Steel industry cautiously welcomes EU hydrogen moves

Measures adopted by the European Union to stimulate the green hydrogen economy have been welcomed as a step in the right direction by the steel industry, but companies say more details are needed..

Reform measures announced in December include revisions up until 2030 to the EU’s emission trading system (ETS) and its Carbon Border Adjustment Mechanism (CBAM) and also set new rules and introduced incentives for the uptake of cleaner technologies in the steel industry, such as Direct Iron Reduction (DRI) using green hydrogen.

The CBAM, which places a tariff on the carbon emitted in the production of goods entering the EU, has been particularly welcomed to help avoid ‘carbon leakage’ whereby EU companies move more carbon-intensive production abroad where climate policies are less strict.

“The CBAM is obviously positive, because it will help us set the price that is needed for green products into Europe without risking seeing polluted products coming in at the cheaper level,” Head of Business Unit Hydrogen at H2 Green Steel Kajsa Ryttberg-Wallgren said.

The creation of the European Hydrogen Bank – which aims to subsidize hydrogen production through auctions – was a “step in the right direction”, Ryttberg-Wallgren said, though added it was still in its preliminary stages and it was impossible to draw any concrete conclusions.

In March, meanwhile, the European Commission (EC) proposed the Net-Zero Industry Act which aims to strengthen the resilience and competitiveness of net-zero-technology manufacturing in the EU.

The act aims to improve conditions for investment by reducing administrative burdens and accelerating CO2 capture by setting a EU objective of an annual 50 million tons (MT) injection capacity in strategic CO2 storage sites.  

Level playing field

The ongoing efforts to adjust the ETS must create a level playing field for new, green steel makers, says H2 Green Steel’s Ryttberg-Wallgren.

“Right now, if you're polluting, you will get a lot of free allocations. If you're not polluting, you don't get those allocations, so if you're a startup that is designing a plant with near-zero emissions, you don't get the same indirect subsidies as larger polluters, and that is a problem that now has to be corrected,” she says.

Meanwhile, a risk of exponentially increasing carbon prices in the EU that has no equivalent outside of the economic bloc due to a pre-defined allocation phase-out trajectory could wipe out EU steel exports worth 45 billion euros ($49 billion) if no export solution is found before 2026, the European Steel Association (EUROFER) warns.

“The European steel sector, which has launched an unprecedented number of low carbon projects to reduce its emissions by 55% by 2030 and become carbon neutral by 2050, is committed to playing its role for a successful decarbonization, but the enabling financial, energy and regulatory conditions must be put in place as soon as possible,” Director General of EUROFER Axel Eggert said in a statement.

Potential bottlenecks

The drive toward a cleaner steel manufacturing industry worldwide, with or without subsidies, faces a number of challenges and potential bottlenecks.

Primetals Technologies is focused on optimizing the steel making process along the entire value chain, including natural gas or hydrogen fueled direct-reduced iron (DRI) technology and electric arc furnaces (EAF) to replace more traditional coal-consuming blast furnaces and basic oxygen furnaces (BF/BOF).

Transitioning to DRI/EAF technology from the (today) cheaper BF/BOF pathway will take time and a lot of money.

“There are not many companies who have the capability to implement large scale, direct reduction and electric arc furnace plants with all the surrounding equipment, material handling, gas cleaning and whatever is related. You have to engineer, install, and commission them,” says Head of Green Steel at Primetals Technologies Alexander Fleischanderl.

But, it is the availability of the base fuel, the green hydrogen, that will likely cause the greatest bottlenecks.

EUROFER estimates the steel industry will need at least an extra 2 MT of hydrogen over the next few years to aid with the transition.

Europe will struggle to install the necessary renewable power capacities to produce the green hydrogen needed to remodel its steel-making manufacturing base.

Renewable electricity prices are relatively high in Europe and hydrogen is notoriously hard to store and transport, so many expect much of the initial high-power processes may shift toward high-intensity renewable areas such as the Middle East or even Australia.

Another potential slowdown that may hit companies worldwide is the slow ramp up of electrolyzer capacity.

Any sizeable transition to hydrogen through an aggressive deployment of electrolyzers will need a global capacity of around 270 GW by 2030, a more than thousand-fold increase from what is available today, and as much as 1,700 GW by 2050, according to the International Renewable Energy Agency (IRENA).

“What I hear from all the main OEMs (original equipment manufacturers) that are going to supply electrolyzers around the world is that the capacities are limited. If we look at all of them that are under construction at gigawatt scale, it will take time,” says Fleischanderl.

By Paul Day