Green Hydrogen First Movers: Brad Davey of ArcelorMittal
A Q&A with ArcelorMittal Executive Vice President Brad Davey about the steelmaking giant’s approach to green hydrogen
Steel is everywhere, from buildings to bicycles to wind turbines. It quite literally underlies the infrastructure that enables our modern economy. We use almost 2 billion tons of steel per year, and that figure will grow to 2.5 billion tons per year by 2050.
Producing steel requires high-heat, fossil fuel–intensive processes, making the sector responsible for more than 7 percent of global greenhouse gas emissions.
As Brad Davey, Executive Vice President and Head of Corporate Business Optimization at steelmaking giant ArcelorMittal, explains, “For steel to decarbonize, production processes that have existed for centuries need to be totally transformed.”
ArcelorMittal is leading the charge in that transformation. In an industry first in April 2022, the company successfully tested the use of green hydrogen in the production of direct reduced iron, effectively greening the raw material for steel. Green hydrogen, which is produced using renewable electricity, is expected to play an important role in the company’s multipronged plan to reach net-zero emissions by 2050.
“We are ready to use green hydrogen today,” says Davey, “and we are prepared to do what it takes to make these projects happen.”
Davey spoke with Bryan Fisher, Managing Director of Climate-Aligned Industries at RMI, about how the company is approaching this technology.
Why is green hydrogen the right decarbonization solution for making steel?
Hydrogen, and specifically green hydrogen, is one of three clean energy solutions — alongside carbon capture and sustainable biomass — that hold the key to decarbonizing steelmaking. There is no doubt that green hydrogen will play a major role in decarbonized steel production in 2050.
While there are other ways to use it, we think its main use will be in making direct reduced iron (DRI). This process currently uses natural gas, but we are eager to use green hydrogen to replace the natural gas and fully decarbonize production. We and others are testing this in order to scale up.
Where do you see the cost of green hydrogen going in the next five years?
The cost of green hydrogen needs to come down significantly for a host of reasons: to ensure a balance of technologies across the globe, to create reasonable cost structures, to manage the social implications of the energy transition. Ultimately, the cost of hydrogen must come down for green steel to be a competitive product.
We need green hydrogen costs to decrease in order to achieve these goals. Is this possible? We think so. What happened with the wind and solar industry, where costs decreased by more than 70 percent in 10 years, is a good analogy for what we think will happen with green hydrogen. As we invest more and as we build more, the technology will improve and costs will come down. That is why we are interested in making projects happen today, because that way everyone grows.
We will have to find a way to make the economics work in the short term, including engaging customers willing to pay a premium for green steel and governments willing to provide incentives. Everyone has a role to play to make these projects a reality.
Which industries will be your biggest clients for green steel?
We foresee a lot of demand for green steel — it is needed and it is wanted. If we look at the automotive industry, for example, they are decarbonizing the end-use phase of the vehicle, and at the same time investing in decarbonizing materials like steel that go into the vehicle itself.
At the moment, only very small volumes of low-carbon-emissions steel exists in the market. But that will change in the near future. We have plans to create the world’s first zero-carbon-emissions steel plant in Sestao, Spain, by 2025, for example. This kind of progress requires billions of dollars of capital expenditure, with operating costs expected to be significantly higher than current, fossil fuel–intensive steelmaking methods.
It is therefore natural to expect that a low-carbon-emissions steel product that costs more to produce will cost more to buy. We do know the interest is there and the demand is coming, but we need to ascertain what value customers will put on it. In the meantime, we have created what we’re calling “virtual green steel,” where steel producers pass along the emissions savings to customers in the form of certificates, which the customer can then report as reductions in their Scope 3 emissions. This is helping grow the market in the near term and helping us assess how quickly customers are going to want this product.
What needs to happen to accelerate widespread adoption of green hydrogen for steelmaking?
First, we need to get all the pieces in place — the economics and the right policy — to make sure green hydrogen projects get off the ground. Second, it comes down to the technology for producing the hydrogen and for using it. ArcelorMittal is putting a lot of effort in to finding ways to solve both.
The steel industry is going to be a large off-taker for green hydrogen. But we are not yet seeing the quantities available that we need. So, we are working with providers and partners all the way through to government to get cost-effective hydrogen projects going and to be able to have enough hydrogen to meet our needs. A great example is in Spain, where we are a part of HyDeal España, an initiative that aims to deliver cost-competitive green hydrogen by 2025. The project involves companies across the supply chain — off-takers like ourselves and Group Fertiberia, energy companies such as Enagas, and hydrogen specialists like DH2 Energy.
We are working at several different levels on the technical solutions to get to green hydrogen steel production at scale. We are investing a lot in our own R&D and, through our XCarb™ Innovation fund and its Accelerator Program, in new technologies to help decarbonization, many of which are hydrogen steelmaking technologies.
How are you working with other stakeholders to accelerate steel decarbonization?
Steelmaking is a “hard-to-abate” sector. We can’t do this on our own — it is a team effort.
One of the ways we’re doing this is working with RMI to act as a critical enabler and kick-start the supply side of hydrogen, while pulling together the stakeholders to make these projects successful. By looking outside and working with partners, we are understanding how we can make green hydrogen projects a reality and how we can better utilize hydrogen in our processes.
We are also engaging with governments so they understand our view on how critical public policy is to our transition. We need a policy framework that will ultimately make low-carbon-emissions steel as competitive as the higher-carbon-emissions steel produced today. This is likely to involve a raft of policy mechanisms, with one example being carbon border adjustments.
In the short term, if you are pursuing decarbonization, it will be at higher cost. You will have carbon leakage to countries that are not decarbonizing if you allow cheaper, high-carbon products to come in and steal market. This support is needed to help absorb the higher cost of decarbonization in the near term, and in the long term to keep industry committed to these technologies. This will create a level playing field where job losses will not occur just because we are going green.