The steel
industry has other, more effective options to reduce emissions
Key
Takeaways:
Over
several decades of implementation in a range of sectors, carbon capture,
utilisation and storage (CCUS) has accumulated a track record of
underperformance and failure.
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17 April 2024 - (IEEFA Australia): A new report by
the Institute of Energy Economics and Financial Analysis (IEEFA) has shown that
carbon capture utilisation and storage (CCUS) will not play a major role in
steel decarbonisation despite support for the technology at the 2023 COP28
climate conference.
Direct reduced iron (DRI)-based steelmaking,
which can run on green hydrogen, is gaining momentum in the steel sector.
IEEFA’s research found that this technology – along with electric arc furnaces
(EAFs) powered by renewable electricity – offers steelmakers a far more
promising pathway to reduce their emissions than CCUS. Despite this, many major
steelmakers around the world still maintain that CCUS will play a role in
decarbonising their operations.
Simon Nicholas, IEEFA’s Lead Steel Financial
Analyst, says: “Major steelmakers’ plans for CCUS tend to push commercial-scale
implementation of the technology off into the 2040s and lack detail. CCUS
technology has been around for nearly 50 years and has accumulated a history of
significant underperformance.”
CCUS is susceptible to significant financial,
technological and environmental risks, made worse by uncertainty over the
long-term effectiveness of geological CO2 storage. The uniqueness of each CCUS project limits
technological learning and cost reductions. The cost of carbon capture implementation has
hardly reduced in dec
“The International Energy Agency
(IEA) has a track record of reliance on CCUS for decarbonisation, but now it
appears to have started to shift in its long-term view on decarbonising the
steel industry. We expect the IEA will continue to downgrade the role it
expects CCUS to play in steel decarbonisation in future updates,” says Nicholas.
“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.”
The steel sector’s first and only commercial-scale
CCUS plant, the Al Reyadah CCUS facility in the UAE, captured less than 20% of
the total Scope 1 and Scope 2 emissions from Emirates Steel Arkan’s DRI-based
steel plant in 2020 and 2021. Furthermore, the captured CO2 is used for
enhanced oil recovery (EOR), enabling the production of more fossil fuels and
the release of additional carbon emissions.
Soroush Basirat, co-author and IEEFA’s Global
Steel Financial Analyst, says: “Despite being operational for eight years, no
other commercial-scale carbon capture facilities for steelmaking have been
built.
“Emirates Steel Arkan is now turning to
alternative technology that it appears to consider more effective for
decarbonising steel. The company is establishing the first pilot project for
DRI-EAF using green hydrogen in the Middle East. The project is expected to
start up in 2024.”
Low capture rates will likely mean that any CCUS
installations will not decarbonise steel production enough to satisfy the
growing number of steel consumers demanding truly green steel. Car makers are
already signing purchase agreements for green steel made using green hydrogen
with virtually no emissions. Tighter definitions of what exactly constitutes
‘green steel’ can be expected in the near future.
“There is a significant risk that the low
capture rates of CCUS will mean steel produced this way will not meet such
definitions. Steelmakers will become increasingly exposed to the risk that
steel consumers will not want coal involved in their supply chains at all,”
says Nicholas.
“The phrases ‘hard to abate’ and ‘carbon capture
and storage’ often go hand in hand. Some steelmakers seem to be using the
phrase ‘hard to abate’ as an excuse to justify indefinite plans for CCUS in
future decades while continuing business-as-usual to a large extent.
"Where better and more cost-competitive
alternatives exist, CCUS is unlikely to play a role in decarbonisation. Using
green hydrogen in DRI and renewable energy to power EAFs enables the production
of truly low-carbon steel, a feat CCUS looks unable replicate."
About IEEFA: The Institute for Energy Economics and
Financial Analysis (IEEFA) examines issues related to energy markets, trends,
and policies. The Institute’s mission is to accelerate the transition to a
diverse, sustainable and profitable energy economy. (ieefa.org