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Electra’s innovation could accelerate steel decarbonisation

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steelUS-based start-up Electra has raised $85 million in funding for a novel process that could overcome some of the major challenges of steelmaking today.

  • Electra’s oxygen-decoupled electrolysis (ODE) process claims to produce low-temperature iron from low-grade ores, using zero-carbon renewable electricity.
  • The process obviates the need for high-grade iron ore, supplies of which are dwindling, and reduces emissions that occur when iron ore is converted into iron.
  • The IEA’s 2050 sustainable development scenario sees 30% of the cumulative emissions reductions coming from steelmaking technologies that are still in early stages of development. 

A method to reduce carbon emissions, and the need for high-grade iron ore in steelmaking has many venture funding companies excited about US start-up Electra’s new process for making iron from iron ore.

While the technology is based on existing and proven methods, a demonstration plant is only expected to be operational by 2025-2030, which adds urgency to the IEA’s projection of new technologies to reduce 30% of steelmaking emissions by 2050.

Electra’s new technology holds promise…

As ideas go, Electra’s value proposition using both renewable energy and low-grade iron ores to produce green steel seems an obvious solution to the issues in the steel sector. 

The new technology is also based on existing and proven electrochemical and hydrometallurgical methods, which eliminates the need to prove its technology works.

The process electrochemically refines iron ore into pure iron at 60 degrees Celsius using renewable electricity, and then converts the pure iron into steel using existing electric arc furnaces (EAF), which are used in 70% of steel production today.

Conventional steel is made at 1,600 degrees C, and requires large quantities of coal, emitting two tones of CO2 for every ton of steel produced, 90% of which occurs during the conversion of iron ore to iron.

A further problem that Electra’s process solves that is inherent in conventional steelmaking, is the need for virgin or high-grade iron ore. 

Based on analysis from the Institute of Energy Economics and Financial Analysis  (IEEFA), ore with iron content above 65% seems to be in short supply, as higher grade ores have been mined out, as supply expanded to meet growing demand from China. 

Green hydrogen-based steelmaking, increasingly being hailed as a potential champion for green steel production, does use less carbon, but requires ore with iron content of 67% or higher. 

Electra’s process can use ore with iron content as low as 35%, without additional processes to purify it, which adds diversity and reduces costs for the entire value chain.

…but industrial scale production is only expected by 2025-2030

Electra claims there are few technical or scaling risks for its process to reach industrial scale yet a demonstration plant is only expected to be operational by the latter half of this decade (2025-2030).

The start-up expects to complete building a green-iron refining pilot plant in Boulder, Colorado, in 2023, and will likely use the funding it has received to hire engineers, scientists and support staff.

Electra plans to invite partnerships with companies across the steel value chain to help accelerate the transition to green steel. 

Legacy steel companies like US Steel (SA:USSX34) may welcome this, as they confront decarbonisation challenges, but will have to factor in the risk of stranding their existing assets from a mass migration to new technologies.

Judging from the VC response money won’t be a problem

If throwing money at the problem can help Electra scale up faster, it won’t have a problem. Its $85 million funding round had participation from several diverse, high profile venture and sovereign wealth funds.

Prominent among these were Breakthrough Energy Ventures (founded by Bill Gates), Amazon (NMS:AMZN), BHP Ventures (LON:BHP), and Temasek (Singapore’s sovereign wealth fund), which implies wide support for Electra’s technology.

Another investor, Breakthrough Energy Ventures, which has raised over $2 billion to support start-ups focused on decarbonisation, sees a trillion-dollar market opportunity to decarbonise steel. 

An advisory board member to Electra, Simon Wandke,  sees the company’s ability to use iron ore inputs with high impurity levels also resulting in large cost savings for the steel industry, and creates new financial opportunities for iron ore producers producing low grade iron ore.

IEA sees new technology development vital to steel decarbonisation

Most  of what the the IEA’s Iron and Steel Technology Roadmap identifies as necessary to achieve a sustainable transition in a global net zero scenario is expected in the form of new technology developments. 

Most of the new steel making technologies expected to account for 30% of the cumulative emissions reductions in the IEA’s Sustainable Development Scenario are currently in the development stage.

These include plants using CCUS and low-carbon hydrogen which will require a great deal of investment to bring to market at industrial scale. 

Government help will also be crucial to help build the much needed new energy infrastructure, which may  the Inflation Reduction Act may help deliver, if measures outlined in it are implemented. 

While it sounds like decarbonisation plans for hard-to-abate sectors, like steel, are built on a lot of conjecture, the continued encouragement of innovation through funding is vital to keeping hope alive.

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