“Five enablers: way forward to sustainable cleaner steel”
Steel Insights|November 2021
Right and scalable technology, appropriate policy guidance by government, access to finance to fund transition, willingness of customers to pay for cleaner products and infrastructure for use of new technologies are the need of the hour for the sustainable and cleaner steel industry, according to Madhulika Sharma, Chief Corporate Sustainability, Tata Steel.
Tamajit Pain
Right and scalable technology, appropriate policy guidance by government, access to finance to fund transition, willingness of customers to pay for cleaner products and infrastructure for use of new technologies are the need of the hour for the sustainable and cleaner steel industry, according to Madhulika Sharma, Chief Corporate Sustainability, Tata Steel. In a free-wheeling interview with Steel Insight’s Tamajit Pain, she said the right policy guidance to incentivize the steel producers to commit to decarbonization and create demand for low carbon embodied steel is key for transition of Indian Steel sector. Steel companies will have to invest significantly for piloting and scaling up near-zero technologies like the use of Hydrogen as an alternative to carbon and carbon capture for mitigation of its high carbon footprint. Collaboration is also the need of the hour and the transition can be accelerated by inter-sectoral collaboration.

There is a general trend towards adoption of decarbonisation for sustainable growth. How do you see steel players gearing up and what are the challenges?

With the run up to COP26, countries like China, Korea, and Japan have come out with their net-zero commitments. China has announced its commitment of net zero by 2060, Japan and Korea by 2050. Till now Asian countries were not there in net zero commitment. These were largely being led by the European countries.

These countries – China, Japan, and Korea, are also significant producers of steel. So, the steel companies operating in these geographies have also come out with commitments. However, unlike power sector and low distance mobility, deep decarbonization of steel is not only a matter of adopting an available technology because carbon is used in steelmaking as a reductant and is a process requirement. Initially for power sector also the adoption of available technology was an issue because of high cost of generation.

However, appropriate policy interventions ensured subsidies to producers to cover their costs and also created a demand base for use of renewable energy. However, for steel, alternate technology which is economically viable and technically scalable is not available globally. Hence, Steel is often referred to as a ‘hard to abate sector’.

The alternate to carbon, which is part of the process as reductant, is hydrogen. Technology for making hydrogen is available but the availability of green hydrogen, the entire supply chain as well as the process of using hydrogen in steel making has not yet been deployed at a large scale. There are some small pilots which have happened.

The challenge for the steel sector is that a scalable technology with the right economics is not available. The cost of developing or scaling up the technology is humongous. This cost cannot be borne by the steel sector alone and needs support from multiple stakeholders like regulators, financiers, customers and other sectors like power.

What are the key enablers for decarbonization in the steel sector?

Deep decarbonisation is possible but there are five key enablers, which are required.

Firstly, the use of Hydrogen technology as an alternate to carbon. Steel sector will have to take the lead in development and scale up of the technology. Secondly, there is requirement of right policies to incentivise steel producers to invest in the development of new technology and also create demand for cleaner steel.

The steel producer who invests in the development of technology does not have a first-mover advantage. For example, steel producers through gas-based DRI route is about 1.5 times more expensive as compared to steel produced through the BF-BOF route. Since Steel is a commodity, the customer is not willing to pay a higher premium for a low carbon embodied steel.

However, the transition for demand for cleaner steel has started in Europe because of right policy guidance for all sectors to reduce their carbon footprint. Hence, Policy is very important for transition.

Thirdly, there is cost of finance. The transition requires huge amount of resources and it is not in the wherewithal of the company or any sector to garner this finance to develop these technologies. Even if you look at renewable energy, they were supported by government subsidies to scale up, which had helped in creating a demand for bulk consumers. With help of right policies, the power sector has taken more than 10 years to reach a point where the cost of generating green power has come down significantly.

The fourth one is customers. Willingness of customer to actually pay more for cleaner steel is crucial for transition of the sector. If the steel companies absorb the entire cost they will be wiped out.

If you have to be sustainable you will also have to be relevant in business. The last one is infrastructure. Whether you are talking about hydrogen or carbon capture, the technology and the supply chain for the existing products of steel have got perfected in the last 100 years.

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