Tata Steel Ltd is turning to gas to reduce its carbon emissions even as it explores other cleaner options for energy in the long term. But the share of coal in its energy mix may remain the same, despite the company's ambitious plan to double its manufacturing capacity.
As Tata Steel aims to double its production capacity in India to 40 million tonne per annum by 2030, it is faced with the dual challenge of reducing its carbon emission while keeping its costs under check. While the company is exploring alternate sources of energy for use across its supply chain, it comes with a price and could potentially hurt its earnings before interest, taxes, depreciation, and amortisation (EBITDA).
“Currently, coal is our primary fuel to produce quality steel in India. However, we are working on various energy mix to diversify the energy basket,” Uttam Singh, vice president, iron making, Tata Steel, told Moneycontrol.
Tata Steel aims to achieve emission intensity of less than 2 tCO2/tcs by 2025 and reach ‘net zero’ by 2045. As of the financial year 2022-23, Tata Steel’s consolidated emission intensity was at 2.21 tCO2/tcs, while on a standalone basis, it stood at 2.38 tCO2/tcs.
Amidst the global push for environmental responsibility, steel companies are compelled to pursue decarbonisation as they grapple with the potential impact of cross-border carbon taxes on their industry.
Tata Steel is working on a long-term plan for decarbonisation, which primarily entails reducing emissions, carbon capture and utilisation (CCU), hydrogen-based steelmaking, increased share of renewable energy generation, and higher use of scrap to manufacture steel. But even as the company, like other steel makers, works on making the technology and cost viable, it looks at gas to fill the gap in the short term.
Rajiv Mangal, vice president of safety, health and sustainability, said, “In the furnace we use coke, and until hydrogen is available we are looking to use natural gas. Natural gas is today not available in Jamshedpur but it has reached east of India. We are in discussion with GAIL to see when they can bring natural gas to the doorsteps of Tata Steel.”
Sourcing Gas
The Tata Group steel manufacturer is talking to state-run GAIL for sourcing liquified natural gas (LNG) to replace 25-30 percent of diesel used by its Heavy Earth Moving Machinery (HEMM) at its mines. Typically, LNG produces 20-30 percent less carbon dioxide (CO2) than diesel.
A query sent to GAIL remained unanswered.
“We have done experiments in Noamundi and West Bokaro. We had replaced diesel with LNG for two dump trucks; it requires a dual fuel kit in the trucks. Our experiment shows that we can run on 30 percent LNG and 70 percent diesel. Now we are sourcing dual kits for our entire fleet,” said DB Sundara Ramam, vice president, of raw materials.
The company has also signed a memorandum of understanding (MoU) with Indian Oil Corporation Ltd to replace furnace oil and high-speed diesel with liquified petroleum gas (LPG) to reduce carbon footprint at its ferroalloy plants. It is currently not using LPG, and to begin with, it plans to start using it at its plants at Athagarh and Gopalpur in Odisha.
Hydrogen play in the works
Energy-intensive industries like steel are exploring hydrogen as a promising fuel to reduce emissions, yet they face significant challenges in terms of infrastructure and cost-effectiveness.
“We are exploring multiple ideas on this front. We are working with different hydrogen suppliers and technical partners to understand the best way of making hydrogen. We are contemplating on both the aspects – making or buying hydrogen,” Singh said.
In a report titled ‘Steel decarbonisation in India’ in September, Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research estimated that the steel industry will replace around 25-30 percent of its grey hydrogen requirements with green hydrogen in the early part of the 2030-2050 period. This will increase to 80 percent by 2050. The report highlighted that the cost of green hydrogen needs to be reduced and there is a need for a price penalty on carbon emissions for Indian steelmakers to switch to hydrogen-based steelmaking.
In April this year, Tata Steel undertook the trial injection of hydrogen gas using 40 percent of the injection systems in ‘E’ Blast Furnace at its Jamshedpur Works. The success of the trial has given the company insights into operating blast furnaces with greener fuel injectors to reduce fossil fuel consumption and cut down on CO2 emissions from the blast furnace.
“We are also working with a number of startups to understand the hydrogen play. Given we have been historically coal users, our focus is to increase our knowledge and expertise in the hydrogen space. We are engaging with the government to solicit support and make it viable for the larger ecosystem,” Singh said.
While the company engages with the Indian government for support, it met success in its UK operations on this front as the government there agreed to give a grant of £500 million to help the company decarbonise its Port Talbot project in Wales, after months of negotiations. Tata Steel will add £700 million of its own as it invests in cutting emissions.
The Challenge
Energy-intensive industries like steel are exploring hydrogen as a promising fuel to reduce emissions, yet they face significant challenges in terms of infrastructure and cost-effectiveness.
“Decarbonisation will be a costly affair for them (Tata Steel) – both in India and in the UK – given the current prices of alternative fuels. It’s not easy but there is societal pressure that will make them take small steps in that direction. They may have to change the pace of decarbonisation depending on trends in the cost of fuel versus that in the realisation of steel. In a good steel cycle, they may accelerate decarbonisation but in a low phase they may slow it down,” Deepak Jasani, head of retail research at HDFC Securities.
There is added pressure to improve performance on account of Environmental, Social and Governance (ESG). To add to that, the European Union will start collecting carbon emission charges at its borders from the beginning of 2026; Carbon Border Adjustment Mechanism (CBAM) initial phase was kickstarted on October 1. Steelmakers will have to move fast and Tata Steel knows that.
“Switching fuel may also need changes in operating assets/ technology. All this may take time. They are responsible corporate citizens but they are also responsible to the stakeholders so they will have to keep doing cost-benefit analysis at different stages,” Jasani said.
(The writer of this article was visiting the company's site on their invitation)
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