SteelWatch

SteelWatch Explainer: Why smart use of green hydrogen is critical for steel decarbonisation

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What needs demystifying?

The hype around green hydrogen’s contribution to climate action boomed in recent years and is now rapidly deflating as realities hit. But this turmoil risks masking an important fact: steel is not going to be able to decarbonise in the near- and medium-term without green hydrogen. Many inappropriate uses of green hydrogen have been touted. Steel is not one of them. From a climate lens, steel decarbonisation is an efficient and necessary use of green hydrogen. 

There is not much known about the technological future of green hydrogen and steel. This SteelWatch Explainer aims to use what is known or estimated today to demystify and shine a light on the best direction for action from a climate lens.

This SteelWatch Explainer sets out:

  • Why full decarbonisation of steel needs green hydrogen for direct iron reduction, unless or until new technology emerges;
  • Why steel decarbonisation should be prioritised, as green hydrogen becomes available, because it offers higher emissions savings per kg of hydrogen than other uses;
  • There are different uses of hydrogen in steelmaking, and it’s important to differentiate what is and is not ‘good’ climate action;
  • There is concern about the amount of renewable energy and green hydrogen available for steel decarbonisation, and yet why these huge numbers should not stifle action.

Getting clear on a few things first:

  • Steel is mainly iron, which can be sourced from recycling scrap steel or produced from iron ore.
  • Emissions from steelmaking – 11% of total global CO2 emissions – are so high that climate action will remain off track unless the steel sector transforms. 
  • Direct reduction of iron oxides’ (DRI) is an ironmaking process that is an alternative to the blast furnace. Unlike the blast furnace which cannot function without coal-based products, DRI can operate with a broad range of materials (coal, gas, hydrogen) to reduce iron oxides.
  •  ‘Green hydrogen’ also called ‘renewable-based hydrogen’, means hydrogen produced using fully renewable electricity. It is thus different from grey, brown, or blue hydrogen which involve fossil fuels.

Why does full decarbonisation of steel require green hydrogen?

Steel production emits around 3.7 gigatonnes of CO2 each year. The largest share of these emissions is due to the fact that iron ore is turned into iron in coal-based blast furnaces.

Amongst an array of decarbonisation technologies in development, there is only one that can eradicate coal, get ironmaking close to zero emissions and is already near commercial viability. This process, known as hydrogen-based direct iron reduction (H2-DRI) turns iron ore into iron in a DRI furnace, using green hydrogen to react with the iron oxides contained in iron ore. The resulting iron can legitimately be called ‘green iron.’

Most other so-called decarbonisation options in steel simply trim emissions and cannot get close to zero because they offer partial substitutes for coal or partial emissions reduction. The only currently emerging technology that might suffice is direct electrification-based ironmaking, without the need for an energy-rich gas, called molten oxide electrolysis (MOE). But for steelmakers that are deciding whether to extend the lifetime of a blast furnace or close it in the next few years, it provides too little certainty in terms of scalability and timeliness to be considered in today’s investment decisions.

So as things stand, steel decarbonisation depends on H2-DRI which requires green hydrogen.

Why is steel decarbonisation a priority use of green hydrogen?

Using green hydrogen to convert from coal-based steelmaking to H2-DRI based steelmaking can save close to 2 tonnes of CO2 per tonne of steel. Or put another way: each kg of green hydrogen used cuts emissions by roughly 25 kg of CO2 (see Box). That is a higher saving than other uses of green hydrogen proposed today

Estimates of CO2 abatement from use of green hydrogen for H2-DRI vary a little. A study carried out in 2022 by a private consultancy for the German Hydrogen and Fuel Cell Association (DWV) and funded by German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMUV) found that one kilogramme of hydrogen consumed in a DRI plant avoids the emission of 25 kg of CO2.

This figure is comparable to:

  • the Rocky Mountain Institute’s estimate of 24 kg of CO2 avoided per kilogramme of hydrogen, 
  • thyssenkrupp Steel Europe’s estimate of 28 kg of CO2 avoided per kilogramme of hydrogen,
  • and SMS group estimate of 26 kg of CO2 avoided per kilogramme of hydrogen.

Figure 1: How much CO2 emissions reduction in steelmaking is possible for 1kg of hydrogen or 1TWh of renewable  electricity

There are legitimate questions about the climate efficacy of green hydrogen at all. Its production consumes so much renewable power, and it loses so much energy in conversion, that it is better to use the power for greening today’s grids and direct electrification of processes such as electric vehicles for transport and heat pumps for heating. Such measures can generate the largest cuts in emissions right now. While recognising these immediate priorities, steel company investments operate over 20-40 year cycles, and need to be facing the right future direction from today, creating the markets and plants of the future.

Shifting from blast furnaces to H2-DRI can save over 500,000 tonnes of CO2 per 1 TWh of renewable electricity used. This means that H2-DRI is a leading use-case of green hydrogen, in terms of CO2 abatement, achieving much higher results than other uses such as displacing grey ammonia, or blending with fossil gas.

Renewable hydrogen is “a vital part of the most effective path to global decarbonisation”.

The conclusion of Paul Martin, chemical engineer and member of the Hydrogen Science Coalition, who is very critical of the hydrogen hype in general. He labels H2-DRI as one of the 5 ‘no-regret applications’ for the use of green hydrogen.

We also assume that national governments are not going to simply stop investment in green hydrogen, and if it’s there, the climate value of using it for steel decarbonisation needs to be known.

Steel decarbonisation should be a TOP priority for access to green hydrogen, from a climate perspective.

How else is hydrogen used in steel decarbonisation?
There is confusion about how hydrogen is planned for use in steel decarbonisation because reduction of iron via H2-DRI is not the only use. In fact it can be used in 2 other ways, with very different climate implications.

Hydrogen injection in a blast furnace

Hydrogen can be injected in blast furnaces as a reductant partially substituting for coal-based products. This does not get rid of the blast furnace or coal use, because blast furnaces cannot function without coal-based products. Estimates show approximately 10 kg of CO2 emissions reduction for one kilogramme of hydrogen injected in a blast furnace.

Hydrogen as feedstock for CO2 utilisation

Hydrogen can be used as a feedstock in a carbon utilisation process which belongs to the family of carbon capture, utilisation and storage technologies (CCUS). Hydrogen is combined with captured CO2 to create products such as fuels. The technology is not specific to the steel industry, but some steelmakers are talking about it and planning it as part of their efforts to capture and trim their emissions. 

This is an inefficient use of green hydrogen compared to H2-DRI as 1 kg of green hydrogen can utilise just 7 kg of CO2 (and this CO2 may yet be released in future). It is also important to note that hydrogen-based carbon utilisation does not end coal-based production and does nothing to address a key obstacle to deploying CCUS in steelmaking: the inadequate percentage of emissions that is captured, which means it cannot take steelmaking to near zero emissions.So when steel companies talk about using green hydrogen in steelmaking it is important to identify which use is being discussed. Both hydrogen injection in a blast furnace and hydrogen as feedstock for CO2 utilisation have a much lower CO2 abatement potential per unit of green hydrogen than H2-DRI in substitution of blast furnace-based ironmaking.

Figure 2: How 1 kg of green hydrogen can be used in steel decarbonisation

How much green hydrogen is needed for green steel and how much is ‘enough’?

Current DRI technology needs at least 54 kg of pure hydrogen to produce one tonne of direct reduced iron. Hypothetically, decarbonising the entirety of today’s virgin iron production (approximately 1,300 million tonnes per year) would require over 70 million tonnes of green hydrogen per year.

In the decades ahead as green hydrogen supplies develop, much else will change. Some we cannot predict, some we can. Demand for iron is predicted to go down as scrap steel supplies go up. The IEA Net Zero scenario assumes that virgin iron production would be lower (around 1,000 million tonnes per year) in 2050, which would require around 54 million tonnes per year of green hydrogen.

An essential element of green hydrogen production is renewable electricity. With the current performance of electrolysers, producing 54 million tonnes of green hydrogen in 2050 would require 2,700 TWh of renewable electricity. This is equivalent to the current annual electricity demand of the EU.

These are eye-watering amounts that seem difficult to produce or afford by today’s standards. Putting them in context shows a big gap between reality today and estimated future figures:

  • 54 million tonnes of green hydrogen is way more than can currently be supplied. Green hydrogen production is today close to non-existent, though production capacity – measured in electrolyser capacity – is increasing.
  • 2,700 TWh of renewable electricity is a big chunk of global annual renewables production in 2023: global power generation from solar and wind stood at 3,935 TWh, of which 1,600 TWh was solar alone.

However, the pace of change is also huge: 

  • Renewable energy production is now scaling exponentially. Global production of solar-based electricity was 1,000 TWh just back in 2021 – a 60% increase in two years.
  • About 600 GW of new solar capacity was estimated to be installed during 2024. In sun-soaked deserts, this would produce about 900 TWh per year. So it would take a capacity of 1800 GW – only three times the solar panels installed during 2024 – to produce enough green hydrogen to decarbonise all of global steel production. This would require solar panels on 50,000 square km of desert, which is 2% of the area of the state of Western Australia.
  • A global net-zero economy as modelled by the IEA NZE scenario would produce in total in 2050 – over 25 years from now – 76,838 TWh of electricity, 89% from renewable sources.

Figure 3: Renewable energy requirements for direct reduced iron in 2050

Aside from the numbers and percentages, there are many drivers of change which can be better harnessed to close the gap:

  • Steel companies are large, powerful consumers that shape markets. At a time when hydrogen investors are wobbling for a multitude of reasons, firm commitments to purchase green hydrogen at scale and over time will help develop the market and drive investment.
  • Several governments are keen to subsidise green hydrogen as part of future industrial strategies, and for a host of national, political, security and other reasons. It’s not clear they are always targeted well, but we can expect subsidies and international competition to catalyse market evolution. What is unaffordable today may look different tomorrow, particularly as policy responds to climate-induced crises.
  • Steel is currently competing in the clamour for green hydrogen with sectors (like transport, power generation, and home heating) that already have far more efficient electrification solutions available. Once steel is recognised as the leading  use case for green hydrogen to produce green iron and cut CO2, we can expect better targeting of subsidies and hydrogen supplies for enabling steelmakers to shift out of coal.
  • DRI plants can take a blend of fossil gas and hydrogen, so steel companies can act now to drive green hydrogen supply by investing in H2-ready DRI plants with clear timelines for reaching 100% green hydrogen.
  • Taking a global view will help reduce constraints. There are countries with abundant renewable energy and a desire to industrialise or modernise their economy focusing on green hydrogen and green ironmaking. Once it is accepted to look for solutions beyond existing steelmaking geographies, a host of opportunities will accelerate.

“To call solar power’s rise exponential is not hyperbole, but a statement of fact. Installed solar capacity doubles roughly every three years, and so grows tenfold each decade. Such sustained growth is seldom seen in anything that matters. That makes it hard for people to get their heads round what is going on.

The next tenfold increase will be equivalent to multiplying the world’s entire fleet of nuclear reactors by eight in less than the time it typically takes to build just a single one of them.

The Economist,  June 2024

Location matters!

It’s not just about whether there is enough green hydrogen in the world, but whether it’s in the right place. Hydrogen is dangerous, difficult and costly to transport. The costs of transporting renewable electricity are even greater over long distances. It is better to take the iron ore to the place where hydrogen is produced, than to take the hydrogen to the iron ore or ironmaker.Fortunately the opportunity for this is growing. There are countries such as Australia, Canada, South Africa, Brazil, Sweden that have high potential for green hydrogen production as well as iron ore. They can produce green iron via H2DRI and then export it in safe form as hot briquetted iron (HBI) to the sites that make steel. Other countries such as in the Middle East, also have high potential for green hydrogen production, while being well located to import the iron ore.

Looking to the future

Amidst uncertainty, 3 facts must guide us: steelmaking is driving 11% of total global CO2 emissions; industrial transformation is required; and as we head towards irreversible impacts of the climate crisis, the window to act is diminishing. Timing matters. In steelmaking, investment decisions and engineering designs made in the 2020s will still be shaping production in the 2040s and 2050s. So the next 5 years are critical to get the steel industry on the right path to a thriving zero emissions society.

The steel industry must make transition plans to replace coal-based blast furnace production with green H2-DRI. It is currently the only known path we can take to get to zero emissions for a truly clean and sustainable sector. With estimated CO2 savings of 25 kg per kg of green hydrogen, it beats other uses of this precious resource in other sectors.

Using green hydrogen for H2-DRI beats other uses within the steel sector. Steel companies need to drive forward investments in H2-DRI rather than use green hydrogen for tinkering with coal-based production.

Likely, this will be done most speedily and cheaply by producing HBI in locations with high potential for green hydrogen production, and shipping it to countries or regions with steelmaking and finishing facilities.

Demystifying what is good and bad use of hydrogen is critical, as the decisions made today will determine our success in halting climate change with a zero-emissions steel industry.

This is part of SteelWatch’s Explainer Series, which aims to demystify confusing issues and set the facts straight on common industry claims, so as to build understanding and momentum for transformative steel decarbonisation.

The first SteelWatch Explainer, ‘Why steelmaking drives climate change’, explains why steelmaking that relies on coal-based blast furnaces drives climate change, and how the industry can move beyond it.

End notes

  1. To qualify as green hydrogen in terms of climate solutions, it also needs to be produced from renewable energy that is additional to the existing grid. This is so that it is not simply taking clean energy away from other current uses that then have to rely more on dirty energy, with no net reduction in emissions. This aspect is also contested. In reality, there will be competing uses for clean energy for some time to come, so even new construction still has a trade-off with other uses of energy for emissions reduction.
  2. Yilmaz, C., J. Wendelstorf and T. Turek, Modeling and simulation of hydrogen injection into a blast furnace to reduce carbon dioxide emissions, Journal of Cleaner Production, 15 June 2017 Shatokha, V, Modeling of the effect of hydrogen injection on blast furnace operation and carbon dioxide emissions, International Journal of Minerals, Metallurgy and Materials, 22 August 2022. Academic articles are here used because steelmakers do not disclose sufficient data on their own projects to enable the calculation by external stakeholders of relations between the quantity of hydrogen used and the volume of CO2 savings.
  3. Meunier, N., R. Chauvy, S. Mouhoubi, D. Thomas and G. D. Weireld, Alternative production of methanol from industrial CO2, Renewable Energy, 2020 and Ali, S. S., S. S, Ali and N. Tabassum, A review on CO2 hydrogenation to ethanol: Reaction mechanism and experimental studies, Journal of Environmental Chemical Engineering, 2022. Academic articles are here used because steelmakers do not disclose sufficient data on their own projects to enable the calculation by external stakeholders of relations between the quantity of hydrogen used and the volume of CO2 savings. Regarding hydrogen as feedstock for CO2 utilisation, the provided figures do not consider what happens to products later in their lifecycle – the CO2 utilised for their production may ultimately be released in the atmosphere depending on the type of product made.
  4. Nicholas, S. and S. Basirat, Carbon Capture for Steel? CCUS will not play a major role in steel decarbonisation, Institute of Energy Economics and Financial Analysis, April 2024. Transition Asia, 2024, Carbon Capture in the Steel Sector.
  5. 1 GW of electricity generation capacity can produce 1 GWh per hour, or 8,760 GWh per year (1 GW x 24 hours x 365 days) if running 24/7 at full capacity (100% capacity factor). However, because the actual output of solar panels depends on weather conditions, the capacity factor is never 100%.

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Glossary of terms

Direct reduction of iron ore (DRI) / H2-DRI

Direct reduction of iron oxides (DRI) is an ironmaking process that is an alternative to the blast furnace. Unlike the blast furnace which cannot function without coal-based products, DRI can operate with a broad range of materials (coal, gas, hydrogen) to reduce iron oxides. 

DRI is today commonly used with gas. It can get close to zero CO2 emissions if it uses green hydrogen. This process is hydrogen-based direct reduction of iron, known as H2-DRI.

Confusingly, DRI is also used to refer to direct-reduced iron (the product rather than the process). This iron can be fed into an electric arc furnace or a combination of electric smelter and basic oxygen furnace to make steel, but certain other processes are involved along the way.

Hydrogen / Green Hydrogen

Hydrogen (technically dihydrogen or H2) is a molecule that is both energy-rich and carbon-free. As hydrogen for the time being cannot be simply extracted, it must be produced from primary sources of energy such as fossil energy and renewables.

The ultimate climate impact of hydrogen depends on how it is produced. For hydrogen to be a genuine decarbonisation tool, it must be produced in a near-zero-emission process: today that means hydrogen produced from water in electrolysers powered by renewable sources of electricity, and is known as green hydrogen or fossil-free hydrogen.

Virgin iron or ore-based iron 

This refers to iron that is produced directly from iron ore. It is contrasted with iron obtained by processing and melting scrap steel.

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