Scientific Foresight (STOA) By / June 18, 2021

New STOA study ‘Carbon-free steel: Cost reduction options and usage of existing gas infrastructure’

Written by Andrés García Higuera. To assess the prospects of success for Europe’s Green Deal policies (most importantly, the transition…

© VITO/EnergyVille

Written by Andrés García Higuera.

To assess the prospects of success for Europe’s Green Deal policies (most importantly, the transition to a carbon-neutral EU economy by 2050), it is necessary to address the evolving technological and behavioural trends and their impact on the implementation of the Green Deal.

With this in mind, the European Parliament’s Panel for the Future of Science and Technology (STOA) has published a new study exploring the options for decarbonising the iron and steel production processes, focusing on the use of renewable hydrogen as an alternative to fossil coal. This study was commissioned by STOA from VITO/EnergyVille, following STOA Panel approval of a proposal submitted by Panel member Tiemo Wölken (S&D, Germany). The study explains the basic physical and chemical differences between alternative processes, their cost structures and the potential for further cost reductions, as well as the larger implications and longer-term consequences of switching to hydrogen in this key industrial sector.

Steel is one of the most challenging sectors to decarbonise and has recently received special attention due to the potential use of low-carbon hydrogen to reduce fuel combustion and process-related carbon emissions in the industry. This study addresses concerns that might arise while evaluating the potential and limitations of the future role of hydrogen in decarbonising the iron and steel industries. The sector is one of the pillars of the European industry and job market, supporting approximately 2.7 million (direct and indirect) jobs. In 2019, the production of crude steel in Europe was 157 Mt, which accounted for 4 % of the greenhouse gas (GHG) emissions in Europe.

Investment decisions in the steel sector are challenging, since margins are tight and competition is fierce. The slowdown due to the pandemic has worsened the situation, resulting in a reduction in demand for steel products in 2020. In Europe alone, prices have fallen nearly 30 % since 2018. Furthermore, manufacturing sectors are now including carbon neutrality in their strategies, putting pressure on steel producers to embrace these commitments while remaining competitive and maintaining their place in the supply chain. In Europe, some blast furnaces are almost 25 years old, making them suitable candidates for technology replacement, while others have recently undergone refurbishments that entailed large investment. In the coming decades, this situation could open a window of opportunities to replace current assets with cleaner, novel technologies. Nevertheless, the decision to shift to a cleaner route is site-specific and will come at different times.

Currently, 60 % of steel produced in Europe originates from the integrated blast furnace/basic oxygen furnace route (BF/BOF), which emits around 1.9 tCO2/tsteel. Other routes, for instance, the natural-gas-based NG‑DRI and Scrap‑EAF generate lower emissions, with 1.4 tCO2/tsteel and 0.4 tCO2/tsteel, respectively. Of the total steel produced in Europe, 60 % (94 Mt) originates from the BF/BOF route and is more suitable for the hydrogen direct reduction route (H‑DRI). Estimates suggest that 94 Mt of ‘green steel’ would require approximately 37‑60 GW of electrolyser capacity, producing approximately 6.6 Mt of hydrogen per year.

By comparison, the EU hydrogen strategy aims at installing 40 GW of electrolyser capacity within the EU by 2030. The authors estimate that these electrolysers would consume approximately 296 TWh of green electricity per year; as a reference, Germany produced 176 TWh of green electricity in total in 2020. Several H‑DRI projects have been backed by iron and steel producers across Europe. The companies involved expect the technology to reach commercialisation at large capacities by 2035. This transition will create demand for low-carbon hydrogen (60‑80 kgH2/tsteel). This hydrogen could be supplied by installing electrolysers on-site, in which case the storage of hydrogen could guarantee an uninterrupted hydrogen supply. An alternative is the use of pipelines to link the hydrogen production sites with consumption locations. Both methods are challenging and the prevalence of one over the other depends strongly on the location of the steel plant and access to low-cost renewable energy.

This study was preceded by the STOA briefing ‘The potential of hydrogen for decarbonising steel production‘ and some of its results were presented at the STOA online workshop ‘Decarbonising European industry: hydrogen and other solutions‘ held on 1 March 2021. True to its mission of providing Parliament’s committees and other parliamentary bodies with independent, high-quality and scientifically impartial studies, STOA continues working on this strategic topic and exploring the potential of hydrogen for decarbonising other sectors of EU industry.

Read the full report to find out more.

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