IEEFA questions viability of hydrogen as steel emissions savior

To what extent hydrogen as an alternative energy can help reduce reliance on fossil fuels has become a topic of discussion this decade.

Late last year, Boston-based Lux Research questioned hydrogen’s cost effectiveness as a transportation fuel. Now, an Ohio-based market research firm says the proposed energy source may not always be fit as an alternative to coal in steelmaking either.

In a Jan. 21 post from Valley City, Ohio-based Institute for Energy Economics and Financial Analysis (IEEFA), Soroush Basirat of that research firm writes, “A range of problems are likely to severely hamper ‘blue hydrogen’s’ potential for decarbonizing steel production.”

Basirat says blue hydrogen is hydrogen fuel produced from fossil gas coupled with carbon capture and storage (CCS) technology.

“Companies like POSCO, Thyssenkrupp and Salzgitter have been exploring the use of blue hydrogen in ironmaking,” Basirat says of the interest the alternative energy technique has received from global steelmakers.

“[However,] steelmakers considering using blue hydrogen to decarbonize production will not significantly reduce their emissions and could find themselves exposed to significant risks of being left behind in the decarbonization race.”

According to Basirat, who formerly was a corporate development and investment analyst in the steel industry, “One of the primary issues facing blue hydrogen is its reliance on carbon capture. Over a period of nearly five decades, CCS has amassed a track record of significant underperformance, with projects consistently falling short of achieving their targets for capturing carbon dioxide.

“Blue hydrogen’s emissions problem extends beyond carbon dioxide. The largest component of fossil gas is methane, emissions of which have a much stronger warming effect than CO₂. Methane leakage rates of gas production and transportation have been significantly underestimated in the reporting of blue hydrogen’s total emissions.”

IEEFA’s research indicates it will be challenging for blue hydrogen to meet emissions reduction targets in North America, Europe, Japan or South Korea.

“Major oil and gas companies like Shell and Equinor have abandoned their blue hydrogen projects, citing the challenges of meeting the EU’s strict carbon emissions regulations and lack of demand,” Basirat writes.

Earlier in January, the Canary Media reported that Swedish steelmaker SSAB “quietly” decided to withdraw from a project in Mississippi that had attracted potential United States government funding to use “green hydrogen” to make direct-reduced iron (DRI) and power a planned steel mill.

According to IEEFA, green hydrogen techniques—which involve using renewable energy—may yet be a better option. Blue hydrogen, Basirat says, requires "significant upfront investment" in production facilities, gas infrastructure and carbon capture. In contrast, green hydrogen can be developed incrementally due to its modularity, reducing investment risks over time.

“Any investment in fossil fuel-based hydrogen production risks trapping investors, as they may find themselves committed to a long-standing technology likely to become obsolete in the coming years,” Basirat concludes.