It sounds like a pipe dream. Instead of the smoking chimneys of the Vaal Triangle belching out greenhouse gases, steelmakers turn from coal to green hydrogen to fire their furnaces and reduce iron ore. The only emission? Water vapour.
Carbon-neutral "green steel" is slowly becoming a reality, as Europe gets serious about combating climate change. A new hydrogen strategy was adopted by the EU on July 8 to help the bloc become climate neutral by 2050 — a target that’s possible only if heavy industry such as steelmaking is cleaned up, and fast.
It’s a development that could open opportunities for SA’s beleaguered steel sector, researchers argue.
As many a community on the highveld can attest, steelmaking is a shocking polluter. It’s responsible for 7% of global industry’s CO² emissions.
Green steel is different from normal steel in that it is produced using hydrogen rather than the coke made from coking coal. Hydrogen burns clean, without carbon emissions.
However, hydrogen has traditionally been produced by splitting natural gas, which releases lots of carbon. Green hydrogen, by contrast, is obtained by using electrolysers to split water molecules. If renewable energy powers this process, no carbon is emitted. This "green" hydrogen can then be used as a reduction agent and fuel by steelmakers, thus slashing the industry’s carbon emissions.
Pilot and demonstration green steel plants are being built in countries such as Sweden, Norway, and Germany.
In June, ArcelorMittal Europe announced concrete plans to slash its CO² emissions by 30% by 2030 and become carbon neutral by 2050. The company says using green hydrogen as a reductant will be key to that.
The problem is that green steel is at present 30%-90% more expensive to produce, depending, in part, on where production is located. It takes vast amounts of renewable power to make the green hydrogen required.
This is where SA has a huge advantage, says Hilton Trollip. He’s researching decarbonisation in the heavy industry sector through a project led by Paris-based independent think tank IDDRI, in partnership with the University of Cape Town’s energy systems research group.
SA’s high solar radiation levels mean it can make solar photovoltaic (PV) electricity considerably more cheaply than Europe, says Trollip. This could replace the high-quality coking coal that is such a high input cost for regular steelmaking, especially if, as in SA, the coking coal is mostly imported.
Over the full life cycle of a plant, "PV electricity could turn out to be less costly, and [it] has the benefits of more jobs and local production", says Trollip.
This could help offset the high upfront investment in the technology required for green steel production.
SA’s steel industry was battered by recession even before Covid-19 slashed production. Weak domestic demand and the global glut of cheap Chinese steel contributed to regional production falling nearly 30% since 2006, and the sector is said to be "under existential threat".
Yet it’s a strategic asset: before ArcelorMittal’s Saldanha steel plant was wound down, the steel industry contributed 190,000 jobs and up to 1.5% of GDP.
Survival may hinge on a swing to green steel. Should Europe introduce regulations that require carbon emission cuts in upstream products and primary materials, export opportunities are likely to open, says Trollip. If public buildings in Europe have to use green steel, for example, a huge market could be created.
Another possible point of uptake is the prestige electric motor vehicle industry. "If your nice, emissions-free car is also made from green steel, it would be a selling point," says Trollip. "People will be prepared to spend more in wealthier countries for environmentally sound goods."
A 2019 case study by Trollip’s team found that huge quantities of "virgin", or primary, steel will be needed to build infrastructure in Africa’s cities, as its urban populations are expected to double by 2050.
Trollip believes if authorities are serious about being carbon neutral by 2050, the world shouldn’t build any more conventional steel plants to produce the steel Africa will need, but turn to hydrogen plants instead.
For exports to have a chance, though, policy agreements between north and south would have to ensure there’s a more level playing field.
"If the Europeans agree to decarbonise global supply chains — if they give [SA] equal access to their steel market — we think we could be competitive," says Trollip. It would need "a hard commitment from the European politicians, saying that for a fair world they would keep their markets open to us. Because it’s not just about decreasing emissions, it’s also a matter of dealing with the sustainable development goals."
The case study estimates that, with the right support, SA could be making export-ready green steel in commercial plants by 2030-2035.
ArcelorMittal Europe is already lobbying for stimulus packages and policy to ensure its future green steel is competitive — including a "carbon border adjustment", or tax, to ensure imported steel that is made the old, dirty way has emissions costs added to the final price. "The biggest barrier to transitioning to carbon-neutral steel, beyond the necessary technologies reaching commercial maturity, is the absence of the right market conditions," CEO Geert van Poelvoorde says in a statement.
For SA to become a player in the global green steel market, government will need to provide a supportive environment
— What it means:
In SA, the political tussles between unions, the government and industry over the transition from coal to renewable energy would need to be resolved to clear the way for green steel.
ArcelorMittal SA says it could benefit from the group’s low-emission steelmaking technologies. But given the structurally higher costs and investment in clean energy infrastructure that would be required for wide-scale commercial rollout, "a supportive policy environment and access to sustainable finance is imperative", says spokesperson Tami Didiza.
"To achieve this vision in SA will require a comprehensive and collaborative approach with government and other stakeholders."
Challenges locally include ensuring a level playing field against imports, funding for research and development and for plants, and affordable renewable energy. "Based on these constraints, we still have a long way to go in SA to realise green steel production," says Didiza.
Michael Ade, chief economist of the Steel & Engineering Industries Federation of Southern Africa (Seifsa), believes Europe’s move to carbon-neutral steelmaking is "worth replicating in SA", thanks to the documented benefits of renewable electricity, which will alleviate pressure on the national grid.
"Seifsa is open to the idea, because of the long-run benefits in reducing unit costs and [achieving] economies of scale, given that energy and logistics costs together comprise a significant share (almost 70%) of the cost basket of primary steel producers," says Ade.
"During this pandemic-induced economic downturn, we will not dismiss any new ideas immediately … SA can definitely produce green steel in the future. However, the industry will need direct cost-minimisation incentives from the government, investors or development finance institutions."
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