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UAE green steel project brushes off hydrogen concerns

Conventional steel production accounts for 8 percent of global carbon emissions, something the UAE hopes to abate with green hydrogen Reuters
Conventional steel production accounts for 8 percent of global carbon emissions, something the UAE hopes to abate with green hydrogen
  • Green steel to be sold in UAE
  • Market forecast to hit $129bn
  • Concerns over green hydrogen costs

The UAE has completed a pilot programme looking into the use of green hydrogen to decarbonise the steel industry.

UAE steel company Emsteel and renewable energy major Masdar joined forces to produce “green” steel despite increasing concerns over cost, regulations, demand and scalability of the clean energy source.

Conventional steel production accounts for around 8 percent of global carbon dioxide emissions and about 30 percent of emissions from industry.

“Steel is the foundation of our modern economy and decarbonising this hard-to-abate sector is key to achieving a net-zero future,” said Saeed Ghumran Al Remeithi, CEO of Emsteel, the UAE’s largest publicly-listed steel and building materials company.

In the pilot project, green hydrogen electrolysers created using solar power from the grid were used instead of natural gas to extract iron from iron ore, a vital step in steel making. The programme is aligned with both the UAE’s National Hydrogen Strategy 2050 and the Abu Dhabi Low Carbon Hydrogen Policy.

The global green steel market size was valued at $2.6 billion in 2023 and is projected to grow from $3.75 billion in 2024 to $129 billion by 2032, according to Fortune Business Insights.

Green steel from Emsteel’s production facilities at the Industrial City of Abu Dhabi will initially be sold in the UAE before hitting the international markets.

Cost concerns

Green steel comes at a premium. Some estimates suggest it could be as much as 25 percent more expensive than regular steel, while this year’s Global Iron Ore and Steel Forecast Conference in Perth, Australia, was told it could amount to an additional $150 per tonne.

A source at Monday’s announcement admitted green steel was “not commercially viable” at the moment.

“I think the cost itself is a challenge,” said Al Remeithi, meanwhile. “But if you want to be first and specifically adapt the technology, it comes with a high cost.”

He added that demand was already there but said it was up to governments, regulators and technology providers to work to bring the cost down as buyers balk at the increased prices.

Hydrogen difficulties

Share prices of US and European clean hydrogen companies Nel, Bloom Energy and ITM Power have dropped by a third, according to a report in the Financial Times.

Despite the concerns, the production of green hydrogen has started something of an arms race between the bloc of six GCC countries – the UAE, Bahrain, Saudi Arabia, Kuwait, Oman and Qatar.

Saudi Arabia’s $8.4 billion Neom Green Hydrogen plant is set to be the world’s largest, and is scheduled for full operations by the end of 2026. And earlier this month, the kingdom’s Public Investment Fund launched the Energy Solutions Company with an estimated $10 billion investment in green hydrogen.

In June last year, Oman’s minister of energy and minerals, Salim bin Nasser Al Aufi, signed $20 billion worth of contracts to produce 500,000 tonnes of green hydrogen each year. The country’s green hydrogen production targets are one million tonnes by 2030, 3.75 million tonnes by 2040 and 8.5 million tonnes by 2050.

A consortium between UK sustainable infrastructure investor Actis and Australian green energy company Fortescue will result in up to 4.5 gigawatts of wind and solar renewable energy resources being built in Oman. This will power electrolysers with the potential to produce up to 200,000 tonnes of green hydrogen per year.

“Without low-carbon hydrogen, I think there’s no net zero,” said Sherif ElKholy, partner, head of Middle East and Africa at Actis. 

He conceded that cost “remains the biggest hurdle because this is a startup industry”, but said supportive government policy and regulation can accelerate investment into the sector and he is confident hydrogen will “play a much bigger role globally” in the coming years.

The hydrogen rainbow

  • Green hydrogen is produced on a carbon-neutral basis through water electrolysis. 
  • Turquoise hydrogen is created when natural gas is broken down into hydrogen and solid carbon with the help of methane pyrolysis.
  • Blue hydrogen is generated from the steam reduction of natural gas. 
  • Grey hydrogen is obtained by steam reforming fossil fuels such as natural gas or coal. 
  • Sometimes other colours are ascribed to hydrogen, based on how it is produced. For red, pink and violet hydrogen, the electrolysers are driven by nuclear power. 
  • Yellow hydrogen is hydrogen produced from a mixture of renewable energies and fossil fuels. 
  • White hydrogen is a waste product of other chemical processes, while the use of coal as a fuel produces brown hydrogen.

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