Can the global community meet its net-zero targets if Asian giants like China and India rely on coal? To compound the issue, both countries are expanding economically, requiring construction materials such as concrete and steel — energy-intensive products to make.
The good news is that the two countries have aggressive green energy targets — not because they want to quiet international attention; instead, they want to create smart cities and attract multinational corporations. However, Asia will remain the world’s biggest consumer of coal, but Bloomberg New Energy Finance predicts it will peak there in 2027. After that, renewables will eat into its market share.
India now relies on coal to fuel 55% of its energy mix, but it has a long-term blueprint to procure much more renewable energy. Specifically, it plans to secure 450 gigawatts of wind, solar, and hydro by 2030 and to hit net zero by 2070. It needs an estimated $160 billion annually to do this.
China relies on coal to fuel 56% of its electricity needs but has pledged carbon neutrality by 2060. BloombergNEF says that China will be the world’s largest wind and solar market, growing from 8% of the international fuel pie today to 48% by 2050.
What will fuel their growth — especially as they modernized their economies? Will it be renewables or coal?
Consider the steel sector, which consulting firm McKinsey says makes up 8% of CO2 emissions globally. But it adds that 14% of all steel companies could see their values eroded unless they decarbonize. Iron oxide and “metallurgical” coal make steel. The coal is put in ovens at 1100 degrees Celsius to remove water and other chemicals. Ultimately, it produces a pure-carbon source called coke to make steel.
Green hydrogen can decarbonize the industry —however, the price to make it must nosedive. A DNV study says that green hydrogen made from wind and solar will start to meet 5% of the global energy demand in 2050 — a figure that needs to hit 13% to realize the goals of the Paris agreement. The International Energy Agency predicts it will be 10% by 2050. It will add 20% to 30% to the steel price in the early going.
Germany’s Thyssenkrupp, Japan’s Nippon Steel, and Sweden’s SSAB are already making carbon-free steel. Meanwhile, Nucor says that its proprietary brand — Econiq — is carbon-neutral and mass-produced, serving the automotive, construction, and renewable industries. Its first customer is General Motors.
“Governments can create an environment to develop this technology,” Rajiv Mangal, former president of Tata Steel in India, told reporters at a conference in Abu Dhabi hosted by IRENA. “If they put a price on carbon, it would happen.” Right now, the standards to make steel using green hydrogen differ depending on geography, increasing the cost of production. With standardization, the market may support a small premium.
Are China and India Committed to the Cause?
Andrew Forrest, chairman of Fortescue Metals, is challenging Australia to make carbon-free steel: Fortescue founded the Green Hydrogen Catapult to generate 45,000 megawatts of green hydrogen by 2027 using an electrolyzer. That is enough hydrogen to power 45 average-sized steel mills.
The company now mines iron ore and exports those materials. Much of that goes to China, which makes the steel and ships it back to Australia. But Dr. Forrest is running tests using green hydrogen as an energy source. If successful, it would mean thousands of new jobs.
“Australia is in an absolutely unique position to scale green steel. Our neighbors and customers want to phase out carbon pollution by 2050, and coal – the most carbon-intensive of the fossil fuels – will be phased out, too,” says Dr. Forrest, of Fortescue Metals, in the Financial Review.
The advantage of hydrogen is that it can be stored in tanks and used later to keep operations going for much longer. Solar panels and wind turbines may produce excess electricity that must be stored in a battery and used in an electrolyzer to create pure hydrogen gas. That gas is stored in a tank before it is piped to a fuel cell, which uses hydrogen to produce electricity.
If green hydrogen can hit its potential, manufacturers will be one of the primary beneficiaries. The industrial sector could reduce production costs and emissions — a win-win in an intensively competitive global economy.
“Surging carbon dioxide prices and decreasing hydrogen prices are crucial to ensuring the economic viability (according to cash cost) of pure hydrogen-based steel production,” says the McKinsey report. “(C)onventional steel production still retains a cash cost advantage. However, this scenario changes as soon as hydrogen prices drop (driven by the cost of electricity) or carbon dioxide prices increase.
“Following this logic, pure hydrogen-based steel production is expected to be cash cost-competitive between 2030 and 2040 in Europe,” the report concludes.
As for China and India, they both rely heavily on coal. But each knows its future is tied to clean energy. Indeed, China is home to about 500 of the roughly 1,000 smart cities. China hopes to become a magnet for new investment by reducing emissions and improving quality of life. At its core, high tech is the catalyst and specifically the Internet-of-Things. It stores and distributes cloud-based data to improve energy and operational efficiencies, enhancing everything from air quality to traffic controls to health care.
The Suzhou Industrial Park, for example, is a carefully planned city built on 27 square miles. Twenty-five ago, it had been farmland. Dozens of Fortune 500 companies have invested billions into hundreds of ventures. It has attracted trailblazing companies ranging from Samsung to Siemens to Philips.
China and India know that future growth depends on decarbonization. If the advanced nations share their technologies and burgeoning countries are truly committed, the globe can hit its net zero goals.