Sweden could produce green crude steel cost-effectively through harnessing its onshore wind to produce green hydrogen, according to analysis by Wood Mackenzie.
Swedish wind power is a competitive source of electricity, with a levelised cost of electricity of around $30/megawatt-hour (MWh).
Further cost reductions are expected with better financing structures for onshore wind, lower capital investment for onshore and offshore installations, technological optimisation for asset management and state support for offshore grid infrastructure.
Alkaline electrolysis technology is most likely to play a key role in green hydrogen production which is crucial for Sweden’s green steel production, said Wood Mackenzie.
Compared to proton exchange membrane (PEM) electrolysis, it is cheaper to install at $925/kW today and it is expected to halve by 2030, enabling a levelised cost of $1/kg of green hydrogen using onshore wind power.
Wood Mackenzie senior research manager Mingming Zhang said: “We find that a combination of hydrogen from alkaline electrolysis and renewable energy from onshore wind will produce the most cost-effective green crude steel in Sweden.”
Assuming a carbon price of $100/tonne, green steel producers could benefit from $85/tonne of carbon credits.
Better financing models for onshore wind and 48% lower capex for alkaline technology in 2025 yield steel cost of $360-390/tonne in carbon price scenarios ranging between $50/tonne and $150/tonne, Wood Mackenzie.
Zhang added: “Producing green steel with cost parity to conventional steel in the 2020s is quite possible if we use natural gas-based direct reduction iron and electric arc furnace steelmaking process as a baseline.”
Although the HYBRIT and H2 Green Steel projects in Sweden are backed by industrial heavyweights, some critical parts of the proposed value chain rely on technological solutions that have yet to be tested at an industrial scale, “posing considerable challenges that must be overcome to deliver on the promises”.
Notably, both ventures have yet to find solutions for secure and economical storage of hydrogen and demonstrate their technology’s commercial success, Wood Mackenzie said.