Future of green steel in India: Growth, scale, and challenges

India’s green steel industry drives decarbonization and sustainable growth. Explore investments, policies, and innovations shaping India’s energy transition.

Key takeaways

Steel sector constitutes almost 10% of India's emission.
Green steel production is essential for achieving India's net-zero target by 2070.
By 2030, green steel demand is expected to rise to 4.49 million metric tonnes.
Demand for green steel is largely driven by construction, infrastructure, and automotive sectors.
Government initiatives mandate green steel in procurement processes, impacting construction and infrastructure industries.
At present, green hydrogen-based DRI plants and scrap-based EAF furnace are the key production pathways for green steel.
However, more technological innovations are emerging that will enhance green steel manufacturing efficiency.
Challenges such as technological readiness, compliance, low demand, and insufficient capital investment hinder transition to green steel production.
US$2-US$4 billion capital investment is required to set up a 1 million metric tonne steel plant, depending on quality of raw material.
To develop a commercially viable green steel sector, India must address challenges while leveraging policies, technology, and investment opportunities.

For India to be net zero by 2070, the Indian decarbonization journey has to start at least a decade or two decades earlier. That is why green steel adoption must happen in steel manufacturing as well as with end users.

Kapil Bansal

Partner, Energy Transition and Decarbonization, EY India

For your convenience, a full text transcript of this podcast is available on the link below:

Pallavi

Welcome to a new episode of the EY India Insights podcast, part of our Energy Transition Dialogues series, where we explore the clean energy transformations shaping India’s sustainable future. I am your host, Pallavi.

In today’s episode, we are diving into the evolving world of green steel, a critical enabler of India’s decarbonization journey. From the growing demand for sustainable materials to the impact of government policy, technological innovation, and investment, we will explore what it will take to build a scalable, low-carbon steel industry in India.

Joining me is Kapil Bansal, Partner, Energy Transition and Decarbonization, EY India, who leads the firm’s energy transition and decarbonization practice and has recently co-authored the EY report “Unlocking Green Steel Demand” in collaboration with WWF India and the CII Green Business Centre.

Kapil, thank you so much for joining us.

Kapil Bansal

Pleasure's all mine. Thank you, Pallavi, for having this podcast along with me.

Pallavi

Thank you. So, Kapil to start off with a basic question, what exactly is green steel? And why is it critical to India's decarbonizing energy?

Kapil Bansal

Thank you for asking that question, Pallavi. By definition, green steel depending upon the geography that you are looking has different definition from the perspective of CO2 emission per tonne of crude steel. From an Indian standpoint, the Ministry of Steel has defined three star-, four star- and five star-rated green steel.

A five star-rated green steel is anywhere between 2 and 2.2 tonnes of CO2 per tonne of crude steel. Four star is anywhere between 1.6 and 2 tonnes of CO2 per tonne of crude steel. Anything less than 1.6 tonne of CO2 per tonne of crude steel is considered as five star-green steel.

So green steel is defined as per the emission intensity of the manufacturing across Scope 1 and 2 emissions. And why is it critical for the Indian decarbonization journey? Because as per our honorable Prime Minister, in Glasgow, he has committed that India will become net zero by 2070. Steel sector constitutes almost 10% of India's emission. To be net zero, at least a decade or two decade earlier, the Indian decarbonization journey has to start. And that is why green steel is a predominant process through which green steel adoption will happen within steel manufacturing, and then its adoption with the end users.

Pallavi

Thank you, Kapil. Now focusing on our report, green steel demand is expected to rise significantly by 2030. So, according to you what factors are driving this demand in India?

Kapil Bansal

So based upon our report, if you look at 2030, green steel demand will rise to 4.49 million metric tonnes of green steel. And this demand is primarily coming from three sectors, which are construction, infrastructure and automotive. Now, if I look into construction and infrastructure sectors, these are driven by the government policies. These policies are coming from government which makes it mandatory to use green steel as a part of their overall government procurement process.

Within the automotive sector, most of the companies are looking towards becoming net zero anywhere between 2030 and 2040. And as you have seen, in the development of EVs (electric vehicles), there is a concept called ZEVs, which is zero emission vehicles under that policy. The automotive sectors are going to adopt green steel, which is roughly around 40% of the cost of any automotive, whether from two-wheelers, three-wheelers, and passenger cars to long haul commercial vehicles.

All of those need green steel as a part of their future growth. So, in short, construction-more from the government mandates, automotive- more from the consumer side of the things, and the auto industries following the green steel norm. And then finally, there is another policy which talks about EPR (Extended Producer Responsibility). Under that, the producers are supposed to reduce their emissions through circularity, where low carbon or solid scrap steel would be utilized, which is considered under the new norm of green steel.

Pallavi

Thank you, Kapil. In line with the government's ambition, how is the government policy, such as the hydrogen mission or the green hydrogen incentives impacting the entire green steel ecosystem?

Kapil Bansal

From our first white paper that was released, which talked about green steel production pathways, there were two different pathways that were defined. One was through green hydrogen based DRI (Direct Reduced Iron) plant and the second was through scrap based EAF (Electric Arc Furnace) route in which, if I look from the first production pathway, which is green hydrogen-based DRI process, the green hydrogen is going to come through one of the incentives coming from the National Green Hydrogen Mission, in which the government has allocated pilot projects through which green hydrogen can be utilized in the DRI pilot projects to generate green steel.

And that is why, one of those policies under the National Green Hydrogen Mission would suffice the need of the Ministry of Steel to do pilot and R&D projects to manufacture green steel using green hydrogen in a DRI plant. These DRI technologies are obviously coming from international collaboration. And those international collaborations are done through three opportunities or three EY clients, through which we are looking towards generating green steel and those are in the public domain.

Pallavi

Thank you, Kapil. Now, pivoting towards the technology perspective. What role does technology play in enabling the production of green steel? And are we seeing real-time innovation in this space?

Kapil Bansal

I will break technology into two parts. One is steelmaking technology, and the second is the adoption of AI and other information technologies, data technologies through which the green steel can be produced. If I talk about steel manufacturing technology, I have already explained in my previous question, that there are two different technological pathways through which green steel can be manufactured.

One is green hydrogen based DRI plant and another is scrap based EAF plant. In both cases, the green steel is coming within the defined green steel nomenclature and the emission standards. In terms of real time innovation, we are seeing some of the plants in the Europe such as Stryker from Sweden and SSAB (Swedish Steel AB), which have fully adopted green hydrogen based DRI plants. In India, we have seen a few more examples coming out using renewable energy, through which the scrap would be converted back into the steel. These are some of the potential production pathways for green steel, and these innovations are happening in real time.

Beyond that, in brownfield projects, there are a lot of newer technologies that are getting adopted, such as renewables, AI and carbon capture technologies, through which the green steel nomenclature could be fulfilled.

But then, that would need capital investment, and those capital investments at this point in time, are not giving the requisite IRRs to make the project within the requisite span of end money currently.

Pallavi

Thank you, Kapil. What challenges do industries face when transitioning from conventional to green steel production?

Kapil Bansal

Challenges are on four different dimensions. One dimension is the technological readiness. Some of these technologies are at a pilot to a certain initial commercial level, not at a full blown scale commercialization. So, that is the number one challenge.

Second challenge is regulatory compliance, which is not harmonized, and it is not penalized for companies to adopt it.

Third challenge is the demand that has not yet picked up to the level through which the investments can be justified.

The fourth element is that the market does not have the requisite capital towards building the green steel manufacturing process. And all put together, there is lack of skills and capabilities to help in transitioning from a conventional business to a green steel production business.

Pallavi

Thank you, Kapil. From an investment perspective, according to you, what will it take to build a scalable and a commercially viable green steel industry in India?

Kapil Bansal

Currently when we look for any green steel viable project at a scalable level, we are talking about at least 1 million metric tonnes of green steel. And for that, we are looking for capital investment on the green hydrogen space, on the renewable space, on the whole new greenfield establishment of a green steel. This would require capital of anywhere between US$2.5-US$3 billion for renewable capacity development. There would be a need of US$1.5-US$2 billion in the green hydrogen space. And then, for 1 million MT kind of steel plant, you would need another US$2-US$4 billion investment, depending upon the quality of raw material, which is iron ore or scrap available.

Based on that, these kinds of investment are required for a scalable, commercially viable green steel project in India, from a green hydrogen to DRI based plant.

Pallavi

Thank you, Kapil. That is incredibly insightful. Thank you for walking us through green steel's implications, growth drivers, challenges, and what India needs to build scale.

Kapil Bansal

My pleasure, Pallavi. Thanks for having me for this discussion.

Pallavi

Thank you, Kapil. And to all our listeners, thanks for tuning in. Until next time, let us continue to work forward towards a cleaner and greener India. Do not forget to subscribe to our channel for more conversations on energy transition and sustainability.

Presenters

Kapil Bansal

Partner, Energy Transition and Decarbonization, EY India

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Podcast

Episode 06

Duration

11m 57s

How the demand for green steel in India is shaping future trends

Green steel is no longer optional—it is the key to decarbonizing India’s fastest-growing industrial sector.

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Future of green steel in India: Growth, scale, and challenges

Key takeaways

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Kapil Bansal

Pallavi

Presenters

Kapil Bansal

How the demand for green steel in India is shaping future trends

Green steel is no longer optional—it is the key to decarbonizing India’s fastest-growing industrial sector.

In this series

Presenters