Renewables pull and strategic push – What drives hydrogen-based steel relocation?

Hydrogen-based steelmaking using green hydrogen can achieve above 95 % CO2 emission reductions. Low-cost renewable electricity is a prerequisite and research has found that access to renewable energy resources could pull energy-intensive industry to new locations, the “renewables pull”-effect. However, previous studies on hydrogen-based steel differ on key assumptions and analyse a wide range of energy costs (10–105 EUR/MWh) making conclusions hard to compare. In this paper we assess techno-economic and strategic drivers for and against such a pull-effect by calculating the levelized cost of green hydrogen-based steel across five archetypical new value chain configurations. We find that the strength of the pull-effect is sensitive to assumptions and that the cost of hydrogen-based steel vary across geographies and value chain configurations to a similar degree as conventional steel. Other geographically varying factors such as labour costs can be as important for relocation, and introducing globally varying cost of capital moderates the effect. The renewables pull effect can enable faster access to low-cost renewables, and export of green iron ore is an important option to consider. However, it is not clear how strong a driver the pull-effect will actually be compared to other factors and polices implemented for strategic reasons. A modest “strategic push“, implemented through various subsidies, such as lowering the cost of hydrogen or capital, will reduce the pull-effect. In addition, focusing on the renewables pull effect as enabling condition risk slowing innovation and upscaling by 2030 in line with climate goals which is currently initiated in higher cost regions.