Carbon capture, utilization and storage unlikely to play role in steel decarbonization: IEEFA

Carbon capture utilization and storage, or CCUS, is unlikely to play a major role in steel decarbonization due to its low carbon capture rate and the existence of better, more cost-competitive alternatives, the US-headquartered Institute of Energy Economics and Financial Analysis, or IEEFA, said April 17.

Direct reduced iron, or DRI-based steelmaking, which can run on green hydrogen and renewable electricity, offers steelmakers a more promising pathway to reduce emissions than CCUS, the IEEFA said.

"Major steelmakers' plans for CCUS tend to push commercial-scale implementation of the technology off into the 2040s and lack detail," the IEEFA's Lead Steel Financial Analyst Simon Nicholas said.

CCUS technology has been around for nearly 50 years and has accumulated a history of significant underperformance due to its financial, technological and environmental risks, as well as uncertainty over the long-term effectiveness of geological CO2 storage, according to the IEEFA. Also, the uniqueness of each CCUS project limits technological learning and cost reduction potential.

While the cost of technologies like renewable energy and battery storage has fallen, with further reductions expected, the cost of carbon capture implementation has hardly reduced in decades, the IEEFA said.

"A key issue with CCUS that is often missed is its low rate of capture ... Installations that capture low CO2 levels cannot be viewed as decarbonized," said Nicholas, adding that CCUS projects have consistently struggled to reach targeted capture rates despite those rates often being far below overall carbon emissions.

The steel sector's first and only commercial-scale CCUS plant, the Al Reyadah CCUS facility in the UAE, captured less than 20% of total scope 1 and scope 2 emissions from Emirates Steel Arkan's DRI-based steel plant in 2020 and 2021, and this is while a few steel end-users, including car makers, are signing purchase agreements for steel made using green hydrogen with virtually no emissions, the IEEFA said.

No other commercial-scale carbon capture facilities for steelmaking have been built, and Emirates Steel has since turned to alternative technologies to decarbonize its operations and is establishing a pilot project for DRI-electric arc furnace using green hydrogen, the IEEFA said.

Low capture rates mean that CCUS installations will not decarbonize steel production enough to meet tighter definitions of what exactly constitutes green steel expected in the near future, while steel consumers may not want coal involved in their supply chains at all.

"Using green hydrogen in DRI and renewable energy to power EAFs enables the production of truly low-carbon steel, a feat CCUS looks unable replicate," the IEEFA noted.