The energy transition continues to gather pace as we race towards the halfway line of the decade, but as the growing number of renewable generation surges, so do the resources needed to support their development.
Indeed, demand for lithium, cobalt, and other minerals is set to rise significantly. The World Economic Forum predicts that lithium supplies will need to increase by a factor of six from 2018 levels to support the energy transition by 2030.
Equally, as companies around the globe instil decarbonisation targets, supply chain decarbonisation becomes increasingly important. Hydrogen, in this sense, could be a defining factor in reducing carbon emissions from the supply chain – but how?
Regular readers of Current± will be aware of the potential hydrogen holds in decarbonising various aspects of society, most notably heavy industry. But it could become an increasingly valuable part of the supply chain, particularly via the use of green steel production.
According to figures released by the International Energy Agency (IEA) last year, the globe will need around 1,974 Mt of steel by 2030. As of 2022, there was 1,878 Mt of demand. Considering that the globe must meet this increase in demand while also decarbonising the production of steel, it is clear why this industry is gaining more recognition.
The steel industry relies heavily on coking coal to operate blast furnaces, which convert iron ore into steel. Unfortunately, this process results in the release of significant amounts of CO2. However, an alternative method called direct reduction of iron exists, which involves the reaction between hydrogen and iron ore without melting and produces water vapour but emits no CO2.
To find out more about how green hydrogen could be used to decarbonise the sector, Current± spoke with Gotzon Gomez Sarasola, head of operations, Spain, at hybrid steel manufacturing and hydrogen production company H2 Green Steel.
The appetite for transition to green hydrogen for steel manufacturing
In areas across the globe, there is a consensus to transition away from traditional means of creating steel, such as via blast furnaces that often use grey hydrogen, a form of the energy carrier that is derived from fossil fuels. This is a trend being witnessed in the United Arab Emirates, according to Sarasola.
“We see that, especially in other locations such as the Emirates, for instance, they are moving from blast furnaces, which produce grey hydrogen for the pellets. Okay, so in this instance, brown hydrogen produces around two tonnes of CO2 per tonne of steel produced. For grey, it is around 800 kilogrammes; for green hydrogen, it is around 60/70 kilogrammes per tonne of steel produced,” he says.
With these figures in mind, it is clear that green hydrogen could have a potential impact on heavy industry and steel production. However, it is important to recognise the current appetite for the clean energy carrier.
“We would say that projects of direct reduced iron (DRI) that will run on natural gas are the main off-takers we see, especially in Europe and Asia, such as Japan and South Korea. We found that these markets were willing to pay a premium to get green steel, which is only produced using green hydrogen from us,” Sarasola explains.
“I also didn’t mention that we will be supplying green hydrogen to the existing green steel industry, on top of what we make ourselves. Instead of them investing in producing green hydrogen, we will provide the green hydrogen and they will keep their employment.”
This presents a crucial aspect of hydrogen-derived green steel, particularly the operations of H2 Green Steel. Not only are they supporting various car manufacturers and other off-takers through the supply of green steel, something that could raise the profile of green hydrogen in the industry, but it is also providing a steady stream of green hydrogen to enable deeper decarbonisation of steel manufacturing.
Could hydrogen present cost savings?
As one may assume, incorporating green hydrogen into the production of steel manufacturing could result in cost savings, perhaps not immediately, but certainly in the future when green hydrogen reaches cost-parity with fossil fuels. Though it is worth noting that this is still someway off, as Sarasola mentions.
“We have a challenge with the grids. And when we talk about using green hydrogen, clearly, all of us are aware of the cost of electricity,” he says. “When we talk about the current hydrogen industry, it’s not cheap.”
This highlights the issue surrounding hydrogen and its adoption – the cost of electricity to produce it. Currently, due to volatile pricing across much of Europe and in the UK, electricity prices remain high compared to 2019. But by scaling renewables, there will be further opportunities to decrease the cost of electricity and, in turn, drive down the cost of producing green hydrogen. Only then will it achieve price parity with conventional hydrogen.
Another key aspect of the steel manufacturing industry is ensuring there is a domestic supply chain for green steel in Europe.
“I think keeping the steel industry in Europe is strategic. Obviously, China is the biggest steel producer,” Sarsola says, highlighting that bolstering European supply chains, especially for green steel, could prove pivotal in increasing demand for green hydrogen.
