Australia needs $120b yearly to pivot to green iron, IEEFA says
About half of the investment would fund renewable energy needed to power production.
Australia would need about $119.7b (AU$170b) in annual investment through 2040 to replace its metallurgical coal exports with green iron, the Institute for Energy Economics and Financial Analysis (IEEFA) said, underscoring the scale of infrastructure and policy support required for the transition.
In a briefing note, the think tank said the investment would require coordinated infrastructure development and stronger policy support to provide investment certainty.
IEEFA estimates that producing one million tonnes of green iron capacity in Australia would require $4.9b (AU$7b) to $7.0b (AU$10b) in capital investment across ironmaking facilities, electrolysers, solar and wind generation, battery storage, and supporting infrastructure.
“In addition, rail and port facilities are required for both bulk supply of iron ore and export of green iron,” the report said.
The report said around half of the required investment would fund renewable energy to power green iron production. It said renewable investment would need to increase significantly to support the country's green iron export ambitions.
IEEFA said that renewable investment across Australia reached an annualised $6.7b (AU$9.5b) in the June quarter of 2024.
The agency cited South Australia as an example of the scale required, noting that the state already generates more than 70% of its electricity from solar and wind, and has established iron ore resources and steelmaking facilities.
It said adding a green iron plant at Whyalla would still require 2.5 times the state's installed utility-scale solar and battery capacity, together with an additional 1.1 gigawatts of wind generation, equivalent to a 40% increase.
The report also identified infrastructure coordination as a challenge.
It compared the proposed green iron industry with Australia's mining boom, noting that vertically integrated iron ore supply chains enabled production to expand faster than metallurgical coal, where mines, railways, and ports were owned by different parties.
“Given the large amount of additional renewable energy and industrial infrastructure needed for green iron exports, governments could similarly provide coordination role to help increase the pace of investment,” IEEFA said.
It added that investment would also require a stronger and more sustained price signal.
It estimated that achieving price parity would require firmed renewable electricity at $30 to $40 per megawatt-hour, which might be achieved in certain countries by 2035 through continued economies of scale and technology improvements.
Whilst demand for near-zero emissions iron and steel is emerging, existing carbon pricing mechanisms in major trading partners remain too low to drive large-scale investment.
The report said Australia could adapt policy mechanisms that helped expand renewable energy, including renewable portfolio standards, contracts for difference and feed-in tariffs, to establish a price premium for green iron exports.
It added that any policy would require sufficient scale and funding certainty to attract investment, warning that Australia is unlikely to secure the capital needed to develop a green iron export industry without stronger support.
(US$1 = AU$1.42)
