Renewables

Decarbonizing one steel plant with hydrogen requires up to EUR 7 billion in investment

steel green hydrogen decarbonization

Photo: iStock

Published

July 29, 2022

Country

Comments

comments icon

0

Share

Published:

July 29, 2022

Country:

Comments:

comments icon

0

Share

Switching an average European steel plant to green hydrogen requires from EUR 3.3 billion to EUR 7 billion of capital investment depending on whether renewable energy production is variable, according to Hydrogen Europe’s report Steel from Solar Energy.

Steel is among the sectors that are the most difficult to decarbonize, together with chemicals, cement and transport. It could be said that the success of the energy transition depends on their decarbonization.

To compare the volume of investments needed for the switch to green steel, the sector’s annual turnover is EUR 166 billion, according to data from the European Commission from 2016. There is more then 160 steel production sites in the EU.

Hydrogen Europe conducted the analysis to assess the viability of using solar energy (and renewable energy in general) for the decarbonization of steel manufacturing, which is responsible for around 4% of greenhouse gas emissions in Europe. The report focuses on hydrogen-based direct reduction of iron ore coupled with an electric arc furnace (H2-DRI-EAF), by comparing the levelized cost of steel with the blast furnace – basic oxygen furnace (BF-BOF) benchmark.

370 TWh of additional renewable energy is needed

Switching all BF-BOF plants in the EU to hydrogen-based DRI/EAF would require up to 5.3 million tones of renewable hydrogen and up to 370 TWh of other renewable electricity generation, including electricity consumption of electric arc furnaces, the document reads.

Converting a single steel plant with a capacity of four million tonnes of crude steel per year (EU average) would require 1.2-1.3 GW of electrolysis running at full load, EUR 3.3 billion EUR of capital investment (including EUR 1.2 billion for electrolysis), between 10.2 and 21.7 hectares of land for the electrolysis plant, and additional area for new renewable power deployment.

If variable renewable electricity is used and the electrolyser cannot be operated at constant full load, the challenge becomes even bigger.

When using exclusively solar PV for hydrogen production, the required electrolysis power would grow to around 4,5-5,0 GW, driving up the required CAPEX to almost EUR 7 billion for a single plant of average capacity, according to the analysis.

Green hydrogen production costs would be equal to the BF-BOF benchmark by 2025-2030

steel hydrogen decarbonization green steelThe analysis is conducted using two distinct price development scenarios: high prices scenario – assuming current high energy prices, and adjusted prices scenario – with energy prices adjusted down to reflect potential long-term fossil fuels price levels.

With an estimated current hydrogen delivery price (including production, transportation and storage) of EUR 5,3 per kilogram, total green steel production costs are higher than the BF-BOF benchmark both in the high and adjusted price scenarios, with the difference being 126 EUR and 203 EUR per tonne of crude steel, respectively.

Capital expenditure on electrolysers is expected to fall by around ¾ from current levels

However, capital expenditure on electrolysers is expected to fall by around ¾ from current levels, which lowers the price to EUR 1.5 per kilogram by 2025. If green hydrogen production costs decrease as predicted, by 2025-2030 it should be possible to eliminate the cost gap entirely, the document reads.

According to the estimate, in order for the project to break even, the hydrogen delivery price would have to be below EUR 3 per kilogram with high prices and below EUR 1.5 per kilogram in the other scenario.

Securing storage is also a challenge

In addition to the scale and costs, the third highlighted challenge is to provide a constant supply of hydrogen to the reduction shaft.

When hydrogen production is based entirely on variable renewable energy, like solar PV or onshore and offshore wind, a significant amount of operational storage is needed, the authors concluded.

Underground hydrogen storage in salt caverns offers a cost-effective solution, but they are not available across the whole EU.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment

Related Articles

Belgrade Energy Forum 2025 BEF 2025 EU Southeast Europe

Belgrade Energy Forum 2025 – top delegations coming from EU, Southeast European countries

07 May 2025 - Belgrade Energy Forum 2025 features eight panel discussions and more than 50 speakers: distinguished energy experts and representatives of energy companies

us DOE Secretary Chris Wright Three Seas Business Forum europe

US wants Central Europe to join ‘team energy freedom’, ditch EU’s energy transition goals

30 April 2025 - Energy Secretary Chris Wright has delivered a keynote speech at the inaugural session of the Three Seas Business Forum in Warsaw

Ember Warming 2024 global power demand rise with fossil fuels

Ember: Warming’s 2024 share of global power demand rise was covered with fossil fuels

09 April 2025 - Renewables and nuclear energy met 79,1% of 2024 global power demand growth. The fossil fuels share was bigger than the part attributed to the annual rise in temperatures.

croatia methane greenpeace catf analysis oil gas ina

Croatia among EU’s top three emitters of methane from oil, gas industry

08 April 2025 - The first large independent analysis in Croatia of methane emissions from the oil and gas infrastructure was carried out, according to Greenpeace Croatia