In today’s world, one of the biggest challenges facing the industry is how to decarbonise and produce “green” steel in an extremely competitive market.
As a globally-traded good with fine cost margins, steel production has been associated with major geopolitical issues, including trade disputes and tariffs. But because of climate change, there is also a sudden and massive demand for carbon-friendly production.
And that’s where hydrogen plays a key role. Steel traditionally made in a blast furnace uses coke—a high-carbon fuel made by heating coal without air—as a fuel source to heat iron ore pellets and liquify the pure iron component. This expels a lot of emissions in order to get the iron hot enough to melt (1,200°C) and be mixed with scrap and made into steel.
The green steel method instead uses hydrogen to reduce the iron pellets into sponge iron, metallic iron that can then be processed to form steel. This process is also done at high temperature but below the melting point of iron (800 – 1,200 °C), saving energy costs.
And by introducing non-fossil fuels to create iron pellets and renewable electricity to turn the sponge iron and scrap into steel, fossil fuels can be removed from the process, significantly reducing emissions as a result.
First, green hydrogen can replace part of the existing fuel in coal and gas-based iron-making processes. There are two main pathways for coal-based iron-making required for manufacturing steel: the blast furnace route where iron ore is melted to make molten iron, and the rotary kiln route where iron ore is reduced to iron without melting.
Green hydrogen can potentially offset 15-20 per cent of energy consumption in blast furnaces. Similar estimates for rotary kilns aren’t yet available. Also, natural gas-based shaft furnaces produce iron without melting the ore. These shaft furnaces are amenable to absorbing as much as 30 per cent green hydrogen without any major changes to the production process. These can be subsequently modified into absorbing 100 per cent green hydrogen.
Evaluating the potential of blending hydrogen in rotary kilns and incremental replacement of coal and natural gas in these steel-making processes with green hydrogen could create a demand of 2.7 million tonnes per year of green hydrogen. This might translate into an emission reduction of 28 million tonnes CO2e, or carbon dioxide equivalent per year.
Second, new production capacities should be ready for the green hydrogen transition. The existing coal-based routes (blast furnace and rotary kiln) for iron production do not allow a complete transition to hydrogen. Blast furnaces require investments to the tune of ₹7000 crore per mtpa that are recovered over a period of 40-50 years.
Hence, policymakers should discourage manufacturers from investing in blast furnaces going forward. In addition to being unfit for a transition to green hydrogen, blast furnaces would also lock-in imported coal supplies till mid-century or beyond. On the other hand, the natural gas-based shaft furnaces are hydrogen-ready and can operate with a varying blend of green hydrogen and natural gas.
Third, given the current high cost of green steel, steel producers should also be encouraged to blend grey hydrogen (derived from natural gas) with green hydrogen, and grid electricity with renewable power. A recent study by the Council on Energy, Environment and Water (CEEW) estimates that green hydrogen-based steel is 50-70 per cent more expensive than coal-based technologies.
However, the analysis shows that by blending 9 per cent green hydrogen, manufacturers could achieve profitability even today with the upper range of blast furnace costs. With a 60 per cent blend of green hydrogen by 2030 and 100 per cent by 2040, steel manufacturing companies could potentially break even with the average and lower range of blast furnace costs.
On the emissions front, a 9 per cent green hydrogen blend combined with the use of renewable energy for power requirements could potentially achieve a 60 per cent reduction in emissions.
Finally, there is a need for market creation for green steel to provide an impetus for steel producers to engineer the switch to hydrogen-based steel-making. Government-funded infrastructure projects such as the Pradhan Mantri Awas Yojana, Bharatmala, and Jal Jeevan Mission would consume as much as 160 million tonnes of steel. To nudge manufacturers towards this transition, government tenders should specify the carbon intensity of steel that will be procured for these infrastructure projects.
While the iron and steel manufacturing sectors are greenhouse gas emissions heavyweights, they can rely on the lightest element to phase down the use of coal and help us reach the net-zero goals. The scale of the sector and potential for growth provide a significant opportunity for ushering in the green hydrogen economy in India.
How much capital is required for growing the green hydrogen infrastructure in India?
According to some study, the target of producing 5 MTPA green hydrogen by 2030 will need a renewable energy capacity of at least 100 GW, electrolyser deployment of 40 GW, and an investment of about $100 billion. If India achieves the target of 5 MTPA green hydrogen production, then it would potentially reduce carbon emissions by 1.6 per cent, natural gas imports by 68 per cent, and save about Rs 40,000 crore on annual energy import bills.
India can also target green hydrogen use across other sectors of the economy. The country can blend green hydrogen in existing steel plants, use it across the mobility sector and also blend in existing natural gas pipelines. Also, it is expected that these sectors can create an additional green hydrogen demand of 3.5 MTPA, which will need the deployment of another 70 GW of renewable energy, 28 GW of electrolyser capacity and an investment of $78 billion.
The future of hydrogen in green steel production
Steel is a foundational element of modern society and engineering and construction projects. The steel industry must adapt to environmental demands and lower its carbon footprint.
Using hydrogen instead of coal will initially raise the cost of steel. Its price is expected to decrease drastically as soon as hydrogen is produced in large quantities.
The data from the pilot projects will be crucial for helping to achieve net-zero emissions by 2050. These pilot projects will improve the technology’s effectiveness and safety and lay the foundation for future commercial-scale green hydrogen production projects.
A green steel future depends on improving current technology, increasing manufacturing capacity, and having an abundant supply of low-cost green hydrogen.