‘Mission Possible’ report urges governments to pave the way for Green Steel [NGW Magazine]
Reaching net-zero carbon emissions from heavy industry and heavy-duty transport sectors is technically and financially possible by 2060, and earlier in developed economies, and could cost less than 0.5% of global GDP, according to a report published November 19 by the ‘Energy Transitions Commission’ (ETC). The report, Mission Possible, outlines possible ways to fully decarbonise cement, steel, plastics, trucking, shipping and aviation. These together represent 30% of energy emissions today, but this could rise to 60% by mid-century ass other sectors lower their emissions.
It advises that electricity’s share of the world’s total final energy demand would need to rise from today’s one-fifth to over three fifths by 2060 – needing global electricity generation to rise from 20,000 TWh today to 85,000-115,000 TWh by mid-century, while switching to zero-carbon sources. That’s a tough message for the midstream gas sector, unless its infrastructure can be repurposed by the new energy economy to flow either a gas/hydrogen mix, or hydrogen, or carbon dioxide (CO2).
Turning to the other report, the International Energy Agency (IEA) in its ‘World Energy Outlook 2018’ released the previous week devoted considerable space to how the world can decarbonise its future electricity, including two pages about Australia’s potential to harness solar and wind power to produce as much as 100mn metric tons (mn mt) of oil equivalent/yr of hydrogen by 2040.
Decarbonisation is ‘feasible’
No escapist fantasy, the ETC report was developed with contributions from over 200 industry experts over a six-month consultation process, then screened by a panel of some 30 ‘commissioners’ representing not just energy incumbents such as Shell chair Chad Holliday, but disrupters like Chinese wind turbines maker Envision Energy’s CEO Lei Zhang.
Finance and utility chiefs provided further intellectual fire-power, as well as the London School of Economics professor Nicholas Stern. He wrote the seminal 2006 Stern Review on the cost of inaction on climate change. The ETC report backs limiting global warming ideally to 1.5°C, or well below 2°C at the very least.
It argues that full decarbonisation is technically feasible with technologies that already exist, though concedes that several still need to reach commercial readiness, and could be achieved at a total cost of the global economy of less than 0.5% of GDP by mid-century.
Such major decarbonisation would only have a “minor impact on the cost of end-consumer products”: for instance, green steel would add about $180 to the price of a car; green shipping would add less than 1% to the price of an imported pair of jeans; and low-carbon plastics would add just $0.01 to the price of a bottle of soda.
For industry though, the report cautions, the cost impact on wholesale prices is more significant: an extra $120/mt for steel (or a fifth more) and an extra $500/mt for ethylene – half as much again.
Mission Possible argues that decarbonisation can be achieved across all sectors of the economy:
● direct and indirect electrification (through hydrogen);
● hydrogen use, which it expects to increase by a factor of 7 to 11 times by mid-century;
● bio-energy and bio-feedstocks - with the stress on tight regulation (to avoid deforestation);
● carbon capture combined with use or storage to curb process emissions from cement.
With reference to steel, ethylene and cement the report notes that the electricity price will determine whether electricity-based decarbonisation is cheaper than a carbon capture route.
Several policy levers should be applied to accelerate the harder-to-abate sectors, the report argues, including: tightening carbon-intensity mandates on industrial processes, heavy-duty transport and the carbon content of consumer products; introducing adequate carbon pricing; accelerating public-private collaboration in infrastructure; and greater use of recycling and less wastage.
Mission Possible contends that “a more circular economy can reduce CO2 emissions from four major industry sectors – plastics, steel, aluminium and cement – by 40% globally, and by 56% in developed economies like Europe by 2050” adding that:
■ primary plastics production could be reduced by 56% versus business as usual, through more extensive mechanical and chemical recycling, and reduced use of plastics in key value chains. The European Commission said November 20 that EU industry has committed to recycling at least 10mn mt of plastics by 2025, but only 5mn mt of demand-side pledges have been made so far.
■ in the cement sector, improved building design could reduce total demand by 34%;
■ primary aluminium production could be cut by 40% through a similar mix of approaches;
■ primary steel production could be cut by 37% versus business as usual, through reduced losses across the value chain, greater re-use of steel-based products, and a shift to more car-sharing.
In an interview with BBC radio, the ETC’s co-chair Adair Turner, a former UK financial regulatory chief, cited how steelmakers in Sweden are using bio-LNG or redesigning plants to run on hydrogen. The report itself says that biomass can work “as a reduction agent in steel production.” But it warns that “a switch from blast furnace reduction to hydrogen-based direct reduction may require scrapping of existing plant before end of useful life”, so urges that “policy should anticipate and compensate” for such effects “through just transition strategies.”
Separately, the IEA’s WEO report finds there are wide differences in how steel is produced worldwide. In China, which produces about half the world’s steel, the majority is produced using traditional technology, with only 10% in electric arc furnaces (EAFs) that also enable greater recycling of steel. In contrast, Indonesia uses EAFs for almost all its steel production.
The ETC report says that transition paths are less complicated in the transport sector, noting that heavy trucks have fairly short asset lives that could allow rapid decarbonisation within 15 years, at a time when alternative vehicles – it cites battery electric or hydrogen fuel-cell – become cost-competitive. More low-emission, LNG-fuelled ships too are being built in the run-up to tough new global sulphur emissions rules in 2020.
Gas as ‘transition fuel only’
The ETC report though notes that gas combustion can produce about half the volume of emissions than coal, as long as methane emissions along the entire gas chain from wellhead to burner-tip are “tightly controlled.”
As such, the report says there could be significant potential to switch from coal to gas, in industries where coal is still used as a heat source, such as cement; and in countries such as China where coal is still used as a feedstock in chemicals production. But it adds that such a potential could be constrained by limited domestic gas supplies in places like China and India.
In transport, it says there could be “a limited transition role for compressed natural gas (CNG) in trucking and LNG in shipping, if these technologies can be retrofitted on existing vehicles now and replaced, respectively, by electric vehicles and by zero-carbon fuels in the next 10-15 years.”
In shipping and aviation, the ETC argues that electric engines using battery or hydrogen energy storage will likely play a role in short-distance transport but that, without a breakthrough on battery density, long-distance aviation will probably rely either on bio jet fuel or synthetic jet fuel, while long-distance shipping will likely use ammonia or, to a smaller extent, biodiesels.
“Since these fuels will likely be more expensive than existing fossil fuels, decarbonisation costs could be $115-$230 per metric ton for aviation and $150-$350/mt for shipping” (see NGW Magazine Issue 19, October 15, p26-28 for more on LNG as a bunker fuel).
ETC argues that “pre-announced strategies” will be needed to ensure that gas-using sectors will eventually switch to biogas; or else apply CCUS to existing gas-fired production processes; or move beyond natural gas to electricity or hydrogen – implying a need to plan either for writing down gas infrastructure; or repurposing it for hydrogen.
Key role for hydrogen
Achieving a net-zero CO2 emissions economy will therefore mean more global hydrogen production from 60mn mt/yr today to something like 425-650mn mt/yr by mid-century, the report says. This makes it “essential to foster large-scale cost-effective production of zero-carbon hydrogen via one of three routes”:
■ electrolysis using zero-carbon electricity (increasingly cost-effective as renewable power prices fall);
■ steam methane reforming (SMR) with the subsequent storage/use of the captured CO2 (this being dependent on the economic and geological viability of CCUS in future). For decades, SMR is the process by which some 95% of the world’s hydrogen has been produced, but without CCUS.
■ biomethane reforming or SMR but substituting bio-gas for natural gas - probably the least likely, as there would be “higher priority demands on limited sustainable biomass resources.”
NGW Magazine Issue 20 on October 29 (pp19-23) reported how governments, gas utilities and train firms in Europe and North America are now eying how to scale up hydrogen through electrolysis.
Could Australia unlock hydrogen’s potential?
The IEA’s World Energy Outlook 2018 points out that hydrogen produced from renewables-based systems can also be used as a feedstock in iron and steel, oil refining, and other industries. But it notes that producing hydrogen through electrolysis is not cheap, and that if the electricity used is purchased from the grid, the hydrogen costs about $6 per kg H2 today, so three-times higher than SMR using natural gas, which is the least expensive current option to produce it.
But the costs could be reduced by developing off-grid hydrogen systems. The report notes: “A hybrid off-grid system involving a solar PV facility co-located with a wind farm in a resource-rich location offers a possibility to increase operating hours of electrolysers, since times of maximum wind generation are often uncorrelated with times of maximum solar PV generation.”
It adds that hydrogen is much easier to transport over long distances than electricity, this possibly being a further reason why the IEA hit on Australia for its case study.
“Australia’s potential to produce hydrogen in this way could be vast. Utilising only the best locations within 50 km of the coastline (to avoid the need for much inland transport) and excluding protected areas, land dedicated to other uses, or water-stressed locations could provide nearly 100mn mt of oil equivalent of hydrogen, equivalent to 3% of global gas consumption today.”
Based on a cost of electricity in such places by 2040 of less than A$65 ($47)/kWh, the report says it should be possible to produce hydrogen for less than $3/kg H2. That would be similar to the cost of producing hydrogen using SMR equipped with CCUS, it adds.