A Pennsylvania-based asphalt supplier this month accepted delivery of a special vehicle.
This super-size dump truck was the first construction machine sold in North America to be made with low-emissions steel, according to the manufacturer, Volvo Group of Sweden.
European companies have a head start in producing low-emissions steel and finding customers to buy it. But U.S. officials are working to close that gap, and the Inflation Reduction Act contains incentives that provide a strong nudge to use cleaner methods.
The tough part is matching up the companies that want to make cleaner steel with the manufacturers that want to use it in their products, and doing so on a scale large enough to make sense financially.
“It is kind of this chicken and egg,” said Jessica Terry, manager of climate-aligned industries for RMI, the think tank and clean energy advocacy group long known as the Rocky Mountain Institute.
She is co-author of a new report arguing that U.S. companies can seize this moment in the global energy transition to become major suppliers of low-emissions steel.
What is low-emissions steel? It can mean a few things, but we are mainly talking about making steel in processes that do not burn fossil fuels, often by using hydrogen.
This is in contrast with methods that use coal or natural gas, and are major polluters. Steel production accounts for 11 percent of global carbon dioxide emissions, according to the research firm Global Efficiency Intelligence.
The majority of those emissions are in China, which is the global leader in steel, while the U.S. steel industry is much smaller than it used be, largely due to competition from low-cost options in China and other countries.
About 70 percent of the steel produced in the United States is made mostly with recycled scrap in electric arc furnaces. This is called “secondary steel,” and it has much lower emissions than “primary steel,” which is usually made in a process of superheating iron ore with coal or natural gas.
The Biden administration would like to see steel production come back to the United States, including primary steel, at the same time that the industry adopts cleaner practices.
To help make that happen, the Inflation Reduction Act includes a tax credit for production of hydrogen. The credit—which is up to $3 per kilogram of hydrogen—is a major incentive that reduces the risks of opening a plant that makes low-emissions steel, Terry said.
One of the challenges of setting up a clean steel plant is figuring out the logistics of obtaining a reliable supply of hydrogen.
The cleanest way to produce hydrogen is to use renewable energy to power electrolyzers, which split water into hydrogen and oxygen.
The cleanliness of hydrogen production is an important consideration for companies because the tax credit has a sliding scale. To get the full $3, a company would need to have emissions that are close to zero.
At the same time, the natural gas industry would like to be a big part of the hydrogen economy, since natural gas can be used to produce hydrogen. Some companies may use gas-derived hydrogen, especially if they don’t have reliable options for obtaining hydrogen made from renewable energy.
Hydrogen made from gas would qualify for the tax credit, but only if the process was backed up by carbon capture technology. The amount of the credit would depend on the effectiveness of the capture system. As ICN reported last year in the “Pipe Dreams” series, carbon capture brings some big technical and financial challenges.
The United States is going to need to find ways to create connections between steelmakers who want to make a low-emissions product with the customers who want to buy it.
A good example is what Volvo Group did in Sweden. Volvo is working with SSAB, a global steelmaker that is based in Sweden. (Note that Volvo Group is a maker of industrial vehicles and buses, while Volvo Cars has been a separate company for several decades.)
Luxembourg-based ArcelorMittal, the second-largest steel producer in the world, could be a key player. The company has a corporate target of getting to net-zero emissions by 2050. In 2021, the company announced investments in its Hamilton, Ontario, plant that would reduce emissions by 60 percent, mainly by switching to electric arc furnaces.
But to find examples of steel plants with current plans to get to zero emissions, or close to it, you need to look to Europe. SSAB is part of a joint venture in Sweden that has a plant operating at a small scale and aims to have a plant operating on a commercial scale in the next few years. Also, H2 Green Steel is a startup raising money to build a plant in Sweden that it says will produce steel with 95 percent fewer emissions than typical practices.
Sweden is the location of both plants in part because of the Swedish government’s support for reducing emissions from industry as part of a national commitment to get to net-zero emissions by 2045.
Who will be the first U.S. companies to step up to produce low-emissions steel or to commit to buying it, and when might that happen?
Terry doesn’t know, but she points to efforts by groups like the First Movers Coalition, a group of more than 70 corporations—including giants like Apple, Ford, United Airlines and General Motors—that are pledging to use their buying power to support a shift to a low-carbon economy.
The coalition members are making plans now with an eye toward meeting goals for reducing emissions by 2030. The Inflation Reduction Act incentives are well-timed for those goals, with the potential to build plants in the middle of this decade and have them fully up and running by 2030.
Just in case all of this talk seems a bit nebulous, let’s go back to something specific: that big dump truck.
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Volvo Group presented the vehicle on Feb. 15 at an industry conference in Las Vegas. The buyer was Pennsy Supply, a company that makes materials for road construction, like asphalt and concrete. The heavy-duty dump truck is going to be used in a quarry near Lancaster, Pennsylvania.
Volvo said this was the second truck it’s produced using low-emissions steel from the SSAB pilot project. The first one was delivered to a customer in Europe.
I asked a Volvo spokesman how much this vehicle cost, and what the cost difference is between the steel in this truck and steel made using fossil fuels. He declined to provide numbers, but said there will be “some cost increases for the steel” in the short run.
But the cost of this one truck isn’t the point. The manufacturer and its customers are building toward a future in which low-emissions options are available and affordable, an idea underscored by Scott Parson, president Americas of CRH, the Irish parent company of Pennsy Supply.
“No business can solve the complex challenges such as climate change alone,” he said, in a statement.
Other stories about the energy transition to take note of this week:
Electric Cars Are Creating a New Economy—and Leaving Some Towns Behind: The transition to EVs is a boon to many communities, but it also is leaving some behind as automakers close old plants and make changes to their supply chains, as Jeanne Whalen reports for The Washington Post. She looks at what happened in Belvedere, Illinois, where Stellantis, the owner of Jeep and other brands, closed the local plant rather than retooling it for EVs.
A New White House Plan Prioritizes Using the Ocean’s Power to Fight Climate Change: The Biden Administration has released the first-ever U.S. Ocean Climate Action Plan which says the planet can’t have a carbon-neutral future without healthy oceans and also discusses the potential for using offshore wind and other resources to help fight climate change, as my colleague Bob Berwyn reports for ICN. But increasing the use of offshore wind also puts pressure on the maritime ecosystems that already face severe challenges, so any development requires a delicate balancing act.
California’s Newsom Touts Lithium Development Near Salton Sea, Counters Rural Fears: California Gov. Gavin Newsom toured a lithium processing project this week and brushed off concerns about renewable energy development disrupting rural communities, as Janet Wilson reports for the Palm Beach Desert Sun. The lithium project near the south end of the Salton Sea is part of a ramp-up in production of the metal to make batteries for use in electric vehicles and battery storage projects.
Solar Developer to Invest Over $600M in Ohio Manufacturing Plant: The renewable energy developer Invenergy is spending more than $600 million to build a solar panel plant near Columbus, Ohio, that will employ up to 850 people, as Sara Samora reports for Manufacturing Dive. Invenergy is working with the manufacturer LONGi on the venture in a state that has a track record of hostility to renewable energy.
An Arizona Plant Will Pull Carbon Dioxide from the Air and Trap It in Concrete: Block-Lite, a family-owned masonry business in Arizona, is working with two partners to retrofit a manufacturing plant to make concrete while also removing atmospheric carbon dioxide, as Maria Gallucci reports for Canary Media. The developers say their processes would reduce overall emissions from concrete-making by 70 percent, which is notable because the production of concrete is a major source of industrial emissions. Block-Lite is one of many companies working on ways of making lower-carbon concrete.
Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to email@example.com.