How much electricity would we need for green steel? Some numbers from Chris Goodall's new book

Maybe "hard-to-abate", but not impossible.

A big chunk of our emissions comes from electricity, heating and road transport. We are making good progress on developing low-carbon alternatives to these sectors (and the economics of these solutions look better every year).

But what about the so-called “hard-to-abate” sectors? People love to tell me that we’re doomed because we’ll never be able to tackle steel, aviation or cement. But is this true? Are these sectors impossible to decarbonise, or have we just not given it a good shot yet?

In his new book – “Possible: Ways to Net Zero” – Chris Goodall looks at our prospects of tackling cement, steel, aviation and shipping, plastics, food, long-term storage, and grids.

As you might guess from the title, it’s technically feasible. While many of these solutions are still in the pipeline, there is a viable path to a low-carbon substitute for most sectors. The economics is the hard part, although these are shifting in a more promising direction.

Some of these solutions will start to come online in the next decade – albeit not at a global scale. The big question is whether they can scale to the level we need by the middle of the century.

If you like this Substack, you’ll like Chris’s work and new book. He uses numbers – often back-of-the-envelope – to get a sense of scale and viability for different solutions. He’s rarely prescriptive and is realistic about the scale of the challenges ahead. There are often several potential solutions for the sectors he covers in the book: he runs through them all, highlighting their benefits and trade-offs. Again, grounded in numbers, not “feels”.

I wanted to provide just one example of some numbers in the book that I found interesting. The prospects for building “green steel”. How much renewable electricity would be needed to produce it from green hydrogen? And how much capital would the world need?

Note that while the numbers are from Chris's book, the commentary is mine. So throw daggers in my direction for any errors there.

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How can we decarbonise steel?

Steel production accounts for around 8% of the world’s emissions. It’s the biggest industrial emitter.

The world will need a lot of steel over the next 50 years as its population grows, gets richer and urbanises. We’ll need it for new cities, bridges, infrastructure, and low-carbon technologies. So we better find a way of decarbonising it.

Two-thirds (1.3 billion tonnes) of the world’s steel is made from blast furnaces of coke, a product of coal. Blasting iron ore with burning coke strips the oxygen, giving us the elemental metal (raw iron). Put this into a furnace, changing the chemical composition to produce steel. One tonne of new steel needs around 0.8 tonnes of coal.

The remaining third of steel is produced from electric arc furnaces. This takes scrap steel and recycles it back into new steel. This has lower carbon emissions, especially if the electricity comes from low-carbon sources. But there isn’t enough scrap metal to produce all of our new steel from electric arc furnaces.

Source: 6 Steps of the Steel Manufacturing Process

There are two paths to decarbonising steel. Capture the CO₂ that’s emitted. Or get rid of the coke in the process.

Carbon capture and storage (CCS) will probably be too expensive and seems unlikely.

But we do have two options to do the process without coke.

First, we could use hydrogen to strip the oxygen from the iron ore. Instead of producing CO₂, you produce steam. This process is called ‘direct reduction’.

Second, you can directly electrify the process. Boston Metal is an example of a company that’s innovating in this direct electrification space.

Which route proves to be the most promising is still an open question. Chris Goodall discusses this in a blog published last year. Both options will require significant quantities of clean electricity. For the first option, electricity will be needed to produce hydrogen.

“Direct reduction” from hydrogen has the advantage that it’s further down the development process. There are already a bunch of projects underway. Direct electrification is still in its infancy.

Direct electrification should be a more efficient way of using green electricity. Its advocates claim that it will be cheaper, could be produced at smaller-scale plants, and can use lower-quality iron ores as inputs.

While direct electrification is behind the curve, I wouldn’t rule it out. But today, I will run through Chris’s numbers on electricity demand and capital cost for the hydrogen route. Even if you think electrification is the way to go, having some numbers on the alternative route will help you make your case…

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How much clean electricity would be needed to produce green steel from hydrogen?

Chris estimates it takes around 4 megawatt-hours (MWh) to make one tonne of steel.

The process will require around 3 MWh of hydrogen, but there will be losses in making the hydrogen in the electrolyser, so the electricity required will be around 4 MWh.

That’s more efficient than the 6 MWh used in making it from coal.

The world produces around 1.3 billion tonnes of steel from blast arc furnaces per year.¹

Multiply these figures together, and we get 7,000 TWh of electricity demand to produce all of the world’s new steel from hydrogen.² Global electricity production today is around 28,000 TWh. ³

Greening the steel industry would add around one-quarter to the world’s electricity demand. 

Of course, if we want to do this low-carbon then that’s going to have to come from nuclear or renewables. These are not small numbers.

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How much capital would be needed for green steel from hydrogen?

To estimate the amount of capital investment needed, Chris takes figures from H₂ Green Steel, a company in the Baltics that aims to open its first plant in 2025. 

It’ll cost around €5 billion and produce 5 million tonnes per year. That’s €1 billion of capital per million annual tonnes.

The world produces 1.3 billion tonnes of new steel each year. That means the new infrastructure to make this all from green hydrogen would cost €1.3 trillion.

Spread over 25 years and you’ve got an annual capex of around €50 billion. Chris estimates this equals around 3% of the steel industry’s revenue. Not crazy numbers, but significant given the profit margins for most industrial steel makers are not massive.

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The main barrier will be achieving low electricity prices

It’s not just capex that is a financial barrier to green steel. The challenge is energy costs: the difference between the cost of electricity and coal.

Green steel will only be viable in locations with very cheap electricity. The problem is that’s not where many steel plants are today. They’re either near coal mines or regions with very cheap coal. Or in countries with relatively expensive electricity.

China produces half of the world’s steel, so it will obviously play a crucial role. If the cost of electricity – and green hydrogen production – can fall faster than coal, then investments will become increasingly attractive.

The benefit that cheap, low-carbon electricity will bring to the process is more stable steel prices compared to volatile fossil fuel markets.

The above is just a snapshot of what Chris Goodall covers on steel in the book. And, of course, steel is just one of many sectors that he tackles. If you’re interested in putting numbers on the potential solutions in front of us, I highly recommend it.

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Speaking of books, if you haven’t yet read mine yet – Not the End of the World – it’s available for just £1.99 until midnight tonight on the UK Kindle store.

1. Another 0.6 billion tonnes comes from recycled steel.

2. 3 MWh x 1.3 billion tonnes = 6.9 billion MWh. That's 7,000 terawatt-hours (TWh).

3. These figures are from Ember Climate: https://ember-climate.org/