Countries with limited potential for renewable power generation could fare better by importing low-emission steel from overseas rather than importing hydrogen to feed domestic ironmaking, according to a new study seen by Kallanish.
According to the Potsdam Institute for Climate Impact Research (PIK), such countries would save around 20% of costs for green steel if they import from countries where renewable energy is cheaper.
Philipp Verpoort, lead author of the study published originally in Nature Energy, names steelmaking regions like the EU, Japan and South Korea, as those which could save 18-38% in costs by employing this strategy. “Focusing on downstream production and refinement could be a cheaper and more robust strategy for securing competitiveness,” says Verpoort.
The scientists looked at the green value chains of three primary basic materials: steel, urea and ethylene. They argue that an electricity price difference of €0.04/kWh ($0.04) can be expected by 2040 in favour of locations like Australia, Chile and South Africa.
Apart from the immediate cost savings, the study also discusses other factors that will influence investment decisions by companies, such as benefits of short and integrated value chains, reliability of supply chains, quality requirements, and public subsidies.
The “deindustrialisation” label in this regard “is both inaccurate and misleading”, notes Falko Ueckerdt, co-author of the study. ”It is only the first few steps of the long value chains of energy-intensive basic materials that will likely be relocated.”
He claims that the shift presents a potential win-win scenario, as industrialised countries can focus on their economic strengths by specialising, for example, in making green steel from sponge iron and then further processing it.
Christian Koehl Germany
