Article
November 17, 2024
Powering the steel transformation
This article outlines the practical actions that steel producers can take to decarbonise and reflects on the key findings of a new report on buyers’ willingness to pay for lower emission steel.
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Anna Ekdahl
Business Development Director
Anna Ekdahl, Director of Energy Intensive Industries for Ramboll, gives her views on the market outlook for lower emission steel and the steps that steel producers can take to get started on their decarbonisation journeys.
What are your thoughts about the findings of Ramboll and Climate Group’s new report: “2024 Market Outlook on Lower Emission Steel and Concrete”?
Anna: My initial thought is that more companies than I anticipated are willing to pay for lower emission steel, which is essential for justifying the business cases for reducing emissions.
The Energy Transitions Commission recently underlined the need for a $1.1 trillion annual investment in grid infrastructure until 2050 to attain the global net zero emissions objective.
However, from an energy perspective I also want to stress how complex and expensive this transition is. The Energy Transitions Commission, for example, recently underlined the need for a $1.1 trillion annual investment in grid infrastructure until 2050 to attain the global net zero emissions objective. And that is just the grid investment side! Then, there are the technical, commercial and environmental complexities, which also need to be addressed.
Already, we see that green hydrogen and green electricity will not be able to meet communicated demands, something that will only get worse in the coming years. It is sometimes easy to communicate ambitions, but when you scratch the surface everything is not in place to back up the claims. It’s important that companies can challenge statements and see through the hype to properly understand risk.
Effectively, what we are looking into is a complete transformation of the entire energy ecosystem to decarbonise the steel industry – so we need to start moving the needle now.
What options exist to decarbonise the steel industry?
Anna: What most decarbonisation projects are communicating right now is wind power and green hydrogen, which is of course a good strategy if it was not for the fact that this energy is currently not available.
The extreme electricity consumption that this transition to hydrogen entails means that a massive increase in electricity production and the power grid is required, which must be financed and realised in a way that is both economically justified for society and does not jeopardise the competitiveness of companies. The magnitude of this change means that there would be significant consequences for society if these hydrogen investments do not materialise or are smaller than planned.
The good news, however, is there are several other energy supply options with risk profiles that are significantly different to green hydrogen. For example, hydrogen production does not solely rely on electricity; it can also be derived from natural gas. And bio-syngas is a third option. Alternatives and risk profiles can vary significantly across regions.
Realistically, companies need to look at a combination of energy supply solutions, or even interim solutions. It is not easy, but it is doable. Thankfully, we are already seeing frontrunners showing the way.
How do you see the steel industry moving forward?
Anna: Access to capital, clear regulation and political stability are all essential. Assuming those factors are in place, the thing that will accelerate the steel industry is collaboration. For example, to secure sustainable energy, companies must learn to collaborate with the entire sustainable energy ecosystem.
In Europe, several decarbonisation projects have already been paused due to grid constraints and delayed dialogues, which is something we must avoid. Traditionally, many grids have not been allowed to invest based on projected demand, but only current demand, which is an extra incentive to start the discussion early in the process.
To all steel producers, I would say: start considering production, distribution, and storage of several energy carriers to meet your demand in terms of risk, cost, and environmental footprint of your end-product. You will be dependent on third parties for your energy supply, and they are also doing this for the first time, so start the discussion early.
RECOMMENDATIONS
4 prioritised steps
Here are the four priority steps steel producers can follow to decarbonise existing steelworks.
1
Reduce energy demand
through energy efficiency and digitalisation.
2
Recycle heat and gas
from one part of the process to another.
3
Meet energy demand using renewable and resilient sources
- via the grid or on-site production. This includes green hydrogen and sustainably sourced biofuels.
4
Apply carbon capture
if all other options have been exhausted.
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