Move over, data centers. US steel mills need lots of clean power too.

The United States is the world’s fourth-largest steel producer, and today, most of the country’s primary steel is made using coal in scorching-hot furnaces. For steelmakers to shift away from these polluting facilities, they’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 we’re seeing, market demand will continue to move this way,” Jen Snook, deputy director of CEBA’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.

America’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 we’re all hoping for,” Snook said.

How Trump’s win could affect steel’s transition

It was always going to be challenging to build enough clean energy capacity for America’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 Trump’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 nation’s power sector.

It’s unclear whether President-elect Trump will rescind some or all of the unspent funds, as he’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.

“We’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 America’s primary steel producers.

Steelmakers are going to need large amounts of clean H2 to decarbonize their operations. In CEBA’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.

The policy outlook is even murkier for federal programs meant to drive the domestic market for greener building materials.

The Biden administration launched its Buy Clean initiative in 2021 to begin purchasing large amounts of low-carbon steel, asphalt, cement, and glass for public works projects. The idea is that federal agencies can serve as crucial early customers, giving producers the support they need to build novel, costly facilities and attract more private buyers.

The IRA provides $4.5 billion in funding for the General Services Administration, Department of Transportation, and Environmental Protection Agency to set emissions standards for low-carbon materials and to start procuring products for buildings and infrastructure. Meanwhile, California and several other states are also making strides to develop or enact public procurement policies of their own.

While states’ efforts are likely to continue, efforts at the federal level ​“will probably just go away,” said Michael Williams, a senior fellow at the progressive think tank Center for American Progress. ​“It would be nice and good if the Trump administration wanted to keep doing it, but I don’t expect that they will.”

Putting a number on green steel’s electricity needs

Despite the political headwinds, industrial policy experts say they anticipate that heavy manufacturers will keep pursuing efforts to tackle emissions, to the extent that they can.

Automakers and construction firms in Europe, China, and other regions are facing mounting pressure from government regulators and customers to source materials made using lower-emissions manufacturing methods. Major corporations, including Amazon and Microsoft, are increasingly signaling their willingness to pay for cleaner and potentially costlier products.

“Demand will continue to increase for low-carbon steel, which means there will be rational market responses [in the U.S.] to produce low-carbon steel,” said Snook of the Clean Energy Buyers Association.

In one respect, the United States is ahead of the curve. About 70 percent of the nation’s total steel supply is made by melting down recycled scrap in electric arc furnaces, of which there are more than 150 nationwide. But many companies still rely on primary steel to meet the strength and quality requirements of their finished goods.

Snook said the CEBA report is the first to model how decarbonizing America’s primary steel production would affect the nation’s electricity sector. Analysts modeled the potential power requirements of two future scenarios.

In a business-as-usual world, the steel industry could need 40 percent more power, from 11 TWh per year in 2025 to 15 TWh per year in 2050, to keep up with increased demand for steel. Emissions would rise 33 percent over the same period, reaching 83 million metric tons of carbon dioxide emissions per year by mid-century — roughly the same as the annual emissions from 221 fossil gas power plants today.

Then there’s the world in which U.S. steel production aligns with efforts to limit global warming to 1.5 degrees Celsius above preindustrial levels. For this, CEBA considered what it called a ​“plausible mix” of technologies, based on when solutions are expected to become commercially available and when existing steel mills are slated to retire.

This scenario would reduce emissions from primary steelmaking by 57 percent relative to business as usual, declining to 36 million metric tons of CO2 emissions by 2050. That, of course, assumes the electricity comes from renewables and not today’s carbon-intensive grid.

Clean hydrogen is expected to play the biggest role in primary steelmaking, accounting for potentially 44 percent of steel production in 2050. Hydrogen can be injected into coal-based blast furnaces to help reduce CO2 emissions. However, the more effective approach involves using H2 in the direct reduced iron (DRI) process to turn raw iron ore into molten iron.

Cleveland-Cliffs has already tested H2 injection at its blast furnaces in Ohio and Indiana, with plans to scale up the practice. The steelmaker is also set to receive up to $500 million in federal funding to build a first-of-a-kind DRI facility in Middletown, Ohio. Initial planning work on the facility has already started, though experts say the grant program supporting the project is also vulnerable to big cuts under Trump.

In the report, another 37 percent of steel mills deployed carbon-capturing systems on blast furnaces by 2050. Some climate and energy groups oppose this approach, given that it prolongs the life of polluting infrastructure and doesn’t deliver meaningful emissions reductions. But it’s one of the industry’s most readily available options. U.S. Steel is deploying a $150 million carbon capture project in Gary, Indiana, that could be completed in 2026.

Finally, about 14 percent of primary steelmaking came from electrochemical processes, which are still in early stages of development. The startup Boston Metal is pursuing ​“molten oxide electrolysis,” an approach that involves using electric currents to heat iron ore to around 1,600 degrees Celsius to drive chemical reactions. Another startup, Electra, is developing ​“electrowinning” devices similar to batteries that can produce iron at about the same temperature as a fresh cup of coffee.

Whether the U.S. steel industry can accomplish such a dramatic shift in the next 25 years is harder than ever to predict. Manufacturers will undoubtedly need federal support to commercialize and scale alternative technologies; they’ll also need a cleaner electricity grid to draw from.

“We’ve seen so much progress [on the clean energy transition] over the last few years, and much of that progress will remain — but it may not be at the scale and pace that it could have been,” said McNamara of the Union of Concerned Scientists.

“We need to build enormous amounts of wind and solar,” she added, ​“and anything that puts that at risk will be a drag on our ultimate ability to decarbonize the economy at large, and industry specifically.”