• Greenhouse Gas Emissions
  • Hydrogen infrastructure
  • European Union

Green Steel Production Builds Momentum in Sweden

Mar 09, 2021

Guidehouse Insights

Northern Sweden has Europe’s largest iron ore mines, vast renewable energy resources from hydropower and wind, and is a front-runner in the race to decarbonize the industrial sector. Two announcements in the past 6 months came from Swedish companies aiming to produce steel with zero emissions. In late February 2021, startup company H2 Green Steel announced it would begin green steel production by 2024. In August 2020, the HYBRIT Technology project began test operations backed by companies including SSAB, LKAB, and Vattenfall. Demand for green steel will likely increase as companies in the automotive, transportation, construction, pipeline, and heavy home appliance industries look to decarbonize in-line with national climate goals and national carbon prices.

Green Steel Requires Green Technology

Steel is responsible for 7% of global carbon emissions annually and the EU is the world’s second largest steel producer after China. Overall, emissions from the EU steel industry are equivalent to about half of emissions from all cars in the EU. These frightening statistics are due primarily to the fact that more than 70% of steel is produced from heating and melting purified coal known as coke. Almost all other steel is made from scrap metal that is melted down in an electric arc furnace. While this less common approach doesn’t use fossil fuels as a raw input, the process requires a significant amount of electricity to heat metal to extremely high temperatures, which typically comes from coal-fired power plants.

H2 Green Steel’s proposed technology replaces the blast furnace with direct reduction reactors, which are a mature technology typically used in places where natural gas is cheap. However, natural gas can be replaced with green hydrogen, which the company plans to produce through an 800 MW electrolyzer. The company aims to initially reduce C02 emissions by up to 95% through this process, with a larger goal to eventually reach zero emissions.

Steel Production Costs Must Decrease to Be Competitive

To build out a future steel industry based on green hydrogen, significant funding will be required to build new steel plants, as well as produce, transport, and store green hydrogen. To compete with the low cost of current steel production, the cost of electrolyzers, renewable electricity, transport, and storage must decrease significantly—or the price of carbon must rise enough to make fossil fuel-based steel production uneconomical.

The steel industry is an essential part of the global economy, but its emissions are too significant to ignore. Swedish companies seem keen to test the waters with green steel production, but it will take some major cost declines before green steel will reach its full potential.