Steel Industry could pivot to Hydrogen with $278B Green H2 Push

Dec. 7, 2021
Hydrogen and recycling will play a key role in reducing steel-industry emissions

A BloombergNEF report states that an investment of $278 billion by 2050 could ensure that steel production does not produce carbon emissions. Hydrogen and recycling are expected to play a key role in reducing emissions from steel production, which is responsible for around 7% of man-made GHG emissions annually.

The ‘Decarbonizing Steel: A Net-Zero Pathway’ outlines the path to manufacturing low-emissions and profitable steel. This will require a combination of cheap clean power, declining hydrogen costs and increased recycling. Green hydrogen could become the cheapest method for steel production by 2050, capturing 31% of the market. Recycled material could make up another 45% and the rest may be from coal-fired plants with carbon-capture systems. Direct reduced iron will be required to convert a significant portion of the fleet to hydrogen.

 To achieve this transformation, five key actions will have to be considered, namely boosting the amount of recycled steel, especially in China, producing clean energy for electric furnaces, designing new capacity with carbon capture technology or hydrogen and retrofitting the coal-fired plants.

 Meanwhile, a massive amount of clean energy will be needed to manufacture green steel from hydrogen and electric furnaces. This shift will also require higher grades of coal. The changes are expected to shake up the mining industry. For instance, Russia and Brazil have access to high-quality iron ore reserves and clean power. The cost of hydrogen production will be the lowest by 2030 in Brazil. South Africa and India have potential to produce a large amount of low-cost clean power and also have good iron ore reserves.

 In China, the steel industry intends to focus on recycling and energy efficiency and then adopt technologies, like carbon capture and hydrogen.

“The steel industry cannot afford to wait for the 2040s to start its transition," Julia Attwood, head of sustainable materials at BNEF and lead author of the report, said. "The next ten years could see a massive expansion of steel capacity to meet demand in growing economies, such as India. Today’s new plants are tomorrow’s retrofits. Commissioning natural gas-fired plants could set producers up to have some of the lowest-cost capacity by retrofitting them to burn hydrogen in the 2030s and 2040s. But continuing to build new coal-fired plants will leave producers with only bad options toward a net-zero future by 2050.”

 Kobad Bhavnagri, head of industrial decarbonization at BNEF, added, “The global steel industry is poised to begin a titanic pivot from coal to hydrogen. Green hydrogen is both the cheapest and most practical way to make green steel, once recycling levels are ramped up. This transition will cause both great disruption, and great opportunity. Companies and investors don’t yet appreciate the scale of the changes ahead.”