Report
Greening Steel
Moving to Clean Steelmaking Using Hydrogen and Renewable Energy
Deepak Yadav, Ashish Guhan, and Tirtha Biswas
September 2021 |
Suggested citation: Yadav, Deepak, Ashish Guhan, and Tirtha Biswas. 2021. Greening Steel: Moving to Clean Steelmaking Using Hydrogen and Renewable Energy. New Delhi: Council on Energy, Environment and Water.
Overview
This study evaluates the feasibility of green hydrogen-based steelmaking [hydrogen-based direct reduced iron (H-DRI) & electric arc furnace (EAF)] in India by providing insights into the techno-economics and associated environmental benefits. It considers four-time horizons: 2020 (current), 2030 (medium-term), and 2040 to 2050 (long-term).
Expanding India’s production capacity with the existing set of technology options in the iron and steel industry will significantly affect its future greenhouse gas (GHG) emissions. Hydrogen has the potential to decarbonise steel manufacturing which currently accounts for 35 per cent of GHG emissions from India’s manufacturing sector.
Key Findings
- A 100% green hydrogen-based steelmaking would be commercially viable only by 2040.
- Access to both wind and solar resources is imperative to achieve the lowest production cost.
- Blending grey with green hydrogen and renewable power with grid electricity will accelerate the transition to green hydrogen-based steel production in India. Our proposed green hydrogen blending trajectory is as follows:
- At today’s prices, blending ~9 per cent green hydrogen with grey hydrogen is competitive with the upper range of BF-BOF costs.
- By 2030, green hydrogen blends up to 60 per cent can break even with the average blast furnace costs.
- By 2040, 100 per cent green hydrogen uptake can break even with the lower range of blast furnace costs.
Proposed transition pathways for blending green and grey hydrogen in steelmaking
Source: Author’s analysis
- Planning the future infrastructure for raw material and energy transportation is critical for scaling up green hydrogen–based capacities. For instance,transporting iron ore from Angul, Odisha to Kutch, Gujarat is cheaper than moving renewable energy and hydrogen from Kutch to Angul. Therefore, green hydrogen-based steelmaking might have significant ramifications on a just transition in India.
- A green steel plant will need investments to the tune of USD 3 billion per million tonnes per annum (MTPA) – more than three times the conventional blast furnace-basic oxygen furnace (BF-BOF) process.
- Converting the current steelmaking capacity to green hydrogen-based production will require 264 GW of solar capacity and annual water consumption representing ~16 per cent of the annual water supply in the state of Gujarat.
Key Recommendations
- Prioritise investments in hydrogen ready technologies that allow incremental blending of green hydrogen. Green hydrogen-based steelmaking can reduce our import dependence on coking/non-coking coal and make India self-reliant. Any investment in blast furnaces today will lock in imported coal demand for mid-century and beyond.
- Existing shaft furnaces in India can blend up to 30 per cent green hydrogen without any major modifications to the process. These can be the testbeds for green hydrogen blending.
- Access to affordable natural gas would incentivise investments in hydrogen-ready technologies like shaft furnaces, further accelerating the transition to green hydrogen.
- Provide green steel plants access to renewable electricity at competitive prices by incentivising captive installations or reducing open access tariffs.
- Nudge domestic steelmakers to institutionalise increased R&D spending and participate in technology collaboration and pilots through domestic policies. Earmarking a certain percentage of the funds towards low-carbon technology pilots will support a faster transition. For example:
- A greenfield project with a 9 per cent blend of green hydrogen will need an investment of USD 1 billion per MTP.
- The total investment planned or earmarked by major global steelmakers on innovative steelmaking technologies amounts to USD 14.7 billion.
India should prioritise investments in hydrogen-ready technologies. Any investment in blast furnaces today will lock in imported coal demand for mid-century and beyond.
