According
to a joint report by the Institute for Energy Economics and Financial Analysis
(IEEFA) and JMK Research and Analytics, green hydrogen is expected to overtake
coal as the dominant fuel source for steel production in India by the year
2050.
The report underscores
the urgency of reducing green hydrogen costs and implementing penalties for
carbon emissions as pivotal steps to facilitate this transition among Indian
steel producers. From 2030 to 2050, the study estimates that 25 to 30 percent
of grey hydrogen currently used in the industry will be replaced by green hydrogen, with
the percentage expected to increase to 80% by 2050.
Given the nascent state
of decarbonization in the steel sector, the report emphasised the critical role
that government policy will play in stimulating demand for green steel.
Establishing a legal definition for “green steel” was highlighted as a practical
measure to guide industry investment in decarbonization efforts.
Vibhuti Garg, Director
of South Asia at IEEFA and co-author of the report, stressed the need for
policymakers to have a long-term vision that encourages the production of green
steel as part of the broader strategy to decarbonize the industry in India.
The study revealed that
green steel production costs are nearly double that of traditional steel
production methods. To address this issue, the report recommends viability gap
funding (VGF) as a means to offset the high initial capital costs associated
with adopting low-carbon steelmaking technologies. The government could offer
this funding to incentivize steel producers to allocate a portion of their
capacity to green steel production.
The report also
highlighted the environmental advantages of green hydrogen over other
technologies for reducing emissions in steel production. While
renewable-powered electric arc furnaces (EAFs) were presented as an
alternative, limitations related to the availability of high-quality scrap were
noted.