Report Abstract: Prices and Impacts of Low-Carbon Applied sciences for Metal and Cement Sectors in India

A current CPI report analyzes the price of CO₂ abatement and the affect on materials manufacturing prices of low-carbon applied sciences for decarbonizing India’s metal and cement sectors. Effectively-designed coverage frameworks will probably be essential to help expertise adoption.

(This piece is a follow-up to our earlier weblog, “The Path to Decarbonizing India’s Metal and Cement Trade” which lays the context and highlights the pressing want for sturdy public coverage and monetary interventions in India to align two of the nation’s largest CO₂-emitting industrial sectors—cement and metal—with long-term, low-carbon pathways.)

Whereas India is doing nicely in transitioning in the direction of a low-emission electrical sector, it must massively step-up efforts to make sure low-carbon development of hard-to-abate industrial sectors. Metal and cement are two of probably the most emissions-, energy-, and capital-intensive industries in India, and industrialization and urbanization are quickly rising the demand from these sectors. Our estimates reveals that the entire put in manufacturing capability in these sectors might develop between 2 to 2.5 instances by 2040. That means, India wants to right away deploy all of the obtainable low-carbon options (LCS) at its disposal, to maintain the emission trajectory from these two sectors in keeping with its long-term targets and international local weather ambitions.

Decarbonizing metal and cement manufacturing would require a number of LCS comprising a number of supply-side applied sciences and a few demand-side measures. At the moment obtainable LCS, like scrap-based secondary metal and composite cement, stay under-utilized attributable to market, regulatory, or financing boundaries. Different high-impact LCS, like inexperienced hydrogen and carbon seize applied sciences, are at present commercially unviable. Our current evaluation of LCS for the metal and cement sectors means that, regardless of these limitations, it’s potential to mitigate about 50% of the cumulative emissions from the brand new metal and cement manufacturing capability that will probably be added between now and 2040. Beneath this situation, transitioning the extra new capability to a decrease emission depth would price the metal and cement sectors (no less than) a further USD 100 billion and USD 65 billion respectively.

A deeper evaluation of the techno-economic profiles of particular person technology-oriented LCS sheds additional gentle on their potential software within the Indian metal and cement sector. To construct this profile, we take into account three key traits of those LCS, which essential in policy-making and funding selections:

Potential to scale back the emission depth of manufacturing (of metal/cement) – a measure to evaluate local weather affect.
Value of CO₂ abatement (CoA)[1] – a measure to evaluate relative financial effectivity of CO₂ abatement throughout completely different LCS.
Impression on levelized price of manufacturing (of metal/cement) – a measure to evaluate affect of LCS on industrial competitiveness.

Key findings from our current evaluation:

STEEL SECTOR

Determine 1: Value of CO₂ abatement (CoA, X-Axis), affect on levelized price of metal (LCOS, Y-Axis) and potential to scale back CO₂ emission depth of manufacturing (measurement of bubble) of low-carbon applied sciences for metal sector, in comparison with baseline coal-based DRI-EAF and BF-BOF routes.

Abbreviations: DRI = Direct Lowered Iron, BF= Blast Furnace, EAF = Electrical Arc Furnace, RE = Renewable Electrical energy, CDQ = Coke Dry Quenching, TRT = High Strain Restoration Turbine, PCI = Pulverized Coal Injection, WHR = Waste Warmth Restoration, H2 = Hydrogen, CC = Carbon Seize, TGR = High Fuel Restoration.

Supply: CPI Evaluation.

Indian metal business is extra emission intensive than the worldwide common. There may be important potential for deployment of current power effectivity and restoration applied sciences, however their potential for local weather mitigation stays restricted. The CoA of those applied sciences is detrimental, implying CO₂ mitigation is achievable whereas having negligible affect on the price of manufacturing. Nevertheless, these applied sciences can cumulatively cut back the emission depth of manufacturing by about 10-20% and due to this fact will seemingly not play a central function in sectoral decarbonization within the long-term. Of the obtainable choices, the biggest potential lies with Waste Warmth Restoration applied sciences that reuse waste warmth for thermal processes or electrical energy technology. Nevertheless, excessive capital expenditure and lengthy payback intervals stay a barrier to adoption, particularly within the SME sector.
Scrap-based EAF route for the manufacturing of secondary metal is a extremely efficient lever obtainable to steelmakers. This various route for manufacturing of secondary metal has a really excessive potential of lowering emissions depth by 60% – 85% (relying on using renewable electrical energy and storage for powering the EAF), a low CoA lower than 10 USD/tCO₂, and negligible affect on the price of manufacturing of metal. Nevertheless, long-term availability of low-cost scrap within the nation is a key problem for brand spanking new capability addition via this route.
Partial use of inexperienced hydrogen in gas-based DRI (as much as 60%) is without doubt one of the main expertise candidates for manufacturing of lower-carbon metal throughout the transition interval. Utilizing between 10% to 60% inexperienced H2 in DRI (remaining share being pure gasoline) is technically possible and has the potential to scale back emission depth by as much as 80%, in comparison with conventional coal-based DRI. Because of provide constraints and anticipated value volatility in international pure gasoline markets, and availability of low-cost RE, this expertise is a beautiful possibility for Indian producers throughout the transition-phase, till a shift to 100% inexperienced hydrogen turns into possible. Nevertheless, at present prices of inexperienced hydrogen manufacturing (~5 USD/Kg), the CoA of about 50 USD/tCO₂and an increment in LCOS by 20-25% (relying on share of inexperienced hydrogen) is to be anticipated, which can negatively impacting the competitiveness of the business. Though speedy decline in price is anticipated over the following twenty years, important interventions in type of value help, low-cost capital, and creation of market demand for low-carbon metal will probably be wanted to incentivize adoption.
High Fuel Recycling Blast Furnace (TGR-BF) and smelting discount (HIsarna) are the highest options to conventional BF for capability addition throughout the transition interval. Each applied sciences might be mixed with carbon seize within the long-term. TGR-BF and HIsarna have 20-25% decrease emission depth in comparison with conventional BF route. The CoA and affect on LCOS are additionally comparatively low at about 35 USD/tCO₂and +5% respectively and would lower additional with technological studying. Each these applied sciences are at present in demonstration stage and market entry is anticipated by 2030. TGR-BF and HIsarna will also be coupled with carbon seize applied sciences, which greater than doubles their CO₂ mitigation potential. However attributable to excessive prices and boundaries related to carbon seize, this feature is unlikely to be deployed at scale earlier than 2040. Even by 2040, the CoA for TGR-BF and HIsarna with carbon seize could possibly be round 40-50 USD/tCO₂, necessitating complete coverage help, revolutionary financing options and enabling market situations to make sure viability.
Inexperienced hydrogen can be utilized partially in conventional BF as feedstock to interchange coal/coke as a lowering agent however is anticipated to stay uneconomical. Hydrogen injection can obtain a couple of 15-20% discount in emission depth in comparison with custom BF route. Nevertheless, on the present inexperienced H2 price of ~5 USD/Kg, the CoA could be very excessive at about 450 USD/tCO₂. Even assuming a speedy decline in the price of inexperienced hydrogen to 2 USD/Kg by 2040, the CoA would solely decline to 80 USD/tCO₂. Subsequently, this expertise would seemingly stay unviable with out important innovation breakthroughs or sturdy coverage interventions that may bridge the viability hole.

CEMENT SECTOR

Determine 2: Value of CO₂ abatement (CoA, X-Axis), affect on levelized price of cement (LCOC, Y-Axis) and potential to scale back CO₂ emission depth of cement manufacturing (measurement of bubble) of low-carbon applied sciences for cement sector, in comparison with baseline manufacturing route.

Abbreviations: VFD = Variable Frequency Drives, VRM = Vertical Curler Mills, WHR = Waste Warmth Restoration,
RE = Renewable Electrical energy, BESS = Battery Power Storage Techniques, AFR = Alternate Fuels and Uncooked Supplies,
PPC = Pozzolan Portland Cement, PSC = Pozzolan Slag Cement.

Supply: CPI Evaluation.

Manufacturing of composite cement, Pozzolan Portland Cement (PPC), and Pozzolan Slag Cement (PSC), utilizing waste supplies like slag and fly ash, is a cost-effective low-hanging resolution for the cement sector with a really excessive potential to mitigate CO₂ emissions. Shifting to manufacturing of PPC and PSC entails detrimental to near-zero CoA and has a big emission discount potential of as much as 35% and 70% respectively (relying on clinker substitution charge), in comparison with manufacturing of Extraordinary Portland Cement (OPC). Nevertheless, a number of supply-side boundaries associated to availability and sourcing of supplies, and demand-side boundaries associated to client consciousness and lack of standardization on use of composite cement have to be addressed to advertise widespread adoption of composite cement.
The Indian cement business is extra power environment friendly and fewer emissions intensive than the worldwide common. Nevertheless, there’s restricted scope for the adoption of power effectivity and restoration applied sciences. Indian cement business has already adopted most main power effectivity applied sciences. Whereas these applied sciences have a detrimental CoA, cumulatively, they’ll solely cut back emission depth as much as 10% and would seemingly play a marginal function in sectoral decarbonization within the long-term. Of those applied sciences, Waste Warmth Restoration is probably the most promising by way of emissions discount and deployment potential.
Use of other fuels in kilns (AFR) and electrical energy provide from RE and battery power storage methods (BESS) are low-cost choices obtainable to producers within the near-term, however have a restricted potential to abate emissions. The usage of RE (for assembly as much as 30% of electrical energy wants) is now extra economically enticing than captive thermal vegetation. The next share of RE use (as much as 75%) might be achieved with BESS however this feature is at present unviable, having a CoA of 40 USD/tCO₂, primarily because of the excessive price of storage. Use of AFR (at a thermal substitution charge of 25%) additionally has a equally excessive CoA because of the important prices related to tools, segregation, and processing of waste earlier than use. With a speedy decline in storage prices, RE with BESS might grow to be economically viable by 2030. Nevertheless, these choices can cumulatively cut back the emission depth by nearly 15%, attributable to limitations in use of AFR and a low share of electrical energy consumption within the total emissions from cement manufacturing.
A very powerful lever for long-term deep decarbonization of the cement sector is carbon seize, however market entry is anticipated solely by 2035-2040. There are a number of confirmed carbon seize applied sciences obtainable that may mitigate between 70% to 90% of direct emissions from cement manufacturing. Nevertheless, the present CoA is about 100 USD/tCO₂ (almost 50% greater than the metal sector). Market entry in India is anticipated by 2035-2040, by when the CoA is anticipated to fall to 60 USD/tCO₂. Even then, this expertise could be unviable with out presence of high-value CO₂ utilization markets, storage choices, and supporting infrastructure, all of which might require focused coverage help and revolutionary financing interventions.

KEY RECOMMENDATIONS AND TAKEAWAYS FOR POLICYMAKERS

Improvement and deployment of the low-carbon options face a various set of country-, sector-, and technology-specific boundaries. Insurance policies have a vital function to play in addressing these boundaries and supporting the business in its low-carbon transition. Key coverage suggestions, based mostly on our evaluation of low-carbon options, embody these market-based, fiscal, and regulatory measures:

Strengthen worldwide collaboration with governments and expertise suppliers for indigenization of applied sciences and mental property.
Present innovation grants and type public-private partnerships for demonstration pilots of early-stage, commercially unviable, and capital-intensive applied sciences.
Develop sector-level long-term decarbonization pathways, in session with the business. Such pathways a lot embody parts reminiscent of definitions of inexperienced metal and inexperienced cement, potential decarbonization levers and boundaries to adoption, interim and long-term decarbonation targets, and the function of the private and non-private sectors.
Planning and public capital outlay for the event of essential supporting infrastructure reminiscent of pipelines for transportation of H₂ and CO₂, and industrial hubs.
Implement a carbon pricing mechanism, both as a tax or a cap-and-trade market. Most high-potential low-carbon applied sciences have a CoA between 30 – 100 USD/tCO2. If designed nicely (to make sure secure and sufficiently-high value on carbon), carbon pricing is usually a highly-effective software to enhance the viability of investments in revolutionary applied sciences and speed up the tempo of transition. Border adjustment mechanisms might be utilized to forestall hurt to the competitiveness of the home business.
Present value help (as inexperienced premium) to producers of low-carbon metal and cement by creating preliminary markets via public procurement schemes, contract-for-difference (CfDs), or requirements for end-use sectors.
Implement a sustainable finance taxonomy mixed with targets for monetary establishments to watch, disclose, and enhance on the carbon-intensity of their portfolio comprising of investments in emission-intensive sectors.
Set up expertise requirements for effectivity applied sciences, Renewable Electrical energy, Battery Power Storage Techniques, Alternate Fuels and Uncooked Supplies.

An in depth evaluation of the techno-economic profiles of low-carbon applied sciences mentioned on this piece might be present in our full report.

Write to yash.kashyap@cpiglobal.org for the total report.

[1] Estimates for greenfield investments: excludes prices related to funding for analysis and demonstration pilots, and supporting infrastructure required for transportation and storage of low-carbon fuels and captured CO2. Subsequently, the precise price of abatement could be larger than mentioned right here.

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