Government releases guidelines, allocates Rs 455 crore for green hydrogen pilot projects in steel sector

Type of projects listed for support in the guidelines seem to include any innovation carried out at a plant of any scale

By Parth Kumar
Published: Friday 09 February 2024
Photo: iStock

The Union Ministry of New and Renewable Energy on February 2, 2024 released scheme guidelines for implementation of pilot green hydrogen projects in the steel sector under the National Green Hydrogen Mission (NGHM). 

The government also allocated Rs 455 crore till financial year 2029-30 to promote the use of green hydrogen in the sector. 

Considering the high cost of green hydrogen, the initiative would support steel plants for blending a small percentage of green hydrogen in their processes,  the guidelines stated.

The blending share can increase as cost economics improve and technologies advance. The scheme will provide support for development / selection / validation of commercially viable technologies using hydrogen in steel sector that: 

  • Use 100 per cent hydrogen in direct reduced iron (DRI) process using vertical shaft / kiln 
  • Use hydrogen in blast furnaces within prescribed limits
  • Substitute fossil fuels with hydrogen in a gradual manner in DRI process
  • Use hydrogen in any other innovative way to reduce carbon emissions in iron and steel production

NGHM was launched on January 4, 2023 and had an outlay of Rs 19,744 crore, with the aim to make India a global hub for production, usage and export of green hydrogen. The mission aims to add to India’s effort on becoming self-reliant through clean energy and become a model state in global clean energy transition. 

The mission has set the target to have a capacity of 5 million tonnes of green hydrogen per annum in India by 2030. Initially, it was being speculated that in terms of industrial usage, most of the green hydrogen initiatives and allocation would happen in the fertiliser and petro-chemical sector, as they already use grey hydrogen in their processes which could be then replaced by green hydrogen.

Sectors like steel and cement, the largest industrial greenhouse gas emitters in the country, were considered a step behind in terms of being beneficiaries of NGHM. This is because they might require larger technical interventions for green hydrogen usage compared to fertiliser and petro-chemicals. Therefore, although it was clear that green hydrogen-direct reduced iron-electric arc furnace (H2-DRI-EAF) is the cleanest steel production route available globally, there was not much surety whether the Indian steel sector will get that push and support from the government to be able to use green hydrogen in its production in this decade. 

With these guidelines coming in and a separate budget allocation, the hopes are high. 

A lot of other developments in the past have seemingly played a role in bringing these winds of change towards hydrogen-based steel production in India. Swedish company SSAB was the first globally to produce steel through hydrogen back in 2018. SSAB along with Vattenfall ( an European Energy Company ) and LKAB (a Swedish minerals and mining group) through HYBRIT technology are planning to bring out world's first fossil free steel to the market by 2026.

Yet another Swedish company, H2-Green Steel, is also planning to roll out its first batch of green steel using hydrogen by 2025. Similar initiatives are being taken by Nippon Steel in Japan and other competitors in France and Germany.  

Very recently at the 28th Conference of Parties to the United Nations Framework Convention on Climate Change, India announced its partnership with Sweden under the LEAD-IT initiative which had a focus on industrial decarbonisation, specially the steel sector. 

One of the major reasons behind this partnership was obviously Sweden’s lead in steel production through hydrogen. Other factors driving this initiative may have been policies like the Carbon Border Adjustment Mechanism and India’s high share of steel export to the European Union.

Domestically, companies like Tata Steel and ArcelorMittal Nippon Steel India had started taking initiatives towards using hydrogen. Tata Steel had put out a press statement in April 2023, mentioning their experiment of using hydrogen in a blast furnace at their Jamshedpur plant. 

In January 2024, ArcelorMittal Nippon Steel India signed a memorandum of understanding (MoU) with the Maharashtra government, proposing to establish a 6 million tonnes per annum green steel plant in Maharashtra that plans to use hydrogen instead of coal. 

The Maharashtra government also signed MoUs with seven renewable energy companies to develop a proposed capacity of 910 kilotonnes per annum of green hydrogen projects. 

Delhi-based think tank Centre for Science and Environment, in its 2022 report Decarbonizing India: Steel Sector, had advocated for pushing cleaner fuels like natural gas and hydrogen for both major steel production routes in the country, highlighting the immense emission reduction they could bring in the sector. 

It also highlighted in its estimates how the coal-based DRI sector, which is mostly small-scale, is the largest contributor to GHG emissions (almost 51 per cent), even more than blast furnace-basic oxygen furnace (BF-BOF) routes, as of 2020-21. 

The type of projects listed for support in the guidelines seem to include any innovation carried out at a plant of any scale. Some dedicated funds should be allocated to the micro, small and medium enterprises in the steel sector (coal-based DRI-EAF), which certainly needs support for technological innovation and fuel switching. This would also be critical towards reducing the overall emissions from the sector in the country. 

At a time when the world has started moving towards the DRI-EAF production route, the known cleaner production route globally, India, due to various factors, is going to build the majority of its future capacity through the BF-BOF route. We are at a point currently where we have started locking our funds into the BF-BOF route and it will be difficult to move out, considering the life of BF-BOF plants is 15-25 years or longer. 

These guidelines and specific fund allocation although just focuses on bringing up pilots in the sector, but surely initiates a path which is well awaited and delivers hope that a substantial share of steel production in India might happen through green hydrogen in the near future. We must continue to take this ahead and work on removing any hurdles that might come in the way of this transition. 

“It is a much needed and welcome initiative taken by the government, and to accelerate the adoption of such pathbreaking technologies and fuels for hard-to-abate sectors, it will also be essential that the government takes measures to bring in demand based incentives may be through public procurement initiatives in the near future,” said Nivit Yadav, programme director, Centre for Science and Environment.

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