Various funds have expressed interest in investing in steel manufacturer Thyssenkrupp’s green hydrogen initiative, which will eventually enable the company to manufacture low-carbon steel, senior executives tell Transition Economist.

Thyssenkrupp is conducting a feasibility study along with utility Steag to build an electrolysis plant at the energy firm’s Duisburg-Walsum facility. Steag would operate the plant, which will produce and supply green hydrogen to Thyssenkrupp’s nearby steel mill.

“There's no alternative to decarbonise the steel industry” Zschocke, ThyssenKruppUhde Chlorine Engineers

Thyssenkrupp Uhde Chlorine Engineers, Thyssenkrupp Steel and Steag will invest in the project, which will seek additional public and private funding. “There is a huge amount of funds interested in investing in such a lighthouse project in Germany,” says Christoph Noeres, head of green hydrogen at Thyssenkrupp. “To make steel production in Central Europe green is a really important topic for society, not only for business, but also because the steel industry accounts for many jobs.”

Noeres declined to reveal more details regarding potential investors or the size of stakes that could be sold to other parties.

In steelmaking, coal is burned to produce carbon monoxide, which in turn acts as a reducing agent on iron ore, removing oxygen to create a purer pig iron. This process emits as a byproduct approximately 1.85t CO₂ for every tonne of green steel made, according to the World Steel Association (WSA). Steel production generates 7-9pc of global CO₂ emissions.

Hydrogen conversion

In November 2019, Thyssenkrupp’s Duisburg steel plant began testing the use of hydrogen instead of carbon monoxide as a reducing agent in one of its blast furnaces. The process produces just water as a waste product.

A single, converted blast furnace will require 20,000t/yr of green hydrogen to operate. For Thyssenkrupp to meet its goal of making its steel production climate neutral, it will need 720,000t/yr by 2050.

“Green steel would be very important for the Ruhr Valley, which is transitioning from coal mining. We can show there's a new economy that fits into existing infrastructure,” says Andrei Zschocke, senior business development manager at Thyssenkrupp Uhde Chlorine Engineers. “This project will give an example to the whole world of how we can decarbonise steel.”

Thyssenkrupp was the 35^th-largest steelmaker globally in 2019, producing 12.25mn t in that year, according to the WSA.

Once the green hydrogen feasibility study is complete, the partners will create a special purpose vehicle that will include the appropriate commercial contracts and technical specifications for the technology.

“We plan to finalise the general concept by mid-2021,” Zschocke adds, saying he is confident a commercial-scale plant and project will be realised. “With the lead times for the technologies and infrastructure…we expect startup by 2025.”

Green steel cannot currently compete directly cost-wise with conventionally made steel, Zschocke acknowledges. “It's considerably more expensive, but we have a huge leverage on the emissions in this deal,” he says.

Green premium

For each tonne of green hydrogen used to make steel, 25t CO₂ is abated, the firm says. Although it receives some free permits, some of the firms operations will still face costs under the EU’s emissions trading systen, where prices are currently at over €40/t CO₂  ($48/t CO₂ ). Zschocke predicts carbon prices will rise over the next 20 years, although cheap natural gas means green hydrogen will remain a premium product.

7-9pc – Steel production’s share of global CO2 emissions

“Customers will need to either to pay a premium on the green steel—or another way to tackle this is through carbon credits. If we want fair competition, we need some sort of tax adjustment that makes the final price of green and grey steel similar,” says Zschocke.

Making green steel economically viable will depend on legislation, he notes. “This is always true for the startup phase of a new market. We saw the same in the wind and solar sectors—you need several years of support until you reach a breakeven level where the market is competitive on its own,” says Zschocke, adding he is confident this will happen.

Germany’s large automobile sector is a major steel buyer and could become a key customer for green steel. A large proportion of cars in Germany are company owned, so corporations wishing to reduce their emissions might  be willing to pay a slight premium for vehicles made from green steel.

Within ten years, the market as a whole will mature and other sectors will provide viable sources of demand for green hydrogen, according to Zschocke.

“The green steel project is not an R&D demonstration, it is a blueprint that can be replicated worldwide,” he says. “We are confident in the mid to long term, green hydrogen can compete against all other commodities provided we have sufficient renewable power available.”

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Author: Matt Smith