EV uptake helping drive increased demand for green steel
From pv magazine print edition 11/24
As it did with lithium-ion batteries, the automotive sector looks set to become a demand driver and transformational force for a crucial aspect of the global energy transition. Carmakers are emerging as the first large-scale purchasers of green steel. With the automotive industry responsible for 12% of global steel demand, according to the World Steel Association, the scale of this demand is kick-starting efforts by manufacturers to ramp up emission-free manufacturing of this key commodity.
The logic behind automotive demand is clear. As carmakers vie for position in a marketplace in the throes of a rapid transition toward electrification, utilising green steel can strengthen the environmental credentials of the automakers, and may be a key differentiator, particularly for environmentally conscious electric vehicle (EV) buyers. With a cost premium of some 20% to 30%, according to Simon Nicholas, the lead analyst for Global Steel at the Institute for Energy Economics and Financial Analysis (IEEFA), green steel is not prohibitively expensive for many carmakers.
“In terms of the price of a car, considering how much steel is actually in a car, it doesn’t make much difference to the overall price,” said Nicholas. “It does impact the customer but we’re talking hundreds of dollars rather than thousands.”
Increased demand for green steel from automakers is coming at a critical time in the development and adoption of processes required for its production. This demand points to a virtuous circle formed by green steel and renewable energy. Large amounts of renewable energy generation capacity will be required by green steel makers to supply electric furnaces and green hydrogen electrolysers. As the energy transition accelerates, fast-growing solar and wind, plus electricity network expansion will require large amounts of green steel.
Carbon-intensive processSteel production has been and remains a carbon-emission-intensive endeavor. Steel production is broadly considered to be responsible for anywhere between 8% and 11% of global CO2 emissions. Market intelligence company Wood Mackenzie finds that 3.6 billion tons of CO2 were produced for 1.89 billion tons of crude steel in 2023.
Steel is predominantly produced via two methods, either from integrated blast furnace-basic oxygen furnaces (BF-BOFs) or from electric arc furnaces (EAFs). Blast furnace operators, which account for roughly 70% of global production, make steel from iron ore and use coal as a reducing agent – extracting the iron from the ore and providing the carbon required by steel. The International Energy Agency, observing that the steel industry is not on track to meet its Net Zero Emissions by 2050 (NZE) scenario, describes blast furnace operators as being “highly reliant on coal.”
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