Jules Verne, the father of science fiction, imagined a society powered by hydrogen back in the 19th century. The idea of the element as a clean fuel has won a harder-headed adherent in Jim Radcliffe. His business Ineos, which produces chemicals and refines oil, has a €2bn plan to expand into hydrogen. Since Ineos owns six private jets the UK entrepreneur may be seeking a distraction from his company’s own carbon emissions.
Ineos’s focus will be on “green” hydrogen, made by splitting the gas from oxygen in water using renewable energy. This has promise for decarbonising industry. It could not only supplant hydrocarbons as a portable and storable fuel, it could also be used for steelmaking.
Blast furnaces use coking coal to melt iron ore and remove oxygen. Hydrogen could do that. But you would need lots of it cheaply.
This would require a huge expansion of electrolysis capacity. The UK produces 7m tonnes of steel annually. Powering that with hydrogen would require 7 gigawatts of electrolysis plants, thinks UK-listed ITM Power, which makes them.
That is seven times its own current capacity. Even if overheads were falling, new plants would still cost more than £3.5bn. The price of hydrogen would also be an issue. At today’s price of $5-$7 per kilogramme, the green version is treble what steelmakers are willing to pay.
ArcelorMittal, Voestalpine of Austria and Sweden’s SSAB have announced early steps towards adopting hydrogen. They will hope to socialise any transition costs, including writedowns for existing mills, via government financial support.
Even starting from scratch to build a green steel plant, which H2 Green Steel plans to do in Sweden, would cost more than €500 per tonne, says Jefferies. The EU produced 159m tonnes of steel in 2019. Rough calculations suggest European steel would need more than €50bn of investment to switch.
Such sums make carbon transition look daunting. But equivalent sums of sunk investment spawned modern industry, the factual counterpoint to Verne’s imaginings. Sink more investment into sustainable alternatives and paybacks would also recur for decades.
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