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CONTRIBUTORS

Andrew Ness

Portfolio Manager, Franklin Templeton Emerging Markets Equity
United Kingdom

This is a chapter from the Franklin Templeton Institute paper, Energy transition: Accelerating investment opportunities. To read all chapters in this paper, download the complete PDF or click here.

Chapter preview

The steel industry is one of the largest contributors to global carbon emissions, accounting for 7% of total emissions in 2019.1 Left unchecked, emissions are forecast to rise by 44% by 2050.2 However, there is another option wherein emissions could fall by 54% by 2050: green steel from zero-emissions hydrogen.

The challenge for investors and the industry is cost. Producing green steel from zero-emissions hydrogen is estimated to require an investment of US$2.8 trillion.3 Green steel plants are under construction or at the advanced planning stage in many countries. However, there are several obstacles to be overcome before the technology can be widely adopted.

In this chapter, we focus on green steel’s production process, breaking down costs and technologies in each step of the process. Read the entire chapter as Andrew Ness discusses:

  • Global hydrogen supply must increase dramatically if it is to be a practical fuel source in steel production. As the cost of inputs to generate renewable energy continues to decline, we expect investment plans for green hydrogen to accelerate.
  • The International Energy Administration forecasts electrolyzer capacity will accelerate dramatically in the coming years as new production in Australia, Europe and the United States comes on stream.4
  • The production of direct reduction iron ore (DRI) in a fluidized reduction furnace requires higher-grade iron ore, or 72% magnetite, produced mostly in Brazil, Canada and South Australia.
  • There are other options for the decarbonization of the steel industry, including carbon capture and storage (CCS), bioenergy and direct electrification.

 

This is a chapter from the Franklin Templeton Institute publication, Energy transition: Accelerating investment opportunities. Arguably, humanity’s greatest current challenge is the need to shift to low and net-zero carbon in a little less than 30 years. New technologies are accelerating the renewable energy transition while reducing environmental impacts. The renewable energy sources of today and the future require new and smarter technologies as well as the rapid creation of new infrastructure. These challenges create investment opportunities as investors have a critical role given the capital required to fund this transition. To read the full paper and explore views from across our specialist investment managers, download the complete PDF or click here.

Endnotes

  1. Source: Energy Transitions Commission and Rocky Mountain Institute China. 2019. China 2050: A fully developed rich zero-carbon economy. November 2019.
  2. Ibid.
  3. Source: Shin, K. and C. Goodall. Crushing it 2: Hydrogen to be the net-zero hero. CLSA U Global Energy Blue Books. July 4, 2022.
  4. Source: IEA. 2020. Iron and Steel Technology Roadmap. IEA: Paris.

 

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