Steel is arguably the single most important resource when it comes to constructing infrastructure.
From roads to railways and the skeleton of most buildings, it is at the very heart of nearly every city on earth. Within those cities, the cars on the road, the cutlery in our kitchens and the furniture in our offices all rely on steel production. Steel production, however, is an incredibly energy intensive process, and the vast majority of this energy comes from fossil fuels.
Globally, steel is responsible for 7-9 percent of all direct emissions from fossil fuels. Most of those emissions come from the burning of coal, which makes up 89 percent of the energy input for blast furnace-basic oxygen furnace (BF-BOF) and 11 percent of the energy input of electric arc furnaces (EAF). Of those two types of steel production, BF-BOF is far more common, making up 75 percent of steel that is produced compared to 25 percent from EAF.
Globally, steel is responsible for 7-9% of all direct emissions from fossil fuels.
A major challenge for the steel industry in the modern era has been reducing its carbon emissions. Unfortunately, energy constitutes between 20 and 40 percent of the cost of steel production, so the reality for most major producers is that "green steel" is simply not affordable. But that could soon change, with the rapid advancements in hydrogen energy.
On Aug. 31, Swedish company HYBRIT officially began a pilot program for a "fossil-free" steel making plant. Swedish Prime Minister Stefan Löfven was there to open the plant, alongside the minister for environment and climate, the deputy prime minister, the president and CEO of SSAB, the president and CEO of LKAB and the president and CEO of Vattenfall.
This groundbreaking program aims to bring fossil free steel to the market by 2026. It aims to replace coking coal with electricity from renewable energy sources and hydrogen in a process that will produce steel and water as opposed to steel and carbon dioxide.
But there is no certainty here for HYBRIT, with an early study suggesting that fossil-free steel at current electricity prices would be 20 to 30 percent more expensive than steel made with the current process. A recent report from McKinsey went even further: "Surging carbon dioxide prices and decreasing hydrogen prices are crucial to ensuring the economic viability (according to cash cost) of pure hydrogen-based steel production."
It aims to replace coking coal with electricity from renewable energy sources and hydrogen in a process that will produce steel and water as opposed to steel and carbon dioxide.
But if there is the political desire to make this transition, the production of fossil-free steel is far from a pipedream.
Steel industry advocates would be quick to point out that plenty of the steel it produces is used within the renewable energy space and more than makes up for its carbon footprint over its lifetime. A three-megawatt wind turbine, for example, can deliver 80 times more energy over 20 years than is used in its production and maintenance materials.
If the steel industry, led by Sweden, does manage to "go green," it will be another hard hit for the coal industry, which is under attack from all sides as low-carbon and carbon-free alternatives gain popularity.
Steel companies such as SSAB are well aware that investors are increasingly focused on emissions, and the fact that its stock priced jumped from $26.61 to $27.48 the day its HYBRIT pilot project opened is only further evidence that energy costs aren’t the only economic incentives at play.
Steel really could be "going green" in the not so distant future.