Mercedes-Benz has announced a new commitment to launch green steel in vehicle models by 2025, marking a significant step in the company’s efforts to decarbonize its supply chain.
While many automakers have announced electric vehicle goals to address climate change, the industry still faces emissions issues from its supply chain. Steelmaking accounts for 7% to 9% of direct emissions from fossil fuels. According to Mercedes-Benz, a sedan is made from about 50% steel, which accounts for about 30% of carbon emissions in production. As manufacturers around the world aim to decarbonize their supply chains, demand for green steel is expected to increase significantly.
Start-ups are getting in on the act as well. H2 Green Steel (H2GS) recently raised $105 million through a Series A equity financing. Founded in 2020, H2GS aims to build the world’s first large-scale fossil-free steel plant. Earlier this year, the company announced plans to build a greenfield steel plant in northern Sweden, with the project including a giga-scale green hydrogen plant as an integrated part of the steel production facility. Using electricity from 100% renewable sources for the energy requirements generated in the manufacturing process, H2GS aims to produce 5 million tons of fossil-free steel by 2030.
A concern about scaling up green steel has been its perceived premium pricing. But analysis by the Rocky Mountain Institute (RMI), a renewable energy think tank, suggests this may no longer be the case. RMI’s modeling shows that the technology already may be cost-competitive. With power prices at $25 per megawatt-hour, achieved in many locations around the world today, and hydrogen electrolyzer costs of about $450 per kilowatt, zero-carbon primary steel without coking coal can reach a fully loaded production cost of $400 per ton. This is competitive with many existing steel mills today.