Decarbonising the average primary steel plant in the EU would require 1.2-1.3GW of renewables-powered electrolysers running at full load to produce enough green hydrogen to extract iron from iron ore, according to a new report from trade association Hydrogen Europe.
“If variable renewable electricity is used and the electrolyser cannot be operated at constant full load, the challenge becomes even bigger,” says the 90-page study. “When using exclusively solar PV for hydrogen production, the required electrolysis power would grow to around 4.5-5.0GW, driving up the required capex [from €3.3bn] to almost €7bn [$7.13bn] for a single plant of average capacity.”
And that does not include the renewable energy that would be needed to power the electric arc furnaces that make the steel.
The typical “BF-BOF” steelmaking process — which produces roughly 60% of steel in the EU — uses coke in a blast furnace (BF) to extract iron from iron ore, with the liquid “pig iron” (or “hot metal”) then moved into a basic oxygen furnace (BOF) to produce steel, emitting a huge amount of CO2. In fact, the steel sector is responsible for about 4% of the greenhouse gas emissions (GHG) in Europe.
“The total of all installed BF-BOF plants in the EU is around 103Mt [million tonnes] of hot metal per year,” the report explains. “Switching all of those plants to hydrogen-based DRI/EAF [direct reduced iron/electric arc furnace] could potentially save up to 196 million tonnes of GHG emissions per year, but in order to do so would require up to 5.3Mt of renewable hydrogen and up to 370TWh of additional renewable electricity generation (including EAF electricity consumption).”
Taking an average capacity factor of 12% for solar power in northern Europe (where most of the continent’s BOF-BF steel plants are located), producing 370TWh would require more than 350GW of PV panels, according to Recharge calculations. Producing 370TWh of wind energy, with an average European fleet capacity factor of 26% (including onshore and offshore), would require more than 160GW of turbines.
“Securing access to a sufficient amount of low-cost renewables will also be a challenge — especially in the northern part of Europe,” says the report, entitled Steel from Solar Energy: A Techno-Economic Assessment of Green Steel Manufacturing.
The EU had 187.5GW of wind power and 160.3GW of solar installed at the end of 2021, International Renewable Energy Agency figures show. And the world currently has only 256.9 of electrolysers in operation, according to Rystad Energy.
The study also notes, using World Steel Association figures, that while Europe manufactured 279.4 million tonnes of steel in 2020, Asia produced 1.4 billion tonnes — over four times more. These figures include both primary production (using the BF/BOF method) and secondary production (using recycled scrap steel via electric arc furnaces).
Costs, sourcing and storage
According to Hydrogen Europe estimates, to be cost-competitive with current steel production, green H2 would have to be delivered in the EU at a price below €3/kg in its “high prices” scenario and below €1.50/kg in the “adjusted prices” scenario — compared to an estimated €5.30/kg today. The “high prices” scenario assumes current high energy prices, while the “adjusted prices” scenario is “adjusted down to reflect potential future long-term fossil fuels price levels”.
At current green hydrogen prices, each tonne of crude steel would be €126-203 more expensive when produced using the DRI-EAF method, which for a typical petrol car translates as an added cost of €100-170 per vehicle.
Other challenges for decarbonising the European steel sector include where all the renewable hydrogen would be produced and how to ensure a constant supply of it to the DRI process.
“When hydrogen production is based entirely on variable energy, like solar PV or onshore/offshore wind, a significant amount of operational storage is needed,” says the study. “While underground hydrogen storage in salt caverns offers a cost-effective solution, underground salt formations are not uniformly available across the whole EU. Furthermore, multiple salt caverns might be needed for a single steel plant.”
It adds: “While imports of renewable hydrogen are most likely inevitable for some EU countries, because of the low hydrogen break-even price, the steel sector will remain a challenging market for imported hydrogen.
“Another possibility, for areas with a shortage of renewable resources, is to produce hydrogen in situ, with electricity delivered through the power grid. In this case however, ensuring a steady supply of hydrogen remains a challenge, as available storage options are expensive.”
However, in its latest draft of the Renewable Energy Directive, the European Commission called for an hour-by-hour “temporal correlation” requirement for renewable H2 production. In simple terms, this means that hydrogen producers would have to prove that their H2 was only being made when the sun was shining or the wind was blowing.
“[This requirement] would create a significant obstacle [for] the deployment of DRI-EAF based on renewable hydrogen,” the report states.
“On the other hand, allowing 24-hour balancing of renewable energy production with its consumption for hydrogen production, would allow [the sector] to increase RE [renewable energy] share in hydrogen production to over 80% without any additional storage — significantly reducing capital demands and thus increasing economic attractiveness of green hydrogen use in the steel sector.”
Hydrogen Europe is not the only organisation to criticise the proposed temporal correlation plan. German utility RWE argues that the regulation would put “unnecessary shackles” on the sector.
“The proposal that electrolysers may only produce hydrogen when electricity is almost simultaneously being produced by these new wind and solar farms is also problematic,” said the utility in May, when the draft directive was published. “This temporal correlation means that electrolysers would have to sit idle during any extended calm period. The result would be an unnecessary increase in the price of hydrogen due to more complex operations, and would make it almost impossible to ensure a continuous supply to industry.”
Hydrogen Europe CEO Jorgo Chatzimarkakis has previously stated that the EU should follow India’s example by allowing renewable energy for green hydrogen production to be “banked” — ie, sent to the grid in times of excess wind/solar with developers taking the same amount of electricity from the grid at a later time — or derived from clean electricity bought through power exchanges.
But despite all the challenges facing the steel industry, Hydrogen Europe notes that the sector is “clearly responding to the every-increasing pressure to decarbonise and many companies are already stepping forward as the front runners in the transition”.
“Several projects all over Europe, led by key stakeholders such as ArcelorMittal, LKAB, SSAB, Thyssenkrupp, Vattenfall and others, are already in development and will play a major role in the ramp-up of the necessary technology and proving the business case for green steel,” it concludes.
