Iron production using direct reduction (DR) is a continuous process that requires a constant supply of energy and reducing gas to remove oxygen from the iron ore. Green iron production requires a significant amount of green hydrogen as a reducing gas, which requires abundant renewable energy to power the electrolyzers. Due to their variable nature, renewable sources such as solar and wind struggle to provide the seamless, uninterrupted power supply that electrolyzers require.
One way to address this challenge is to stabilize power generation through robust electricity storage systems that can support hydrogen production when the wind isn’t blowing and the sun isn’t shining. Alternatively, building oversized electrolyzers and renewables to produce and store green hydrogen can ensure a steady supply when renewable energy isn’t available. Each approach has its advantages and disadvantages, and the combination of renewables available in different regions will determine the best hydrogen value chain configuration.
To operate a green steel plant with a capacity factor of 20% and without battery support using a photovoltaic power plant, the size of the electrolyzer must be increased by a factor of 3.5. To support this expansion, a solar power plant five times larger is required. This increases the project’s capital expenditure (Capex) and complicates the transition to green steel.
In January 2024, IEEFA discussed how these barriers are driving the first round of green iron and steel production in regions with cheap, low-emissions off-grid energy, largely generated from a mix of renewables and hydropower. Access to low-emissions grid power is a unique benefit that is not a viable option for many regions.
Green hydrogen production is highly dependent on the local supply of renewable energy. In certain regions, electrolyzers should be directly connected to renewable energy sources despite the limited operating hours. In the Middle East and North Africa (MENA), the availability of low-cost renewable resources with limited seasonal variability can reduce the size of the required electrolyzers and hydrogen storage units.
Given the availability of gas-based DR technology in the MENA region and its flexibility in using different hydrogen blends, a short-term solution could be to produce hydrogen intermittently and replace gas consumption as much as possible. This could be an important first step towards green steel for MENA producers.
Compatibility of DR technology with hybrid reducing gases
Supplying direct reduction plants (DRIs) and electric arc furnaces (EAFs) with pure hydrogen 24/7 represents a huge transformation. In addition to the size of the electrolyzers and renewables required to supply large steel plants, strict regulations such as the three pillars (additionality, timing and geographic alignment) of the EU, US and Canada impose significant restrictions on hydrogen production. It makes sense to break this huge task down into smaller, more manageable steps.
DRI technology is flexible enough to work with different hydrogen blends. Both major suppliers of gas-based DRI technologies worldwide have made it clear that injecting hydrogen into existing furnaces is feasible. Midrex, the largest supplier of DR wells, has consistently stated that it is possible to replace up to 30% of natural gas with hydrogen without modifying the existing plant. Danieli and Tenova, the developers of Energiron’s technology, have confirmed that their plants are hydrogen-capable and can operate with different hydrogen blends. Energiron is reportedly able to use up to 80% hydrogen in the short term with an unchanged plant configuration.
Therefore, a gradual transition seems to be a promising solution for steelmakers already using gas-based DRI technology. The gradual substitution approach will enable better risk management for investors and enable steelmakers to adopt new technologies more effectively.
The implementation of a phased substitution strategy must be a priority for steelmakers already using gas-based DRI technology. Developing low-emission iron and steel plants in the MENA region, which accounts for 46% of global DRI production, will be crucial to reducing emissions from current steel plants. By partially using hydrogen instead of gas, these plants can build a value chain that paves the way for truly green iron production in the region.
While a partial switch can enable a reduction in project scope for electrolysers, renewables and storage, obstacles still need to be overcome.
Challenges and opportunities
Due to the variability of renewable energy sources, hydrogen electrolyzers continue to face challenges. These challenges can lead to issues such as low efficiency and higher costs, as well as potential safety concerns.
Electrolyzers have a safe operating range and a specific capacity factor (actual operating capacity compared to rated capacity) that must be carefully managed. Operating outside this range can be dangerous as hydrogen can mix with oxygen and form a highly explosive mixture. While developers specify different safe ranges (typically 10% – 100%), maintaining at least 50% capacity is considered a conservative and safe value.
A comprehensive review of 130 studies on the impact of intermittency in electrolyzer production finds a unanimous consensus: variations in temperature and electrical load significantly impact efficiency, gas purity and durability. While most of these studies emphasize the negative impacts of intermittency, there is a notable lack of real-world operational data. More practical experience is critical to fully understand the obstacles faced by intermittently operated electrolyzers. Overcoming this challenge could usher in a new era in hydrogen production from electrolysis, as demonstrated by proton exchange membrane (PEM) technology, which shows promise for effective operation with variable renewable energy input.
Despite these challenges, studies have shown that intermittent green hydrogen production can be cost-effective. This approach could eliminate the need to over-design renewable energy and battery storage capacity to cover the full capacity of electrolyzers. Research from Stanford University found that the lowest cost of hydrogen production could be achieved using wind, hydro and solar energy sources when electrolyzers are operated at 20 to 65 percent of their capacity factor.
There are also considerations of using curtailed electricity to produce green hydrogen. Some studies suggest this is technically feasible, but to make it commercially viable, additional support may be needed. The South Australian Government is investing A$593 million to build a hydrogen production, generation and storage facility in Whyalla. The project includes 250 megawatts (MW) of electrolyser capacity, a 200 MW hydrogen power plant and hydrogen storage infrastructure. The hydrogen produced will be used for electricity generation and industrial applications, including iron production at the nearby Whyalla Steelworks.
A gradual reduction in carbon emissions aligns perfectly with the provisions of the European Union (EU) Carbon Border Adjustment Mechanism (CBAM), which is to be gradually introduced for exports to the EU from 2026, with CBAM credits gradually increasing until 2034. The MENA region can maintain and even expand its iron and steel trade with the EU, as it has the potential to produce low-emission, lower-carbon products that comply with EU regulations.
While the first generation of true hydrogen-based green iron production plants are being developed by companies such as H2 Green Steel, HYBRIT and Blastr in the Nordic countries using low-emission electricity from the grid, the MENA region has the opportunity to hybridise its current fleet of gas-based DRI plants before switching fully to hydrogen. Hydrogen developers and steel producers in the region must seize this opportunity.
