Unlocking green iron, without locking in gas
Renewables could take lead position via direct reduced iron at existing plants
Key Takeaways:
Direct reduced iron (DRI) projects announced and under construction have increased by more than 50% since 2020, but they are facing increasing natural gas costs, particularly in LNG-importing regions including the EU, China and India.
Coke oven gas (COG) was deployed to produce DRI in India from the 1990s until 2014 to avoid costs for natural gas and metallurgical coal. Since 2023, the approach has been revived by two of the largest steelmakers in China.
Replacing onsite electricity generation with renewables and electrifying reheat furnaces will likely reduce costs at blast furnace sites in these regions, allowing the COG that was used for these purposes to be redirected to DRI.
Widespread uptake of the COG DRI approach could see metallurgical coal use reduced by 10%-15% (even with high gas prices) across EU, China and India, highlighting further downside risk for exporters like Australia.
28 October 2026 (IEEFA): Research published today shows how steelmakers can unlock low-emissions iron production by using renewable electricity at existing production sites, while avoiding the use of natural gas and the risk of a prolonged dependence on fossil fuels.
A new briefing note from the Institute for Energy Economics and Financial Analysis (IEEFA) explores the potential of coke oven gas (COG) as a fuel source for the production of direct reduced iron (DRI) – widely recognised as a key pathway for decarbonising iron and steelmaking. Entitled Leapfrogging gas: How renewables can unlock new DRI on brownfield sites, the briefing note shows how diverting COG towards DRI production could reduce costs and emissions, while preparing steelmakers for a future switch to green hydrogen.
“Steelmakers do not need to build a new dependence on natural gas to start moving beyond blast furnace ironmaking,” says Lachlan Wright, Energy Finance Analyst, Global Steel at IEEFA and the note’s author. “Renewables and targeted electrification could unlock an alternative at existing sites, reducing exposure to volatile gas markets, while laying the groundwork for near-zero-emissions iron production.”
DRI uptake is gaining momentum worldwide, with a large rise in project announcements and construction activity since 2020. However, the projects in development have often been designed to initially run on natural gas, potentially locking them into long-term use of the fossil fuel. Moreover, many of these projects have struggled as natural gas prices have increased – particularly in Europe.
IEEFA’s research highlights an alternative that is already operating commercially in India and China: using gases from neighbouring coke-making or smelting operations to supply DRI plants. A by-product of the production of coke from metallurgical (met) coal, COG is rich in hydrogen and methane. It is typically burned at steelmaking facilities to generate electricity or provide heat. Replacing these uses with renewable electricity could make the COG available for DRI instead.
“Burning coke oven gas to generate electricity is an inefficient use of a relatively expensive fuel,” says Wright. “Renewable generation sources can provide a cheaper alternative, while electrifying selected heating processes can deliver additional benefits through improved output and lower energy requirements.”
The briefing note cites the example of Thyssenkrupp’s Duisburg site in Germany, where a planned facility is expected to produce 2.5 million tonnes of DRI per year – initially using natural gas. IEEFA calculates that shifting onsite electricity generation to renewables and electrifying reheat furnaces could release more than enough COG to supply the plant. By avoiding natural gas use, the facility’s direct emissions could also be reduced by 10%.
The COG DRI approach does face several constraints – notably in obtaining sufficient renewable energy. The Duisburg plant would require about 2.8 gigawatts of solar capacity to free up the amount of COG required. Long-term power purchase agreements could help steelmakers bring forward the necessary investment. Another issue is the uneven treatment of imports compared with domestic production under EU carbon pricing legislation.
The wider application of COG DRI remains uncertain, with only two new plants deployed in China in recent years. Moreover, COG Is still a derivative of coal, meaning it is not a long-term solution to decarbonising iron and steel. However, widespread adoption could lower demand for met coal in the EU, China and India by 10%-15% – with implications for met coal exporters such as Australia.
“COG DRI is a strategy for transition, not an argument for prolonging long-term use of coal,” Wright says. “The opportunity is to use renewables to reduce costs and emissions now, avoid perpetuating demand for gas, and lay the foundations needed for a future transition to DRI produced using green hydrogen.”
Read the report: Leapfrogging gas: How renewables can unlock new DRI on brownfield sites
Media contact: Eloise Lane, ph +61 437 809 833, [email protected]
Author contacts: Lachlan Wright, [email protected]
