Imported US Hydrogen Cheaper for Steelmaking Than Green Hydrogen

A new report on the potential for clean-burning hydrogen at ArcelorMittal Dofasco has come to a surprising conclusion: it’s more economical to import United States hydrogen made from natural gas than to manufacture it locally from Ontario electricity.

The report, released last month by the climate think tank Transition Accelerator (TA) and the Canadian Steel Producers Association (CSPA), is the first publicly available analysis of ArcelorMittal Dofasco’s long-term hydrogen supply challenge.

The company plans to eliminate three million tonnes of carbon dioxide (CO2) emissions per year — equal to 60 per cent of its releases — by converting from coal-based production to natural gas by 2027. But squeezing that last 40 per cent out of the process by switching from natural gas to zero-emission hydrogen continues to pose a big challenge.

The report estimates ArcelorMittal Dofasco will need 492 tonnes of hydrogen per day to convert from natural gas to hydrogen. This is equivalent to six per cent of Canada’s current total hydrogen production of 8,200 tonnes per day. Most of the hydrogen currently produced comes from Western Canada and is used in the chemical and refining industries. Even if it was possible to produce sufficient volumes of western gas for steelmaking in Hamilton, pipelining it thousands of kilometres would be hazardous, expensive and technically difficult.

But rather than producing so-called “green hydrogen” locally using low-emission Ontario electricity, the report finds it would be cheaper to use “blue hydrogen,” imported from the United States and produced from natural gas with CO2 emissions captured and stored underground.

Ontario lacks the geology to store large volumes of CO2, but there are potential underground storage sites in Pennsylvania, Ohio and Michigan. The report estimates blue hydrogen pipelined to Hamilton from a plant in one of these states would cost between $2.50 and $3.10 per kilogram (including carbon capture costs), compared with $3.46 per kilogram for green hydrogen produced from large-scale, Ontario-produced wind or solar electricity.

The report estimates that it would require 27 gigawatt hours of power per day to meet Dofasco’s hydrogen needs with electricity, or about 6.5 per cent of Ontario’s current total power consumption. It also argues Dofasco would have to compete for power with growing electricity demands from vehicles, heat pumps and agriculture.

If the report’s findings are accurate, it could have a significant impact on the steel industry in Canada and the United States. It could also lead to increased investment in blue hydrogen production in the United States. However, it’s important to note that the report has been criticized by some experts who say that it overlooks some of the risks associated with blue hydrogen, such as the potential for methane leaks and the reliance on U.S. trade and environmental policy.

It’s still too early to say definitively whether blue or green hydrogen will be the best option for steelmaking in the future. However, the report’s findings suggest that blue hydrogen may have the edge in terms of current price estimates.