as corn and canola outputs. For example, digestion, with production of biogas through anaerobic such as manure are suitable for the biodiesel. Wet wastes 4.3.1 Context processes to electricity or heat. There are multiple animal material that can be used to produce Biomass is plant or Additional detail on hydrogen production assumptions and results is available in Appendix B. hydrogen production assumptions and Additional detail on 4.3 Biomass expansion of electrolyser capacity, as well as the additional benefits due to greater experience with variable renewable with variable due to greater experience additional benefits as well as the of electrolyser capacity, expansion upside will above, this potential analysis presented not reflected in the While for hydrogen development. energy needed Industry ETI. Phase 2 of the Australian throughout in the pathways modelled be included and potentially far sooner (ETC 2021). These more optimistic scenarios are based on economies of scale from global of scale from are based on economies optimistic scenarios 2021). These more far sooner (ETC and potentially AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 70 60 59 TABLE 23: other alternativefuels. biofuels, strengtheningthecasefordeployingtheselimitedresourcestosectorswithpotentialelectrification or around one-fifthoftotalcurrentenergyuseinAustralia.Thishighlightsthechallengeswithwidespreadfuelswitching to 2050 bydifferentconversionmethods.Evenatthehigherendofestimates,futureproductionpotentialonlyrepresents Based ontheaboveestimatesoffuturebiomasssupply, TABLE 22: growth) whichcomprisearoundaquarterofprojectedbiomassavailabilityin2050. feedstock requiringdistributedproduction.Anexceptiontothisisshortrotationtrees(requiringonlythreefouryearsof biomass sourcesduetofeedstockavailability,competitionfromotherandthegeographicalspreadof stubble, nativegrassesandplantationforests.Thereisexpectedtobelimitedpotentialforexpandedsupplyofmost excluding oil-basedfeedstocks.Currentavailabilityofsecondandthirdgenerationfeedstocksispredominantlyfrom (Crawford etal.2012).Table22providesestimatesofcurrentandfutureavailabilityforvariousbiomasssources, Total Waste Lignocellulosic Feedstock intensive animalagriculture Abattoir/animal wasteand Municipal solidwaste Short rotationtrees Bagasse Native forest Plantation forest Native grasses Stubble Feedstock

The quantitiesoffeedstockavailablehave notbeensplitbetweenprocesses.Forexample,ithasassumed that alllignocellulosic Estimates arebasedonmodellingand doincludeexpectedclimatechangeimpactssuchasareductioninrainfall indifferentregionsaround non-oil feedstockbiofuel processes. feedstock issenttobiomass-to-liquid, pyrolysisorbiogasprocesses.Hencetotalsaredisplayedasarange.Estimates areonlyavailablefor not availableforabattoir/animalwaste, sewagetreatmentplants(STP)andintensiveagriculturefeedstockquantities. Australia. Estimatesarenotavailable for oil-basedfeedstockse.g.tallow,canolaandfuturecropssuchasalgae and Pongamia.Projectionsare EstimatedcurrentandfutureproductionofbiofuelsinAustralia Current andprojectedavailabilityofbiomassresourcesinAustralia Gasification and Pyrolysis (BTL) Biomass toliquids process Production Digestion methanation 234 6,517 0 5,502 7,942 10,907 19,721 27,678 Current availability(kt) Biogas Biogas replacement Conventional fuel replacement Conventional fuel Fuel Table 23 No projectionavailable 9,044 14,661 5,502 7,942 14,198 19,721 27,678 Availability in2030(kt) presentsestimatedbiofuelsproductionin2030and 16 16 0 0 0 ( 2020 Estimate PJ ) 60 59 No projectionavailable 10,943 29,346 5,502 7,942 12,821 19,721 27,678 Availability in2050(kt) 674 –1,049 26 848 1,023 648 ( 2030 Estimate PJ ) 776 –1,206 32 987 1,174 744 ( 2050 Estimate PJ ) PHASE 1 TECHNICAL REPORT | JUNE 2021

71

1.45 6.4 2050 0.9–4.4 1.7–2.7 1.4–1.8 20–33 3.7–21 1.51 1.30 6.4 2030 0.9–4.4 2.0–2.7 1.9–2.0 25–33 3.7–21 1.35

61 62 1.20 6.5 2020 0.9–4.4 2.5–2.7 2.0–2.1 30–34 3.7–21 1.25 for the processes using lignocellulosic feedstocks feedstocks using lignocellulosic for the processes Table 24 Petrol ($/L) Natural gas ($/GJ) Fuel (unit) Biodiesel ($/L) Conventional fuel replacement ($/L) Conventional fuel replacement ($/L) Biogas ($/GJ) Biogas ($/GJ) Diesel ($/L) and storage solutions including pumped hydro, utility-scale batteries 64 requiring the flexibility to respond to supply-demand variability within minutes to hours (IEA requiring the flexibility to respond to supply-demand variability within minutes 63 Gasification and methanation Digestion Refining N/A Production process Fatty Acid Methyl Ester (FAME) Biomass to liquids (BTL) Pyrolysis Estimated current and future costs of fuel productionEstimated current and in Australia

presents estimated current and future costs of production for biofuels using various processes and feedstocks, and feedstocks, using various processes for biofuels future costs of production estimated current and presents consumption away from peak demand times in the broader energy system (ClimateWorks 2014) Average national terminal gate price 2019-20 financial year (AIP 2021) Average east coast wholesale price 2019-20 financial year (AER 2021b) For example, see Figure 15 of IEA 2019a to incentivise energy users to shift Demand side response activities refer to a range of market signals and commercial offerings which seek

Natural gas Oil Waste Lignocellulosic Feedstock Bio-oils ABLE 24:

63 64 61 62 while saving the electricity system and end users the excessive costs of maintaining these peaks (ClimateWorks while saving the electricity system and end users the excessive costs of maintaining provide some DSR function, Australia 2014). Currently, industrial companies such as aluminium smelters already failures caused by lengthy although in the case of aluminium smelters, the service is limited by risks of technical As a major consumer of energy, industry can play a key role in overall energy system reliability through engaging in As a major consumer of energy, industry can play a key role in overall energy reducing production at these times. DSR activities – directly targeting periods of peak energy demand and prices by generation for participating companies, This has the benefit of reducing costs and increasing productivity and revenue measures such as demand side response (DSR) reliability through energy storage systems and behind-the-meter storage. Given the prohibitive costs of providing system alone, DSR is a particularly attractive and feasible option. Based on current penetration of renewables in the electricity grid, Australia is on the cusp of moving into a new phase of Based on current penetration of renewables in the electricity grid, Australia is on energy system integration practices, requiring additional flexibility 2019a). These challenges are less easily managed with existing resources or shares of variable renewable generation. This is creating a need both for electricity storage and for electricity demand shares of variable renewable generation. This is creating a need both for electricity design paradigm of electricity supply to follow available generation. This represents a major shift from the historical following demand. considered the ‘business as usual’ case by 2050. This is a cost-driven transition, with the speed primarily determined by by 2050. This is a cost-driven transition, with the speed primarily determined considered the ‘business as usual’ case leaves the system (CSIRO 2019). Although wind and solar PV are the lowest the rate at which existing fossil generation becomes critical as supply-demand challenges increase at higher cost generation technologies, system integration 4.4 The critical role of regional energy and industry integration 4.4 The critical role of regional globally and in Australia, with renewable generation shares approaching 100% An electricity transformation is underway T The lowest cost lignocellulosic feedstock is native barks and woodchips. The biogas digestion and FAME ranges are and FAME ranges The biogas digestion barks and woodchips. feedstock is native cost lignocellulosic The lowest oil/tallow respectively. are municipal solid waste and waste costs, where the lowest cost feedstocks based on feedstock compared with oil- and gas-based fuels. This suggests that projected costs of biofuels are expected to remain higher expected to remain costs of biofuels are that projected fuels. This suggests with oil- and gas-based compared in term. The ranges shown fuels over the long than fossil costs. cost and feedstock on ranges in the capital are based and methanation) pyrolysis and gasification (that is, BTL, Table 24 AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 72 66 65 address costandreliabilityconcernssimultaneously,withouttheneedtorelyentirelyonexpensiveenergystorage. supply, itcomesatconsiderablecost.Effectiveintegrationthroughacombinationofmeasuresdiscussedabovecanhelp storage systemsforuseintimesofsurplusdemand.Whilethisisamatureandeffectivetechnologytofirmelectricity variable renewablegeneration.Asdiscussedabove,onewayofmanagingelectricitygenerationisbydeploying Managing electricitycostsandensuringreliablesupplyaretheprimarychallengesinshiftingtoveryhighsharesof generators forsupply.Aswetransitionfromcoaltorenewables,identifyingthenewlow-costsourcesisimperative. Highly electricity-intensiveindustry,suchasaluminiumsmelters,typicallycontractdirectlywithlowestcostelectricity sourced hydrogenmaynotbecompetitiveuntilthe2030s. However, achallengeforrealisingthepotentialofhydrogenproductionintegratedelectricitysystemisthatelectrolysis system, creatingavirtuousloopofsupportingevenhighersharesvariablerenewablegeneration(IRENA2019a). Producing andstoringlargequantitiesofhydrogencouldalsoprovideimportantlong-termseasonalflexibilitytothe This increasestheutilisationofrenewablegenerationassetsbymakingproductiveuseotherwisewastedelectricity. profiles, producinghydrogenattimesofexcesselectricitygenerationortaperingoffduringperiodshighdemand. as theyarewell-suitedtorampingupanddownveryquickly.Thisallowsthemadjustvariablesupply-demand industry builtonrenewable-poweredelectrolysers.Electrolyserscanprovideadditionalflexibilitytoenergysystems Another emergingopportunitytohelpmanagevariabilityofsupplyanddemandisestablishingalarge-scalehydrogen renewable generation)(IRENA2019b). (for example,time-of-usetariffs)andsystemoperationimprovementsadvancedforecastingofwasted smart homes,electricvehiclecharging),newbusinessmodels(forexample,energy-as-a-service),marketdesign A numberofinnovationshaveemergedtosupportDSRinthesesectorsthroughenablingtechnologies(forexample, Residential andcommercialsectorscanalsoassistinbalancingelectricitygridsathighsharesofvariablerenewables. demand includemining,comminution(crushingandgrindingores)earthmovingexcavation. (2014) indicatesindustrialprocesseswiththelargestpotentialtoloadshed DSR programsandinadequatecommercialincentivestoencourageparticipation.AnalysisbyClimateWorksAustralia production downtime.

Defined astheabilitytoshiftorshed load foraperiodof2-4hours,fivetotentimesyearduringnetworkor electricity systempeakifa A disruptioninsupplyofmorethan3hours cancausepotlinestosolidify,whichcatastrophicfailurefor smeltersandincur commercial returnis offered considerable re-startcosts 65 Other barriers to uptake of DSR include concerns over loss of throughput, the cost of implementing Other barrierstouptakeofDSRincludeconcernsoverlossthroughput,thecostimplementing 66 as a percentage of their peak electricity asapercentageoftheirpeakelectricity

PHASE 1 TECHNICAL REPORT | JUNE 2021 73 67 . The analysis finds that with low demand . The analysis finds Table 25 Levelised cost of electricity for firmed and variable renewable generation, 2050 Levelised cost of electricity for firmed below shows the considerable additional costs required to supply 100% available (firmed) renewables in available (firmed) to supply 100% additional costs required the considerable below shows CSIRO analysis using AEMO Integrated System Plan (2020a) input and assumptions workbook – ‘medium’ values CSIRO analysis using AEMO Integrated System Plan (2020a) input and assumptions workbook – ‘medium’

67 FIGURE 19: hour, with a 100% renewable system at the higher end of this range due to additional storage. Greater demand flexibility, range due to additional storage. Greater system at the higher end of this hour, with a 100% renewable storage needs production, significantly reduces large-scale integration or large-scale hydrogen through vehicle-to-grid and drives LCOE as low as $20/MWh. costs. Summary results for these scenarios in 2050 are presented in for these scenarios in 2050 are presented costs. Summary results considerably renewables, while increased demand flexibility rise proportionate to the share of flexibility, storage needs $50-$90 per megawatt demand flexibility produce costs of Modelled electricity systems with low reduces storage needs. Preliminary CSIRO analysis has explored four different grid-only electricity system structures with varying degrees of electricity system structures with analysis has explored four different grid-only Preliminary CSIRO and system implications for storage requirements and demand flexibility, to better understand renewable generation – resulting in LCOEs as low as $20 per megawatt hour. Importantly, for most current industrial production methods, production methods, for most current industrial hour. Importantly, $20 per megawatt in LCOEs as low as – resulting demonstrate the intermittent. However, these results these capacity factors would be unacceptably electricity supply at wholly replaced by for energy storage could be partially or that could be unlocked if the need significant cost benefits other balancing measures. 2050, with LCOEs inclusive of storage in the range of $53-$84 per megawatt hour. Transmission costs associated with costs associated hour. Transmission of $53-$84 per megawatt storage in the range LCOEs inclusive of 2050, with renewables are connected comparison, variable megawatt hour. By another $5-7 per renewables will add integrating storage – that is, with zero 30–50%) capacity factor (approximately power at their points and supply only to demand Figure 19 AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 74 70 69 68 (ACIL AllenConsulting2018). regions wouldbewell-suitedtodevelopahydrogenexportindustry,whichcouldmajoropportunityforAustralia infrastructure anddistributionnetworks.Importantly,giventheiraccesstodeepwaterports,manyexistingindustrial egg’ problemfacinghydrogenbyprovidingtheearlydemandandcertaintyrequiredtoestablishproductionfacilities, DSR activitiesandactingasnearbydemandcentresforhydrogen.Thelatterwouldpartlyaddressthe‘chicken-and- enhance Australia’sa criticalroleinthisintegrationbothbyengaging industrialcompetitiveness.Industrycanplay in lowercostfirmedelectricityforallotherconsumers(witharounda$20-$30/MWhpremium),whichcould most otherindustrieswillrequirefirmedenergy.However,thepresenceofalargescaleflexiblehydrogenindustryresults variable renewableenergyintothegrid.Whilehydrogensectorcandirectlyuselowcost(Table26) regions arelocatedinproximitytoRenewableEnergyZones(REZs) Locating demandcentresnearenergysupplyalsoreducesinfrastructurecosts.ManyofAustralia’sexistingindustrial or feedstock)andreadilytransportedontrucksothervessels(GHDAdvisoryACILAllenConsulting2020). stored forlongperiodsoftime,usedinavarietydifferentmarketsandapplications(forexample,asanenergysource Hydrogen isparticularlywell-suitedtoplayingnumerousrolesinenergyintegrationanddecarbonisationasitcanbe and, inturn,prospectsfordeepdecarbonisation–drivenbyeffectiveintegrationofenergyandindustrialsystems. analysis suggeststhepotentialforapositivefeedbackloopbetweenlow-costrenewableelectricity,hydrogenproduction more challenging(seetechnologydetailinSection (see Section major decarbonisationopportunityinitsownright(seeSection These findingsaresignificantinthecontextofanetzerotransitionforindustry.Zeroemissionselectricityisnotonly a TABLE 25 demand case Strategy highhydrogen (4) NationalHydrogen balancing supporting grid electric vehicles (3) Scenario1with system leading policy withelectricity (2) Netzeroemissions outcome (1) LikelyBAU scenarios Electricity system

Renewable EnergyZonesaregeographic areaswithhigh-qualityvariablerenewableenergyresources,suitabletopography anddemonstrated COAG EnergyCouncilHydrogenWorking Group2019 GenCost dataCSIRO(2020,unpublished) –preliminaryelectricitysystemmodelling cost-effective, grid-connected renewableenergy. interest fromprojectdevelopers.These areascanbeusedtoidentifywherenewtransmissionlinesareneeded enablethedevelopmentof : PreliminaryCSIROanalysisondifferentelectricitysystemstructures 4.2 69 ) –itselfaprimarysolutioninsupplychainssuchasIronandsteelChemicalswhereelectrificationis 100% 90% 100% 90% (2050) Renewables share demand Flexibility of High Medium-high Low Low 3.1.3 and 3.4.3 2.4 ), butalsoaprerequisiteforproducinggreenhydrogen , andanalysisin 70 and stand to gain from effective integration of andstandtogainfromeffectiveintegrationof any sourcerequired Proportionally lowerstorageof storage required Minimal additionalstationary and demand required tobalancesupply Proportionally largerstorage and demand storage tobalancesupply Proportionally moderate Storage requirements 68 Box 1 andBox2).TheaboveCSIRO

other consumers $40-$60/MWh for hydrogen industry $20-$30/MWh for $30-$60/MWh $50-$90/MWh Mid tohigherendof $90/MWh Lower endof$50- (2050) Cost outcome PHASE 1 TECHNICAL REPORT | JUNE 2021 75 h) MW 2050 ($/ $21 / $35 $23 / $37 $22 / $40 $31 / $40 $28 / $42 $26 / $42 $22 / $39 h) MW cost / combined wind and solar cost cost / combined wind Variable renewable energy cost*: lowest Variable renewable 2020 ($/ $47 / $55 $51 / $56 $50 / $59 $59 / $65 $63 / $64 $57 / $63 $49 / $58 New England Fitzroy/Wide Bay Nearest Renewable Energy Zone Nearest Renewable WA North WA South Northern SA South West Victoria Tumut Gladstone Portland Port Kembla Hunter Valley Pilbara Kwinana Whyalla Industrial region : Estimated variable renewable energy costs for Renewable Energy Zones in proximity to industrial regions, industrial regions, in proximity to Energy Zones energy costs for Renewable variable renewable : Estimated QLD NSW NSW VIC WA SA WA State average cost of wind and solar PV at combined capacity factors in each region, assuming a simplified 50:50 split. In practice, the cost-optimised share factors in each region, assuming a simplified 50:50 split. In practice, the cost-optimised share average cost of wind and solar PV at combined capacity by the relative quality of each resource in different regions. of wind and solar generation would be determined *Based on GenCost data and the solar PV and wind capacity factor published by AEMO for the nearest Renewable Energy Zone. ‘Lowest cost’ *Based on GenCost data and the solar PV and wind Victoria 2020 (where wind is currently lower cost). ‘Combined wind and solar cost’ represents the represents solar PV in all regions except South West TABLE 26 2050 2020 and AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 76 FIGURE 20: zero emissionshydrogenarealreadybeloweachofthesethresholds. cost-effective thandieselwithtrolleyarrangements.AsshownintheHydrogenSection4.2,potentialcostsofproducing haulage whencomparedtoconventionalfuelssuchasdiesel,gasandbiodiesel.Below$6/kg,hydrogenisalsomore As shownin on decarbonisationprospectsofend-usesectorssuchasmininghaulage,steelmakingandammoniaproduction. Preliminary analysisoftheAustralianIndustryETIhasassessedimpactlow-costrenewableelectricityandhydrogen supply chains Impact oflow-costrenewableelectricityandhydrogenonselectAustralianIndustryETI BOX 02: Figure 20 Preliminary analysisoncosttippingpointsfortheuseofhydrogeninminesitehaulage

, atcostsbelow$8/kg,hydrogenrepresentsacost-effectiveoptionfordecarbonisingmining

PHASE 1 TECHNICAL REPORT | JUNE 2021 77

Preliminary analysis on abatement options in ammonia production Preliminary analysis on abatement options in steelmakingPreliminary analysis shows that with a $35/MWh electricity price in 2050, hydrogen direct reduced iron electric arc furnace direct reduced iron electric arc furnace electricity price in 2050, hydrogen shows that with a $35/MWh FIGURE 22: Similar analysis found that a green hydrogen route would become the lowest cost source of production of ammonia Similar analysis found that a green hydrogen a cost below $35/MWh (Figure 22). by 2050, if electricity can be delivered with FIGURE 21: (H2-DRI-EAF) would serve as the cheapest decarbonised steelmaking route, while CCS and a biomethane based route, while CCS and a biomethane serve as the cheapest decarbonised steelmaking (H2-DRI-EAF) would as transitional route could technically serve iron-electric arc furnace (BioNG-DRI-EAF) natural gas direct reduced the Section 3.1 – Iron and steel). face other challenges as covered in options (although these Figure 21 AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 78 erc0290_erc0295_erc0296_erc0300_erc0306_erc0307.pdf gov.au/sites/default/files/documents/rule_change_submission_-_australian_aluminum_council_-_20200812_-_erc0263_ Australian AluminiumCouncil 2020a, https://aluminium.org.au/sustainability/ Australian AluminiumCouncil2021, uploads/2017/12/Aluminium_Finkel-Review-Feb17.pdf Future SecurityoftheNationalElectricityMarket Australian AluminiumCouncil2017, council/sub029.pdf 1 February2021, Australian AluminiumCouncil2005, 13 February2021, Australian AllianceforEnergyProductivity2016b, 13 February2021, Australian AllianceforEnergyProductivity2016a, Parameters-Review-2020.pdf files/electricity/nem/planning_and_forecasting/inputs-assumptions-methodologies/2021/Aurecon-Cost-and-Technical- Aurecon 2020, parameters-review-draft-report.pdf?la=en electricity/nem/planning_and_forecasting/inputs-assumptions-methodologies/2019/aurecon-2019-cost-and-technical- Aurecon 2019, projects/microwave-plasma-ammonia-synthesis Arpa-e 2016, projects/ammonia-synthesis-membrane-reactor Arpa-e 2018, viewed 1February2021, American CouncilforanEnergy-EfficientEconomy(ACEEE)2018, 2021, Alfano, S,Berruti,F,Denis,N&Santagostsino,A2016, AERA 2019, https://aemo.com.au/-/media/files/electricity/nem/emergency_management/rert/2020/rert-quarterly-report-q1-2020.pdf AEMO 2020b, workbook-dec20.xlsx?la=en electricity/nem/planning_and_forecasting/inputs-assumptions-methodologies/2020/2020-inputs-and-assumptions- AEMO 2020a,2020 https://acilallen.com.au/uploads/projects/149/ACILAllen_OpportunitiesHydrogenExports_2018pdf-1534907204.pdf ACIL AllenConsulting2018, https://library.e.abb.com/public/9e770a172afc8d7ec125779e004b9974/Paper%20LNG_Rev%20A_lowres.pdf ABB 2016,AllelectricLNGplants: References https://www.mckinsey.com/business-functions/sustainability/our-insights/the-future-of-second-generation-biomass Australian EnergyResourcesAssessment Microwave-Plasma AmmoniaSynthesis Ammonia SynthesisMembraneReactor Reliability andEmergencyReserveTrader(RERT)QuarterlyReportQ12020 2020 CostsandTechnicalParameterReview 2019 CostsandTechnicalParameterReview https://www.pc.gov.au/inquiries/completed/energy-efficiency/submissions/australian_aluminium_ https://www.a2ep.org.au/manufacturing https://www.a2ep.org.au/mining Inputs andassumptionsworkbookDec20 https://www.aceee.org/sites/default/files/publications/researchreports/i1801.pdf Opportunities forAustraliafromHydrogenExports Better, safer,morereliable–andprofitable Sustainability DataTables2000to2019 Submission onthePreliminaryReportofIndependentReview intothe Submission totheProductivityCommissionInquiryintoEnergy Efficiency System ServicesRuleChanges

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PHASE 1 TECHNICAL REPORT | JUNE 2021 89 34.4 29.6 21.1 23.0 21.8 25.8 23.7 21.9 25.3 25.6 28.4 26.6 26.8 22.4 27.2 31.4 30.6 25.0 26.0 21.4 22.6 23.3 22.3 19.9 19.9 25.8 22.9 28.3 22.3 20.0 21.1 20.8 20.6 21.2 22.6 21.6 21.4 2050

40.5 37.0 24.9 27.1 25.6 30.4 27.9 25.7 29.7 30.1 33.4 31.2 31.7 26.4 32.1 37.2 36.2 29.5 30.7 25.3 26.7 27.5 26.2 23.4 23.5 30.4 27.0 33.4 26.3 23.6 24.9 24.6 24.2 25.0 26.6 25.4 25.2 2040 47.8 39.6 29.3 32.0 30.1 35.7 32.8 30.3 34.9 35.4 39.2 36.8 37.5 31.2 38.0 43.9 42.8 34.9 36.2 29.9 31.5 32.5 30.9 27.6 27.7 35.9 31.8 39.4 31.0 27.8 29.3 29.0 28.5 29.5 31.4 30.0 29.8 2030 52.0* 42.4* 47.1 51.4 48.2 57.0 52.5 48.2 55.5 56.5 62.6 58.7 60.4 50.4 59.1* 59.0* 65.6* 56.3 58.4 48.1 50.8 52.3 49.7 44.3 44.4 57.6 51.0 50.9* 42.7* 44.7 47.1 46.5 45.5 47.4 50.5 48.2 48.1 Variable renewables LCOE Variable renewables (lowest cost*) 2020 73.3 61.5 65.0 63.2 77.0 73.4 68.8 72.6 80.3 83.9 74.3 73.8 76.3 70.3 69.6 74.9 78.3 74.4 69.8 72.4 62.1 65.7 69.2 59.9 68.3 71.6 70.8 65.4 52.5 59.9 65.0 63.0 67.5 63.2 72.8 64.0 71.3 2050 72.2 60.6 63.9 62.1 75.7 72.2 67.7 71.4 78.9 82.5 73.1 72.6 75.0 69.1 68.4 73.7 77.0 73.1 68.6 71.2 61.1 64.6 68.1 58.9 67.1 70.4 69.6 64.3 51.7 58.9 63.9 61.9 66.3 62.1 71.6 62.9 70.1 2040 81.3 68.3 71.2 69.4 84.1 80.6 75.5 79.3 87.8 91.8 81.7 81.1 84.0 77.1 76.7 82.8 86.4 81.7 76.9 79.3 68.4 72.2 75.9 65.6 74.7 78.8 77.6 72.3 58.0 65.7 71.2 69.1 73.8 69.3 79.8 70.3 78.1 2030 109.7 95.1 106.8 115.4 112.2 108.8 123.8 104.5 103.1 101.9 120.2 118.3 123.3 111.8 114.2 124.6 128.8 119.3 113.6 114.1 100.6 106.0 100.1 105.7 100.7 115.0 102.1 112.5 119.8 117.3 109.8 113.2 126.0 131.7 86.7 95.3 103.1 Firmed renewables LCOE (combined Firmed renewables storage) wind and solar PV, with 2020 Levelised cost of renewable electricity ($/MWh) Levelised cost of renewable

WA south Eastern Eyre Peninsula Western Eyre Peninsula North East Tasmania North West Tasmania Central Highlands WA north Riverland Mid-North SA Yorke Peninsula Northern SA Leigh Creek Roxby Downs Murray River Western Victoria South West Victoria Gippsland Central North Vic South East SA Broken Hill South West NSW Wagga Wagga Tumut Cooma-Monaro Ovens Murray Wide Bay Darling Downs Banana North West NSW New England Central-West Orana Far North QLD North Qld Clean Energy Hub Northern Qld Isaac Barcaldine Fitzroy Region

*Represents Renewable Energy Zones where wind is the lowest cost source of variable renewable energy in that year. *Represents Renewable Energy Zones where wind is the lowest cost source of For all other years, solar PV is lowest cost. WA TAS SA VIC NSW QLD State APPENDIX A1:

Appendix A: Electricity system cost assumptions and results system cost assumptions Appendix A: Electricity Appendix AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 90 APPENDIX B1: Appendix B:Hydrogenproductioncostassumptionsandresults CCS SMR with with CCS gasification Brown coal electrolysis Alkaline electrolysis PEM Technology

Technology assumptions (Alternative) Capital cost (Base) Performance (Base) Capital cost Metric Performance Capital cost Performance Capital cost (Alternative) Performance (Alternative) Capital cost (Base) Performance (Base) Capital cost (Alternative) Performance % capacity $/GJ % capacity $/GJ kWh/kgH $/kw kWh/kgH $/kw kWh/kgH $/kw kWh/kgH $/kw Unit 2 2 2 2 71 49 61.5 93.8 46.5 2516 46 1264 50.74 3510 52.6 1944 2020 1374 45.5 859 48 1305 49.7 1358 2025 71 44.3 65.4 87.5 46 1208 45 584 45.3 758 47 949 2030 71 35.6 69.5 58.4 45.5 982 43 413 43.4 485 45 526 2035 71 35.6 69.5 57.8 43.4 760 43 292 41.5 347 43 292 2040 71 35.6 69.5 57.2 41.4 632 43 245 41.5 282 43 245 2045 71 35.6 69.5 56.6 41.4 555 43 206 41.5 245 43 206 2050 71 35.6 69.5 56 41.4 assumptions Performance et al.2021). scenario (Graham ‘High VRE’ the latestGenCost costs sourcedfrom scenario: Capital Alternative on IEA(2019). Projections based Aurecon (2019). (2019) and based onIEA assumptions performance Initial costand Base scenario: references Notes/ analysis based onCSIRO (2017). Projections based onCollodi assumptions performance Initial costand on CSIROanalysis Projections based Langer (2007). based onMueller- assumptions performance Initial costand (2020). based onAurecon PHASE 1 TECHNICAL REPORT | JUNE 2021 91 calculations are 2 electricity supplied at the capacity factor of variable energy only. GHD (2018) Cost of production of gas from a stranded gas asset or from a gas producer looking to convert excess gas into hydrogen be possible not may it As to use a stranded gas asset, sensitivities were included with gas price of $6 and $9 LCOH based on the REZs with the lowest LCOE in 2050 for firmed and variable electricity. For firmed renewables, this is the Far North Queensland REZ ($52.5/MWh in 2050). For variable renewables, it is the Leigh Creek REZ in South Australia ($19.87/ MWh in 2050). Firmed renewables include additional costs of storage to provide constant supply of electricity (2 hours storage until 2043 and 6 hours thereafter). Variable renewables do not include any additional costs of storage, with Notes/references 0.6 3.3 6 9 52.5 30 19.8 2050 0.6 3.3 6 9 51.0 30 21.4 2045 0.6 3.3 6 9 51.7 30 23.4 2040 0.6 3.3 6 9 53.7 30 25.2 2035 0.6 3.3 6 9 58.0 30 27.6 2030 3.3 6 9 33.9 0.6 74.2 30 2025 3.3 6 9 44.3 0.6 86.7 30 2020 $/GJ $/GJ $/GJ $/MWh $/GJ $/MWh $/MWh Unit

Energy cost assumptions Energy cost

Cost of gas used (mid) Cost of gas used (upper) Cost of coal used Cost of gas used (lower) Variable renewables LCOE (solar PV) Renewables PPA (combined wind and solar PV, with storage) Firmed renewables LCOE Metric Gas Coal (wind and solar) Renewable electricity source Energy APPENDIX B2: APPENDIX AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 92 APPENDIX B3: Assumption PEM stacklife2050 PEM stacklife2020 AE stacklife2050 AE stacklife2020 PEM totalstackdegradation PEM stackreplacementcost PEM opex AE totalstackdegradation Stack degradationfactor AE opex2050 AE opex2020 AE stackreplacementcost2050 AE stackreplacementcost2020 Oxygen by-productsaleprice Construction time(SMR) Construction time(coalgasification) Construction time(electrolysis) Water consumption(SMRandcoal) Water consumption(electrolysis) Water cost Discount rate Economic life

Additional assumptions Unit hours hours hours hours %/Stack life % oforiginalcost % capex %/Stack life %/year $/kW/year $/kW.year $/kW $/kW $/kg years years years L/kg H L/kg H $/kL % years 2 2 Value 2.97 83.6 1.4 45 50 52 316 0.04 3 5 1 4.5 9 1.82 5.9 25 216,522 80,000 191,681 100,000 86.7 25 Notes/references Bruce etal.(2018) Bruce etal.(2018) Bruce etal.(2018) Aurecon (2019) Aurecon (2019) Bruce etal.(2018) Bruce etal.(2018) Half ofvaluefromKornbluh(2019) Collodi (2017)andBruceetal.(2018) Mueller-Langer (2007)andBruceetal.(2018) Aurecon (2021) Deloitte (2019) Bruce etal.(2018) Bruce etal.(2018) Graham etal.(2021) Aurecon (2021)andassumedthesameforalltechnologies IEA (2019) IEA (2019) IEA (2019) IEA (2019) Bruce etal.(2018) Bruce etal.(2018) PHASE 1 TECHNICAL REPORT | JUNE 2021 93 2.02 3.05 1.97 1.24 2.62 1.84 1.71 2.19 2.73 1.42 2.75 1.45 2.71 1.62 1.10 2.43 1.56 2.94 2050 2.20 2.97 1.99 1.38 2.54 1.84 1.72 2.21 2.75 1.58 2.70 1.60 2.63 1.65 1.26 2.38 1.70 2.86 2045 2.48 3.07 2.05 1.55 2.58 1.85 1.77 2.25 2.79 1.77 2.73 1.82 2.69 1.67 1.45 2.41 1.87 2.90 2040 3.04 3.41 2.27 1.83 2.72 1.88 1.76 2.24 2.78 2.44 3.08 2.27 2.95 1.82 2.12 2.76 2.15 3.04 2035 3.68 3.90 2.51 2.33 3.16 1.91 1.76 2.25 2.78 3.62 3.82 3.09 3.51 2.15 3.30 3.50 2.65 3.48 2030 4.32 4.82 2.64 3.13 4.15 2.52 1.99 2.48 3.02 5.15 5.28 4.85 5.04 2.79 4.83 4.96 3.45 4.47 2025 6.79 6.29 3.45 4.37 5.07 2.78 2.15 2.63 3.17 7.54 6.89 11.04 8.25 5.20 7.22 6.57 4.69 5.39 2020 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 $/kg H2 Unit ) results 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH LCOH Metric

Upper gas price ($9/GJ) Base – variable renewables with sale of oxygen Base – firmed renewables with sale of oxygen Base Lower gas price ($3.3/GJ) Mid gas price ($6/GJ) Base – firmed renewables with sale of oxygen Base – variable renewables Base – firmed renewables Alternative – variable renewables Alternative – firmed renewables Alternative – Renewables PPA Base – variable renewables Base – firmed renewables Alternative – variable renewables Alternative – firmed renewables Alternative – Renewables PPA Base – variable renewables with sale of oxygen Scenario Levelised cost of hydrogen (LCOH Levelised

Technology SMR with CCS CCS Brown coal gasification with electrolysis Alkaline PEM electrolysis APPENDIX B4: APPENDIX AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 94 Glossary DISER DACS DAC CST CSIRO CO CO CNG CHP CCU CCS CCUS CCGT CAPEX BTX BTL BOF BioNG-DRI-EAF BF BEV BECCS B20 AEMO AE ACT ACD 2 Department ofIndustry,Science, EnergyandResources direct aircaptureandstorage direct aircapture concentrated solarthermal Commonwealth ScientificandIndustrialResearchOrganisation carbon dioxide carbon monoxide compressed naturalgas combined heatandpower carbon captureandutilisation carbon captureandstorage carbon capture,utilisationandstorage combined-cycle gasturbine capital expenditure benzene, tolueneandmixedxylenes biomass-to-liquid basic oxygenfurnace biomethane basednaturalgasdirectreducedironelectricarcfurnace blast furnace battery-electric vehicle bioenergy withcarboncaptureandstorage 20% blendofbiodieselwithdiesel Australian EnergyMarketOperator alkaline electrolysis Australian CapitalTerritory anode cathodedistance PHASE 1 TECHNICAL REPORT | JUNE 2021 95 negative emissions technology liquefied petroleum gas lithium molten oxide electrolysis mechanical vapour recompression nitrous oxide National Electricity Market International Energy Agency integrated gasification combined cycle Intergovernmental Panel on Climate Change levelised cost of electricity levelised cost of hydrogen leak detection and repair liquefied natural gas fuel-cell electric vehicle gross domestic product greenhouse gas hydrogen furnace hydrogen direct reduced iron electric arc Hydrogen Energy Supply Chain Energy Transition Initiative emissions Trading Scheme European Union electric vehicle fatty acid methyl esters fuel cell direct reduced iron direct reduced response demand side furnace electric arc enhanced oil recovery 2 -DRI-EAF O 2 2 2 NEM NET N MOE MVR LPG Li LNG LCOH LDAR LCOE IGCC IPCC HESC IEA H GHG H GDP FC FCEV FAME EU EV ETI ETS EOR DSR EAF DRI AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 96 ZEV WA VRE VIC USD US UAN TRL TGR-BF TAS T&D SMR SA RMI REZ R&DD R&D PV PPA PHEV PFCs PEM Other metals OPEX NT NSW NO NH NG-DRI-EAF x 3 New SouthWales nitrogen oxides ammonia natural gasdirectreducedironelectricarcfurnace zero-emissions vehicle Western Australia variable renewables Victoria United Statesdollar United States urea ammoniumnitrate technology readinesslevel top gasreinjectionforblastfurnace Tasmania transmission anddistribution steam methanereforming South Australia Rocky MountainInstitute renewable energyzone research, developmentanddemonstration research anddevelopment photovoltaic power purchaseagreement plug-in hybridelectricvehicle perfluorocarbons proton exchangemembrane copper, lithium,nickelandzinc operating expenditure Northern Territory PHASE 1 TECHNICAL REPORT | JUNE 2021 97 76 7 16 33 41 42 44 77 56 17 27 51 57 64 65 68 73 77 17 20 34 56

mine site haulage they are used in in 2019–20 and zinc Other metals – copper, lithium, nickel aluminium in 2019–20 domestic emissions and workstreams Preliminary analysis on abatement options in ammonia production Emissions sources in the LNG supply chain Australian production of key metals and the low carbon technologies Australian production of key metals Preliminary analysis on cost tipping points for the use of hydrogen in Preliminary analysis on cost tipping points for the use of hydrogen Calculated levelised cost of electricity by technology and category for 2030 Calculated levelised cost of electricity by technology and category Projected costs of hydrogen production routes, 2020–2050 2050 Levelised cost of electricity for firmed and variable renewable generation, Preliminary analysis on abatement options in steelmaking Estimated capacity factors for solar and wind generation, by Australian region Estimated capacity factors for solar and wind generation, by Australian Variation in emissions intensity of different LNG supply chain steps Energy intensity for mining, beneficiation and processing in select Energy intensity for mining, beneficiation supply chain Emissions sources in the Chemicals Emissions sources in the Iron and steel supply chain Emissions sources in the Iron and Contribution of the Australian Industry ETI supply chain to Australia’s the Australian Industry ETI supply Contribution of zero transition Decarbonisation pillars for a net bauxite, alumina, and Export quantity and value of Australian Estimates of future gas demand under global decarbonisation scenarios Quantity and per-unit value of exported copper, nickel, lead and zinc Quantity and per-unit value of exported Emissions sources in the Aluminium supply chain Emissions sources in the Aluminium Current electricity use in the Australian Industry ETI supply chains Current electricity use in the Australian Emissions by source in the Australian Industry ETI supply chains in the Australian Industry ETI Emissions by source Timeline of Australian Industry ETI activities across different phases Industry ETI activities across Timeline of Australian

FIGURE 21: FIGURE 22: FIGURE 20: FIGURE 18: FIGURE 19: FIGURE 17: FIGURE 15: FIGURE 16: FIGURE 13: FIGURE 14: FIGURE 12: FIGURE 11: FIGURE 10: FIGURE 08: FIGURE 9: FIGURE 07: FIGURE 06: FIGURE 04: FIGURE 05: FIGURE 03: FIGURE 02: FIGURE 01: List of figures List AUSTRALIAN INDUSTRY ENERGY TRANSITIONS INITIATIVE 98 and Climate-KIC Australia Climate-KIC and An initiativejointlyconvenedbyClimateWorks Australia [email protected] Program Manager Tom Wainwright [email protected] Program Director Rob Kelly FURTHER INFORMATION