Green Steel: Make Electric Vehicles Greener

  • Yingxia Yang Senior Fellow, ISE
    Director of Commercial Strategy, BrightNight

President Biden just announced last week that the administration looks to make half of new vehicle sales electric vehicles by 2030. While achieving this target will help the U.S. on its decarbonization path due to the higher efficiency of electric vehicles and decarbonization of the electric grid, using green steel produced by green hydrogen will make electric vehicles even greener and help to jump-start the decarbonization of the steelmaking process—one of the most carbon-intensive industrial processes.

The past decade was a period with exciting clean energy technology breakthroughs that drove down the costs of renewable power generation and storage. From 2010 to 2020, the cost of electricity from solar dropped by 85% and from wind by around 50% while battery prices decreased by 88%.

The combination of the breakthroughs in these three technologies paints a bright outlook for decarbonizing the electric and transportation sectors, both of which account for 54% of greenhouse gas emissions in the U.S. and 40% globally at present. Cheaper solar and wind lead to higher renewable penetration in the grid. Cheaper batteries further help integrate more solar and wind into the grid. A cleaner grid means cleaner electric vehicles. Eventually, when the grid is 100% clean, electric vehicles go 100% green.

Well, not quite. Not when you consider the life-cycle carbon emissions of a vehicle, which not only includes emissions from the operation of a vehicle, but also emissions from the manufacturing processes of a vehicle, the materials that go into a vehicle, and all the way up the supply chain to raw material extractions.

It turns out that some materials used in vehicles are manufactured in very carbon-intensive processes. One such material is steel. On average, one vehicle uses 0.9 tons of steel. To produce one ton of steel, an average of 1.8 tons of CO2 is produced. With about 92 million vehicles produced in 2019, carbon emissions from steelmaking for automotive production were about 150 million tons. Further, with steel made for other industries such as building and infrastructure, mechanical equipment, etc., the steelmaking industry emitted 3.5 gigatons of CO2 globally or about 11% of global CO2 emissions in 2019. This is unsurprising as most steelmaking processes use coal as their energy resource and feedstock.

Considering the environmental impact of materials used in vehicles is not new in the automotive industry. However, for many years the focus has primarily been on the tailpipe carbon emissions impact of the materials, instead of the carbon emissions during the material production stage, because tailpipe emissions account for the majority (65%-80%) of the emissions in the life cycle of internal combustion engine vehicles. For example, lightweighting materials such as aluminum and carbon fiber reinforced polymer (RFP) have been partly used in vehicles as alternatives to steel to increase fuel efficiency and thus reduce the carbon emissions during the operation stage of vehicles. Whereas lightweighting materials can lead to an increase of carbon emissions as compared to steel when considering emissions during the material production process.

However, as electric vehicles are penetrating rapidly and the tailpipe emissions decrease, carbon emissions during the material production process will play a more important role in vehicle life cycle carbon emissions. As such, reducing the carbon footprint of the steelmaking process is critical for electric vehicles to go truly green and for the world to be decarbonized.

The good news is that the technological breakthroughs in renewables are spilling over to the steelmaking industry in the form of green hydrogen. Using electricity generated from wind and solar to electrolyze water, green hydrogen can be used in the steelmaking process to replace coal or natural gas as the feedstock without emitting any carbon. Due to the cost reductions of wind, solar, and electrolyzer in recent years, the cost of green hydrogen is expected to decline significantly. For example, among other studies, a recently published McKinsey study indicates that green hydrogen cost can decrease from $6/kg on average in 2020 to $1.4-$2.3/kg in 2030.

However, steel made by green hydrogen is still at a cost premium over traditional steelmaking processes. According to the Fuel Cell and Hydrogen Energy Association, even when green hydrogen is at $2/kg, the green steel that uses hydrogen is about 50% more expensive than steel made by using natural gas (or about $400/ton with the expected cost at $800/ton by the existing steelmaking process based on natural gas). In a competitive environment, this seems to be too big a price sticker to be adopted by any steelmakers without regulation. But putting a regulation in place may take time and is not easy. While some steelmaking companies have announced voluntary carbon neutral goals by 2050, such as ArcelorMittal, Nippon Steel, and Baowu Steel, there is not a clear timetable for how to achieve these targets and they still face the challenge of the high cost for green steel.

Is there any way for the green hydrogen-based steelmaking process to make inroads without having to wait for regulations or reach cost parity with the traditional steelmaking process?

To answer this question, it may be enlightening to look at what happened in the electric sector. For many years, renewable procurement has been primarily driven by state renewable mandates in the absence of federal clean electricity regulation. Instead of waiting for the regulation to be in place, corporates stepped up. Led by tech companies such as Google and Amazon, many corporates set up voluntary environmental goals and procure electricity directly from renewable developers. Today it has become a big driving force of renewable demand. Over the past ten years, corporates globally have signed about 23.7 GW of renewable projects and are expected to further drive 44-72 GW of new wind and solar projects in the U.S. over the next decade, which is about 20% of all utility-scale renewable power additions in that period.

There are two important reasons for the success of corporate renewable procurement: (1) Tech companies are big electricity consumers and therefore have purchasing power and big influence over utility companies; and (2) electricity cost is not a significant part of operating costs for corporates and thus the cost premium can be absorbed.

Interestingly, both seem true for electric vehicle automakers on green steel:

  • Automotive is an important customer for the steelmaking industry. Automotive uses 13% of steel manufactured globally and 28% in the U.S. While electric vehicle share is not big yet, its volume is poised to take off.
  • Assuming 0.9 tons of steel in one vehicle and the cost of green steel based on hydrogen is $400/ton more expensive, the cost premium for using green steel is $360 per vehicle, which is less than 1% of the cost for buying a $40,000 Tesla car.

As Dr. Rebecca Dell at ClimateWorks noted in a recent interview, when looking from the lens of the final consumers instead of the lens of the commodity producers, the additional cost for clean products may become negligible. The problem is not that society cannot afford clean products, but how can we efficiently spread the cost through the supply chain and transfer it to the final consumers.

Therein comes the opportunity for electric vehicle automakers to take the leadership to initiate green steel procurement, like what tech companies did with renewable electricity procurement, and provide consumers greener electric vehicles. It will help to kick off the commercialization of green steel, which will be followed by further technology improvement and cost reduction, such as what happened in renewable technologies, before it reaches cost competitiveness against traditional steel and penetrates widely into the rest of the economy.[1]

Go electric vehicles. Go green steel.

Dr. Yingxia Yang, a Senior Fellow at the Boston University Institute for Sustainable Energy, is Director of Commercial Strategy at BrightNight.

The opinions expressed herein are those of the author and do not necessarily represent the views of the Boston University Institute for Sustainable Energy.


[1] Obviously, this does not have to be constrained to electric vehicles, but any vehicles with less cost-sensitive consumers. In fact, this is happening now. Volvo announced it will produce green steel cars in 2021 and Mercedes Benz announced plans to start using green steel in 2025.