A green hydrogen project tied to a novel steelmaking initiative in Mississippi faces delays as headwinds batter the emerging market for cleanly produced hydrogen.
Hy Stor Energy has proposed building gigawatts’ worth of wind, solar, and geothermal capacity in southern Mississippi to produce what it calls “zero-carbon renewable” hydrogen, which it will then store in underground salt caverns. Earlier this year, the Jackson company signed an exclusive letter of intent to supply fuel to the steelmaker SSAB, which is developing a green steel facility in the state’s Perry County.
Late last month, however, Hy Stor hit the brakes on part of the project, abruptly canceling a preliminary supply deal with Nel, a Norwegian electrolyzer manufacturer. Electrolyzers are an essential component of making hydrogen from renewables, using electric currents to split water into its constituent parts of H2 and oxygen — in sharp contrast to the carbon-intensive methods used to produce most industrial hydrogen today.
Hy Stor signed an agreement with Nel in April to reserve more than 1 gigawatt of alkaline electrolyzer capacity for the so-called Mississippi Clean Hydrogen Hub. But on September 30, in a stock exchange filing, Nel reported that Hy Stor had terminated the deal.
In a statement to Canary Media, a representative for Hy Stor said the company isn’t canceling the hydrogen hub itself.
“The green hydrogen market has faced a series of headwinds that have resulted in it taking longer than anticipated to bring our lead project to fruition,” said Eric Reidel, a managing director for Connor, Clark & Lunn Infrastructure, which is Hy Stor’s controlling shareholder.
“Because of this, it did not make sense for us to make the upcoming capacity reservation payments that would have been due under the Nel agreement,” Reidel said. “In spite of the difficult market environment, we remain optimistic about the long-term potential of Hy Stor’s unique base of assets,” including its portfolio of salt domes and land rights in the Gulf Coast.
He added that “revised timelines for the hydrogen hub are not currently available.”
Clean hydrogen is seen as key to slashing planet-warming emissions from certain industrial sectors, including steelmaking and aviation. But creating hydrogen from renewables remains prohibitively expensive for many producers and would-be consumers. And while production costs are predicted to decline, the costs of storing and distributing hydrogen are expected to remain a major barrier for years to come, according to a recent study by Harvard University researchers.
“Our results challenge a growing idea that hydrogen will be the ‘Swiss army knife of decarbonization’ and suggest that the opportunities for hydrogen may be narrower than previously thought,” Roxana Shafiee, the study’s lead author, said in an October 8 news release.
It also doesn’t help that a key pillar of U.S. clean hydrogen policy — tax credits created by the Inflation Reduction Act — is still in limbo. The rules for deciding what projects qualify for 45V tax incentives aren’t finalized and likely won’t be until after the November election. Meanwhile, developers are postponing multibillion-dollar investments in clean hydrogen projects in the absence of such certainty.
What’s next for Mississippi’s green steel ambitions?
When Hy Stor initially unveiled the Mississippi project in October 2021, the company aimed to complete its first phase by 2025, with a goal of producing 110,000 metric tons of green hydrogen per year and storing more than 70,000 metric tons of it underground. Last year, Hy Stor applied for — but didn’t receive — $1 billion in U.S. Department of Energy (DOE) funding from the $7 billion hydrogen hubs program, which went to seven other projects. In its application, Hy Stor said it could break ground as early as 2023.
It’s not clear how Hy Stor’s project delays will affect its partner SSAB, which is banking on Hy Stor to supply 100 percent of the hydrogen for its green steel initiative in Perry County. Earlier this year, Sweden-based SSAB was selected to receive up to $500 million from the DOE to demonstrate methods for making iron and steel that are cleaner than today’s highly carbon-intensive, highly polluting processes.
A spokesperson for SSAB said the company “is currently in pre-award negotiations with the DOE, so at this time we are unable to comment on the proposal or related activities.”
Only one commercial ironmaking operation in the world uses hydrogen produced from renewables: the Hybrit pilot plant in Sweden, which SSAB is involved with. Instead of a coal-fueled blast furnace, the facility deploys a direct reduced iron (DRI) process that relies on hydrogen — produced on-site using wind and hydropower — to convert raw iron ore into iron briquettes.
For the U.S. project, SSAB proposed deploying Hybrit technology at a new DRI facility in Mississippi. Although SSAB hasn’t specified how large the ironmaking plant will be, a typical DRI facility produces 2 million metric tons of iron every year. The company said it also plans to expand its steelmaking operation in Montpelier, Iowa, where SSAB currently melts scrap metal in an electric arc furnace.
Beyond Mississippi, other green steel projects have recently encountered difficulties of their own. In Germany, the steelmaker Thyssenkrupp said on Monday that it’s reviewing its plans for a $3.3 billion hydrogen-fueled ironmaking plant amid rising costs, casting doubt over a key piece of the company’s decarbonization strategy, Reuters reported.
Last month, U.S. steelmaker Cleveland-Cliffs suggested it might ditch plans for a green steel project in Middletown, Ohio, citing the unwillingness of automakers and other major steel buyers to pay higher prices for lower-carbon material. Cleveland-Cliffs then swiftly reversed course and reaffirmed its commitment, leaving industry observers scratching their heads.
Like SSAB, Cleveland-Cliffs was selected to receive up to $500 million from the DOE to build a first-of-a-kind commercial facility. Not long after its flip-flop, Cleveland-Cliffs entered into phase one of its Ohio project, receiving $9.5 million from DOE to help with preliminary design and engineering work, community engagement, and environmental reviews. That phase is expected to last 15 months and cost a total of $19.1 million, according to the agency.
The two green steel projects are intended to revitalize America’s shrinking primary steel industry while also slashing CO2 emissions and toxic pollution from the country’s aging mills. Meeting those goals will require building out many gigawatts of renewable energy capacity and producing gigawatts of hydrogen within the next few years, experts say. The mounting uncertainties facing hydrogen production underscore just how monumental this challenge will be.
