Carbon capture losing steam in steel industry as hydrogen takes center stage
With renewable energy costs plummeting and green hydrogen gaining momentum, a new report from IEEFA predicts the steel sector is poised for a transformative shift towards truly low-carbon production methods.
A recent report from the Institute of Energy Economics and Financial Analysis (IEEFA) suggests that carbon capture utilisation and storage (CCUS) may not be the silver bullet for decarbonisation that many had hoped for.
Despite garnering support at the 2023 COP28 climate conference, the IEEFA report indicates that CCUS is unlikely to play a major role in reducing emissions in the steel industry. Instead, the report points to the rising momentum behind alternative technologies, particularly those involving hydrogen.
The shift away from CCUS is driven by increasing demand from consumers for truly green steel, which CCUS may not be able to provide due to its low capture rates. As tighter definitions of 'green steel' emerge, steelmakers are recognizing the limitations of CCUS and the potential of hydrogen-based technologies to meet these standards.
Direct reduced iron (DRI)-based steelmaking, which can operate on green hydrogen, is gaining traction within the industry. This method, coupled with electric arc furnaces (EAFs) powered by renewable electricity, presents a more promising pathway to decarbonise steel production than CCUS, according to the report.
The report outlines several key challenges facing CCUS, including significant financial, technological, and environmental risks, as well as uncertainties regarding the long-term effectiveness of CO2 storage.
“A key issue with CCUS that is often missed is its low rate of capture. CCUS projects have consistently struggled to reach targeted capture rates. Moreover, targeted carbon capture itself is often far below overall carbon emissions. Installations that capture low CO2 levels cannot be viewed as decarbonised,” says Simon Nicholas, IEEFA's Lead Steel Financial Analyst.
