The United States is the worldâ€s fourth-largest steel producer, and today, most of the countryâ€s primary steel is made using coal in scorching-hot furnaces. For steelmakers to shift away from these polluting facilities, theyâ€ll need to use huge amounts of clean energy and adopt cutting-edge technologies.
A recent report by the Clean Energy Buyers Association quantifies just how much carbon-free electricity the steel industry might need to make this transition. CEBA, a group of energy customers and partners, put the number at a whopping 174 terawatt-hours per year by 2050 — ten times more than if the industry stuck to its current ways.
Whether the country will actually build that much power capacity, and at what pace, has only gotten harder to predict in the wake of the U.S. election. But industry analysts say that, regardless of what happens in the second Trump administration, demand for green steel is expected to grow worldwide as companies work to slash carbon from their supply chains.
“Given the basic [global] nature of the steel industry and the trends weâ€re seeing, market demand will continue to move this way,†Jen Snook, deputy director of CEBAâ€s Transaction Acceleration Group, told Canary Media days after the election.
The 174 TWh figure is nearly equal to Illinois†overall electricity output in 2023. Meeting the new demand using only renewables would entail building around 28 gigawatts of wind and solar and 53 GW of battery storage, the report said. States would also need to install long-distance transmission lines and advanced grid technologies to move that carbon-free electricity to traditional steel communities.
Americaâ€s primary steel mills are concentrated in five states: Indiana, Illinois, Michigan, Ohio, and Pennsylvania. None of these locations have much available space for installing on-site electricity generation, and the states presently get only a tiny share of their power from wind, solar, or other renewables.
“This really underscores why state regulators and lawmakers need to take these forecasts into account, so they can start building out the required infrastructure to respond to market forces,†Snook said.
In its analysis, CEBA assumed that future steel production would include a mix of three alternative approaches: installing carbon capture and storage systems on existing furnaces; using clean hydrogen to produce iron in facilities both old and new; and deploying novel ironmaking techniques using electrochemistry. The latter two methods are also paired with powerful electric furnaces that transform iron into high-strength steel.
“We wanted to put a spotlight on this, so that we can better prepare for the electricity demands of that decarbonized future weâ€re all hoping for,†Snook said.
How Trumpâ€s win could affect steelâ€s transition
It was always going to be challenging to build enough clean energy capacity for Americaâ€s steel mills — to say nothing of meeting the rising demand from new data centers, factories, aluminum smelters, and electrified buildings and vehicles. But with Donald Trumpâ€s election to a second term, the pace of that deployment now looks especially precarious.
In 2022, President Joe Biden signed the Inflation Reduction Act into law, unleashing hundreds of billions of dollars in funding to reduce the costs of deploying clean energy and to spur investment in domestic factories that make solar panels, batteries, and even green steel. The bipartisan infrastructure law, which passed in 2021, provides billions in additional funding to support upgrading and decarbonizing the nationâ€s power sector.
Itâ€s unclear whether President-elect Trump will rescind some or all of the unspent funds, as heâ€s pledged to do. Trump and his allies have signaled plans to pass an enormous tax cut geared toward large corporations that could cost the nation trillions of dollars — and slashing clean energy incentives could help to pay for it.
Still, Republicans in Congress might lean toward protecting federal tax credits that boost clean energy production, since the policies are driving investment in their own districts, said Andrew Silverman, a senior tax analyst for Bloomberg Intelligence.
“Weâ€re a bit more optimistic about the ability of these credits to stick around, because they are doing so much good in the economy,†he said.
Another key incentive, the 45V Clean Hydrogen Production Tax Credit, may also survive the chopping block in the next administration. But the implications for the U.S. steel industry are nuanced.
Today, almost all of the hydrogen produced in the United States is derived from fossil gas. The 45V tax credit is meant to spur lower-carbon production methods — including the use of clean electricity to split water molecules through electrolysis. The Treasury Department has yet to issue formal guidance on what qualifies as ​“clean,†and some fossil fuel groups are pushing for laxer rules that allow companies to claim tax credits even if their H2 production creates substantial carbon emissions.
Industry members say they expect to see looser standards for hydrogen subsidies under Trump. That could pose a problem for Americaâ€s primary steel producers.
Steelmakers are going to need large amounts of clean H2 to decarbonize their operations. In CEBAâ€s analysis, a sizable share of the projected power demand in 2050 comes from using electricity to make hydrogen. But steel products made from carbon-intensive hydrogen will ultimately have higher embodied carbon emissions — and could therefore be less competitive on the global market.
“Those who want to decarbonize need truly clean hydrogen,†said Julie McNamara, a deputy policy director with the Climate and Energy program at the Union of Concerned Scientists.
“The various emissions accounting frameworks around the globe count pollution, whether or not the U.S. does,†she added. ​“And so if suddenly the market for producing clean hydrogen is undermined by a weakening of standards, that could have some challenging implications for offtakers,†including steel producers.
