Karan Kochhar, Luis Janeiro and Francisco Boshell at IRENA look at the decarbonisation of iron and steel. They account for about 7% of global energy–related carbon emissions. The authors explain what’s needed for green hydrogen and direct green electrification to take over from traditional fossil-based production. Many projects are in the pipeline, and the authors reference case studies like H2 Green Steel, SIDERWIN and Boston Metal. Though that pipeline is young, the iron and steel industry is facing a pivotal moment, say the authors. A substantial portion of emission–intensive BF–BOF (fossil-fired) capacity is set for retirement by 2030, so stakeholders must now make strategic decisions to grasp the opportunity to choose a solution, switch away and get on the decarbonisation pathway.
### IRENA’s fourth Innovation Week (free to attend) will be held from the 25th to 28th of September in Bonn, Germany. The event focuses on renewable energy solutions to decarbonise end–use sectors. A wide array of topics will be covered, including direct and indirect electrification solutions for sectors such as buildings, transport, and industry. To access details of Innovation Week and to register for the sessions, please visit the website.
The need to transition to renewable energy is intensifying as there is a need to triple average annual renewable power capacity additions until 2030 to keep the 1.5°C climate target within reach. IRENA’s Innovation Week serves as a forum for leaders, experts, industry representatives, academics, and policymakers to meet and discuss solutions to accelerate the shift needed towards renewables. It is a platform for knowledge sharing and collaboration and advancing actions on renewable energy and its integration in various sectors.
The fourth edition of Innovation Week will be held in Bonn, Germany, from the 25th to the 28th of September this year. The event will focus on renewable energy solutions to decarbonise the end–use sectors and will cover an array of topics that cover the energy sector. These include direct and indirect electrification solutions for the end–use sectors such as buildings, transport, and industry.
The event will also host dedicated sessions on innovations covering diverse topics such as demand–side management, sector coupling for net–zero pathways, and the establishment of quality standards for green hydrogen infrastructure, among others. Several organisations, such as EPRI, IEC, EC JRC, OECD, worldsteel and GIZ, among others, are partnering with IRENA for different sessions to bring together world class expertise and diverse perspectives. The discussion in these sessions will be crucial to understand the role and pace of innovation needed for transitioning to renewables and the actions to foster such innovations.
Innovation and Renewables in the Iron and Steel Industry
One such session will focus on decarbonising the iron and steel sector. The industry is vital to the global economy, catering to essential services such as construction and transportation. Production of steel has risen from 190 million tonnes per year in 1950 to almost 2 billion tonnes per year in 2021. Without material efficiency measures, the demand for steel is expected to grow to 2.5 billion tonnes per year by 2050.
However, the iron and steel sector is also one of the most significant contributors to climate change, responsible for about 7% of global energy–related carbon emissions. IRENA recently published a report tilted “Towards a Circular Steel Industry”, as its contribution to India’s Presidency of the Group of Twenty (G20). The report looks at different pillars to decarbonise the iron and steel industry. G20 nations, this year, have echoed the role of several pillars such as material efficiency and scrap recycling highlighted in the report. These pillars while important, will not be enough to completely decarbonise the industry. IRENA’s analysis underscores the essential role of renewable energy for steel production to fully decarbonise the industry.
Steel production routes
Steel can be produced either through iron ore or through recycled scrap. Production using iron ore is primary production, while recycling scrap is secondary production. Scrap recycling is important as it consumes less energy than the primary production route and emits a fraction of emissions. However, despite the growing availability of scrap in the future, recycling can only contribute to about half of the global steel demand. Hence, the importance to increase efforts to decarbonise primary production as well.
Currently, the principal method for primary steel production is the BF–BOF (Blast Furnace–Basic Oxygen Furnace) route, which constitutes about 70% of the overall steel production and 90% of the primary steel production. The emissions intensity of production routes can vary depending on the type of fuel used. However, the BF–BOF route is the most emissions–intensive production route on a global average basis.
The Direct Reduced Iron–Electric Arc Furnace (DRI–EAF) route, the other primary production route, is a promising decarbonisation avenue. This indirect renewable electrification route can directly use green hydrogen, from renewable electrolysis of water, to convert iron ore to iron for further steel production. This pathway is gradually becoming a viable option for steelmakers to use in the DRI–EAF to decarbonise production.
Figure 1: Traditional methods to produce iron and steel / SOURCE: IRENA, 2023
Apart from indirectly electrifying the production using green hydrogen, several initiatives aim to pioneer the production of steel directly using electrification, skipping the need for any agents such as hydrogen. Direct electrification is already used to produce aluminium and lithium from their respective ores. Efforts to make commercial steel through direct renewable electrification are underway, with initiatives like SIDERWIN demonstrating the possibility of producing iron via electrolysis, and the company Boston Metal – presenting at this year’s IRENA’s Innovation Week – with plans to have a commercial plant by 2026.
Figure 2: Molten Oxide Electrolysis by Boston Metal for direct electrification of iron ore / SOURCE: Boston Metal Fact Sheet, 2023
What is driving the growth in Green Hydrogen–based Steel production?
More than 40 projects are in different stages of development that will either use green hydrogen or plan to transition to using it. If commissioned, these could produce over 60 Mt/year of green steel by 2030. While this is a small proportion of roughly 2,000 Mt of steel produced annually, the pipeline of such projects is growing fast.
Several factors contribute to the growth, with one of the primary reasons being the falling cost of renewable power in the last decade. This cost reduction is a critical factor that makes a strong case for the cost of production of green hydrogen to be at par with fossil fuel–based hydrogen in the near future.
Figure 3: Cost of green hydrogen production as a function of electricity costs and electrolyser deployment / SOURCE: IRENA, 2020
There is also an increasing appetite from several steel consumers demanding green steel. For instance, H2 Green Steel – also to be present at this year’s IRENA’s Innovation Week – has signed a series of multi–year purchase commitments with steel consumers such as Cargill, Mercedes, SPM and Marcegaglia even before the commissioning of its Boden site. Volvo Trucks has also announced an agreement on the supply of green steel with Swedish steelmaker SSAB. The growing membership of initiatives such as First Movers Coalition and SteelZero also capture the demand for green steel by the private sector.
Along with private sector pull, a nascent public sector push through regulations and Green Public Procurement is also shifting the focus to green steel production and consumption.
Challenges & opportunities to fully transition to Green Steel Solutions
Green hydrogen–based DRI (Green H2–DRI) steel faces significant barriers towards widespread deployment. For instance, securing significant volumes of green hydrogen is essential to large–scale steel production using a green H2–DRI production route. A significant scale–up of renewable energy and electrolyser deployment is needed for this. As a rule of thumb, 10 gigawatts (GW) of electrolyser capacity and 20 GW of renewable power are required to produce 1 Mt/year of hydrogen annually.
An uninterrupted supply of hydrogen is also critical to the stable operations of a green H2–DRI plant. Storage will likely play a key role in ensuring this reliability. However, the planned hydrogen storage project pipeline lacks projects in the advanced stages to support the development of the iron and steel sector.
Without a level playing field, steel producers using Green H2–DRI will have higher costs to produce steel than conventional production methods. Estimates for this premium range from 20% to 30%. While the cost increase of using green steel in final steel products is relatively low for end consumers, the higher expenditure in setting up green steel production is a crucial barrier to building green H2–DRI production in different geographies. Other challenges include changes needed to operational parameters in existing facilities to use green hydrogen and a potential shortage of high–grade iron ore.
The iron and steel industry is currently facing a pivotal moment. As a substantial portion of emission–intensive BF–BOF capacity is set for retirement by 2030, stakeholders must make strategic decisions to decrease their reliance on fossil fuels. Exploring paths of direct and indirect electrification powered by renewable energy sources presents an exceptional opportunity for curbing emissions.
We see encouraging developments in the sector, increasing number of low-carbons steel projects as well as the efforts to establish robust standards and certification schemes like ResponsibleSteel and Sustainable STEEL Principles. Additionally, regulations such as EU CBAM can create substantial reductions in emissions from the industry globally. However, more action and coordination are needed in areas such as technology, policy, investment, and skills.
Addressing the challenges and harnessing the opportunities require systemic innovation using enabling technologies, market designs, business models and system operations. IRENA’s Innovation Week 2023 will discuss the solutions for decarbonising several end–use sectors, including iron and steel.
To access additional information, the event details and to register for the sessions, kindly visit the Innovation Week 2023 website.
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Karan Kochhar is an Associate Programme Officer at IRENA
Luis Janeiro is a Programme Officer at IRENA
Francisco Boshell is Head Innovation and End Use Applications at IRENA
