The global steel industry is on the verge of a transformative, multi-billion-dollar opportunity, with plummeting renewable energy costs and green hydrogen pointing to a possible pathway to completely decarbonize an extremely energy-intensive industry by 2050, writes Rocky Mountain Institute principal Thomas Koch Blank in a recent blog post.
Largely unnoticed while most attention has focused on carbon reductions in electricity and personal mobility, continuous efficiency improvements and increasing access to scrap have reduced the energy required to make a tonne of new steel 40% over the last 30 years, Koch Blank writes. But “the challenge is that while we can anticipate continued progress, this trend will never get us to net-zero emissions. New technology is fundamentally required—and fast.”
That’s why it was seen as a breakthrough in late August when Swedish steelmaker SSAB launched a pilot project to produce hydrogen-based primary steel, along with iron ore supplier LKAB and Swedish power utility Vattenfall. “The plan is to establish a demonstration plant at scale in 2026, a pace of change that globally needs to increase 100-fold to achieve a net-zero emission outcome by 2050,” Koch Blank says.
That shift depends on “the relentless cost reductions” in renewable energy production and the resulting shift out of an economy that favours fossil fuel production, which “will open up space for new industrial footprints and has the potential to fundamentally shift geopolitical balances.”
While carbon dioxide-free steel is still perceived as a premium-price product that will need “perpetual subsidies” to succeed, Koch Blank says that’s old news. Rocky Mountain Institute’s cost modelling “shows that this technology may already be cost-competitive,” he writes. “With power prices at US$25 per megawatt-hour, which is achieved in many locations around the world today, and hydrogen electrolyzer costs of $450 per kilowatt, which will be achieved by the end of this year, zero-carbon primary steel without coking coal can reach a fully-loaded production cost of $400 per ton. This is competitive with many existing steel mills today.”
Much of the motivation for decarbonizing steel comes from the downstream benefits the shift will produce, Koch Blank adds, producing enough demand for electrolyzer capacity to enable a nascent green hydrogen industry to build infrastructure and economies of scale. “It is broadly accepted that a regional steel industry is an engine of downstream innovation and economic growth through the engineering, manufacturing, and production sectors,” producing an estimated eight indirect jobs for each direct one, he writes.
So far, potential hydrogen users are nervous about shifting to a new, as yet uncertain energy source, while potential producers aren’t sure there will be enough demand. But “establishing a large-scale steelmaking cluster would leapfrog the market into critical scale,” increase renewable energy’s share of the grid by using hydrogen as a storage medium, and give various different stakeholders a reason to support the shift—showing that this kind of rapid transition is always assumed to be impossible, until it’s not.
Get the rest of the Rocky Mountain Institute’s green steel analysis here.