Winding path to 'green steel': Transition for sector needs policy enablers
The root of the problem lies in the centuries-old steelmaking process
 "steel industry")
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Steel mills in India, according to Crisil Research, typically contribute 10-11 per cent of total carbon emissions from the country
Steel is ubiquitous. There is a bit or a lot of it in everything around us — from cars, appliances and airplanes to buildings and bridges. That’s also part of the reason it’s a problem in tackling climate change.
Globally, steel contributes between 7 and 9 per cent to emissions. Steel mills in India, according to Crisil Research, typically contribute 10-11 per cent of total carbon emissions from the country.
With top steelmakers looking to add capacity at breakneck speed — 40 million tonnes in the next five years — the importance of adopting environment-friendly technology and processes is significant not just for the country but for the world’s decarbonisation journey.
Simon Nicholas, energy finance analyst with US-headquartered research organisation, Institute for Energy Economics and Financial Analysis (IEEFA), said, given the continuing rise in steel demand, the steelmaking technology path taken by India going forward will be key to determining how successful global steel sector emissions reductions will be.
The path to decarbonisation in India can be broken down into two parts. Top private sector steelmakers are reducing carbon emissions in their facilities and looking to meet some energy requirements through renewable sources. And there are early thoughts around setting up more environment-friendly plants. The root of the problem lies in the centuries-old steelmaking process. The carbon-intensive blast furnace-basic oxygen furnace (BF-BOF) route — in which iron ore is smelted at a very high temperature and coal is used as the reducing agent — is the preferred method for primary steelmakers and accounts for 71 per cent of steel produced in the world.
The electric arc furnace (EAF) and induction furnace (IF) route is the other one and is less polluting. The major inputs in the process are scrap or sponge iron/DRI.
In India, due to shortage of scrap, sponge iron ore or direct reduced iron (DRI) is mostly used. Most of the sponge iron units are coal-based and therein lies the problem.
The large integrated players mostly use the BF-BOF route, accounting for about 45 per cent of crude steel production.
The major share in India’s steel production is accounted for by the integrated steel producers at close to 64 per cent. And they are adopting measures to cut emissions or mulling “green” technology. But the role of secondary producers will be equally important for India to achieve its net zero target.
Large players are typically at the forefront in announcing green manufacturing capacity additions, Hetal Gandhi, director, Crisil Research, pointed out.
Among the proposed green plants are the $5 billion Adani-POSCO integrated steel mill and ArcelorMittal Nippon Steel India’s (AM/NS India’s) new plant in Odisha. Jindal Steel & Power’s (JSPL’s) expansion at Angul, Odisha, will be partly based on coal gasification method, which, according to the company, will have less emissions than burning coal in open furnaces.
Then, the top two private sector steelmakers in the country — JSW Steel and Tata Steel — have set targets for reducing carbon emissions at existing plants.
“We have committed Rs 10,000 crore to achieve our target of 23 per cent reduction in carbon emission by 2030,” said Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.
The target will be met through different initiatives — from improving the quality of iron ore by setting up beneficiation plants in Odisha to increasing scrap consumption in steelmaking to transition to renewable energy. JSW Energy is setting up 958 Mw wind and solar power for captive use of JSW Steel. “We are investing 26 per cent equity in those plants. The balance investment will be made by JSW Energy,” said Rao.
Tata Steel has set a target to bring down CO2 emissions to 1.8 tonnes per tonne of steel for 2030, which will be achieved by charging more scrap, using better quality raw materials and other operating initiatives (Jamshedpur Steel Works was at 2.29 tCO2/tcs in FY21).
It has also initiated a pilot project for continuous injection of coal bed methane (CBM) in the blast furnace to reduce emissions. Tata Steel is also looking to invest in scrap-based electric arc furnaces.
Globally, companies are investing billions of dollars to reduce carbon emission.
ArcelorMittal has set a target of 25 per cent global reduction in CO2 emissions intensity by 2030 at an anticipated cost of $10 billion. In India, it recently entered into a strategic partnership with the Greenko Group for a $600 million “round-the-clock” 975Mw of nominal solar and wind capacity.
The project will be owned and funded by ArcelorMittal and AM/NS India will have a 25-year offtake agreement to buy 250 Mw of renewable power annually from the project. That will result in over 20 per cent of the electricity requirement at AM/NS India’s Hazira plant coming from renewable sources, reducing carbon emissions by approximately 1.5 million tonnes per year.
JSPL, which is on an aggressive expansion mode after deleveraging, will have a capacity of 20-25 mt by 2027. About half of that will be through the EAF and DRI route, said JSPL Managing Director V R Sharma.
The company has set an overall target of 1.8 tonne of CO2 per tonne of steel (tCO2/tcs) from 2.6 tonne currently.
Steel Authority of India Ltd (SAIL), as part of its modernisation plan, installed energy efficient technologies that reduced specific CO2 emission from operations by more than 9 per cent over the last 10 years.
The target for 2030 is further CO2 emission reduction to 2.30 tCO2/tcs (India’s Nationally Determined Contribution, according to the Paris Accord, for 2030 is 2.4 tCo2/tcs).
But for the transition to low-carbon steel, Gandhi said incentives to set up hydrogen plants, infrastructure development for gas and hydrogen transport were important. “PLI-like (performance-linked incentive) incentives for electrolyser capacities and more will be needed,” she added.
Nicholas says the government will need to support lower-emission primary steelmaking such as DRI using green hydrogen. That will mean supporting the production of cheaper green hydrogen (for which there are early-stage government plans) and also ensuring increased supply of high-grade iron ore (as DRI needs higher quality iron ore than blast furnaces), he explained.
Companies also believe that to incentivise decarbonisation, a carbon credit mechanism is required.
Between FY22 and FY26, according to an ICRA report, India’s steel capacity is likely to increase by 40 mt, which is almost double the capacity added during the previous five-year period spanning FY17-FY21.
Even as policy enablers are awaited, major steel producers that export need to decarbonise as developed nations mull a carbon tax.
Globally, steel contributes between 7 and 9 per cent to emissions. Steel mills in India, according to Crisil Research, typically contribute 10-11 per cent of total carbon emissions from the country.
With top steelmakers looking to add capacity at breakneck speed — 40 million tonnes in the next five years — the importance of adopting environment-friendly technology and processes is significant not just for the country but for the world’s decarbonisation journey.
Simon Nicholas, energy finance analyst with US-headquartered research organisation, Institute for Energy Economics and Financial Analysis (IEEFA), said, given the continuing rise in steel demand, the steelmaking technology path taken by India going forward will be key to determining how successful global steel sector emissions reductions will be.
The path to decarbonisation in India can be broken down into two parts. Top private sector steelmakers are reducing carbon emissions in their facilities and looking to meet some energy requirements through renewable sources. And there are early thoughts around setting up more environment-friendly plants. The root of the problem lies in the centuries-old steelmaking process. The carbon-intensive blast furnace-basic oxygen furnace (BF-BOF) route — in which iron ore is smelted at a very high temperature and coal is used as the reducing agent — is the preferred method for primary steelmakers and accounts for 71 per cent of steel produced in the world.
The electric arc furnace (EAF) and induction furnace (IF) route is the other one and is less polluting. The major inputs in the process are scrap or sponge iron/DRI.
In India, due to shortage of scrap, sponge iron ore or direct reduced iron (DRI) is mostly used. Most of the sponge iron units are coal-based and therein lies the problem.
The large integrated players mostly use the BF-BOF route, accounting for about 45 per cent of crude steel production.
The major share in India’s steel production is accounted for by the integrated steel producers at close to 64 per cent. And they are adopting measures to cut emissions or mulling “green” technology. But the role of secondary producers will be equally important for India to achieve its net zero target.
Large players are typically at the forefront in announcing green manufacturing capacity additions, Hetal Gandhi, director, Crisil Research, pointed out.
Among the proposed green plants are the $5 billion Adani-POSCO integrated steel mill and ArcelorMittal Nippon Steel India’s (AM/NS India’s) new plant in Odisha. Jindal Steel & Power’s (JSPL’s) expansion at Angul, Odisha, will be partly based on coal gasification method, which, according to the company, will have less emissions than burning coal in open furnaces.
Then, the top two private sector steelmakers in the country — JSW Steel and Tata Steel — have set targets for reducing carbon emissions at existing plants.
“We have committed Rs 10,000 crore to achieve our target of 23 per cent reduction in carbon emission by 2030,” said Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.
The target will be met through different initiatives — from improving the quality of iron ore by setting up beneficiation plants in Odisha to increasing scrap consumption in steelmaking to transition to renewable energy. JSW Energy is setting up 958 Mw wind and solar power for captive use of JSW Steel. “We are investing 26 per cent equity in those plants. The balance investment will be made by JSW Energy,” said Rao.
Tata Steel has set a target to bring down CO2 emissions to 1.8 tonnes per tonne of steel for 2030, which will be achieved by charging more scrap, using better quality raw materials and other operating initiatives (Jamshedpur Steel Works was at 2.29 tCO2/tcs in FY21).
It has also initiated a pilot project for continuous injection of coal bed methane (CBM) in the blast furnace to reduce emissions. Tata Steel is also looking to invest in scrap-based electric arc furnaces.
Globally, companies are investing billions of dollars to reduce carbon emission.
ArcelorMittal has set a target of 25 per cent global reduction in CO2 emissions intensity by 2030 at an anticipated cost of $10 billion. In India, it recently entered into a strategic partnership with the Greenko Group for a $600 million “round-the-clock” 975Mw of nominal solar and wind capacity.
The project will be owned and funded by ArcelorMittal and AM/NS India will have a 25-year offtake agreement to buy 250 Mw of renewable power annually from the project. That will result in over 20 per cent of the electricity requirement at AM/NS India’s Hazira plant coming from renewable sources, reducing carbon emissions by approximately 1.5 million tonnes per year.
JSPL, which is on an aggressive expansion mode after deleveraging, will have a capacity of 20-25 mt by 2027. About half of that will be through the EAF and DRI route, said JSPL Managing Director V R Sharma.
The company has set an overall target of 1.8 tonne of CO2 per tonne of steel (tCO2/tcs) from 2.6 tonne currently.
Steel Authority of India Ltd (SAIL), as part of its modernisation plan, installed energy efficient technologies that reduced specific CO2 emission from operations by more than 9 per cent over the last 10 years.
The target for 2030 is further CO2 emission reduction to 2.30 tCO2/tcs (India’s Nationally Determined Contribution, according to the Paris Accord, for 2030 is 2.4 tCo2/tcs).
But for the transition to low-carbon steel, Gandhi said incentives to set up hydrogen plants, infrastructure development for gas and hydrogen transport were important. “PLI-like (performance-linked incentive) incentives for electrolyser capacities and more will be needed,” she added.
Nicholas says the government will need to support lower-emission primary steelmaking such as DRI using green hydrogen. That will mean supporting the production of cheaper green hydrogen (for which there are early-stage government plans) and also ensuring increased supply of high-grade iron ore (as DRI needs higher quality iron ore than blast furnaces), he explained.
Companies also believe that to incentivise decarbonisation, a carbon credit mechanism is required.
Between FY22 and FY26, according to an ICRA report, India’s steel capacity is likely to increase by 40 mt, which is almost double the capacity added during the previous five-year period spanning FY17-FY21.
Even as policy enablers are awaited, major steel producers that export need to decarbonise as developed nations mull a carbon tax.
Topics : Steel Industry Carbon emissions India