The Institute for Energy Economics and Financial Analysis (IEEFA) has stated in its latest report that “blue hydrogen” will not result in a significant decrease in the emissions of steelmakers and that they could be at risk of falling behind in terms of the decarbonization race.
According to IEEFA, over the last year, steelmakers have reached a more realistic understanding of hydrogen’s potential use and production costs, with its applications being narrowed to a few key specific areas including iron and steel production, in which the electrification process may not be able to completely decarbonize the sector. Even though green hydrogen has been considered as the primary means to produce green steel, its costs remain higher than anticipated.
In the meantime, a lot of companies and countries have been considering using blue hydrogen that is produced from fossil gases as well as carbon capture and storage (CCS) technology. In particular, producers such as POSCO, thyssenkrupp and Salzgitter have been exploring the option to integrate the use of blue hydrogen into their ironmaking processes. Yet, there are several problems that are likely to hinder blue hydrogen’s potential for decarbonization of the steel industry. One of the issues is blue hydrogen’s reliance on carbon capture. CCS has remained well below its expected performance over the last 50 years, with projects being unable to achieve their target of capturing carbon dioxide. Second, blue hydrogen’s emissions problem extends beyond carbon dioxide since the most significant component of fossil gas is methane, which has a much stronger effect than carbon dioxide. Furthermore, its cost advantage is thought to be short-lived. Some countries state that they will be able to produce green hydrogen at lower costs than blue hydrogen by the end of this decade. Also, high volatility in natural gas prices will continue to pose a challenge to blue hydrogen. In addition, blue hydrogen requires significant investment in production facilities, gas infrastructure and CCS technology.
As a result, IEEFA stated that green hydrogen remains the most effective long-term solution for addressing the decarbonization of primary steelmaking.