Enabling innovative business models for emerging low-carbon technologies in the steel sector

Abstract

In responding to climate change, one of the most serious threats facing humankind today, recent climate movements have aimed to decarbonise different parts of society, in particular energy generation and industrial production. These movements have culminated in international climate agreements, such as the 2015 Paris Agreement, which set ambitious emission reduction targets at national levels, and industries respectively have followed suit in taking climate action.

The steel sector is one such industry. The steel sector is the second highest industrial sector by emissions, only second to the cement sector. Efforts to decarbonise steelmaking have largely focused on improving energy-efficiency measures which do not suffice for meeting the global climate ambitions. As such, breakthrough innovative low-carbon technologies which have the potential to radically reduce emissions from steelmaking have become a necessity. However, while such technologies do exist, they remain in the research or demonstration phases, with limited potential for implementation at the scale and pace required to meet those climate targets.

While some have been tested and are technically proven, implementing breakthrough low-carbon technologies such as Carbon Capture, Utilisation and Storage (CCUS) or hydrogen reduction remain hampered by their high capital costs, which, in the absence of regulatory mandates, would deter steelmakers who operate on small profit margins from pursuing them. This thesis aims to address this by exploring innovative business models which would accelerate the adoption of such technologies in steelmaking.

To do so, this work undertakes a multi-method qualitative research involving semi-structured interviews and a survey questionnaire with leading steelmaking and low-carbon technology experts worldwide. The research sets out to first explore potential business models for CCUS technologies as a case study, given their technical maturity over alternative technologies (Paper 1). This study builds upon literature on existing CCUS business models in the oil and gas industry and draws on commonalities with industrial sectors such as steel. This leads to the identification of a new potential revenue stream to support low-carbon integration into steelmaking, that is the creation of a niche market for ‘green steel’ products, which would be sold at a premium over traditional steels.

Green steel as a concept is then explored in Paper 2, including an appraisal of what defines greenness in the steelmaking context, what policy support mechanisms would see the product penetrate a highly-competitive market, and what sectors may be potential consumers of green steel. As the automotive sector is identified as a likely outlet for green steel demand, green steel adoption within the sector is subsequently explored as a case study in Paper 3. The main finding of this paper is that certain types of automakers, specifically heavy-duty and electric vehicle manufacturers, may be more prone to adopting green steel in their production lines than others.

This overall work was initially undertaken with the intention of writing three separate papers, or ‘chapters’. However, the research conducted in the first three papers led to the identification of gaps in the literature and areas worthy of further exploration. These are then explored in Paper 4, where a novel business modelling tool is proposed, and in Paper 5, which proposes a model to replicate the green steel example amongst steelmakers and potentially in other material production industries.