The green hydrogen project in Mississippi, designed to fuel SSAB’s green steel venture, represents a critical effort in the broader campaign to decarbonize heavy industries. However, encountering substantial headwinds, Hy Stor Energy’s initiative has highlighted the complex obstacles involved in the transition to green hydrogen, with market uncertainties and policy ambiguities adding further complications.
Project Overview and Ambitions
Hy Stor Energy’s ambitious plan involves the construction of a massive green hydrogen hub in southern Mississippi, leveraging gigawatts of wind, solar, and geothermal energy to produce “zero-carbon renewable” hydrogen. This hydrogen would be stored in underground salt caverns for subsequent industrial use, aiming to reduce greenhouse gas emissions substantially. The goal is part of a broader endeavor to decarbonize heavy industries and usher in a new era of sustainable industrial practices.
Earlier this year, Hy Stor solidified its commitment to the green hydrogen initiative by signing an exclusive letter of intent to supply green hydrogen to SSAB, a steelmaker planning to develop a green steel facility in Perry County, Mississippi. Green hydrogen is crucial to SSAB’s strategy to manufacture steel using clean energy sources, setting it apart from traditional carbon-intensive steel production methods. This alignment between Hy Stor and SSAB represents a visionary step towards a greener future for steel manufacturing.
Setbacks and Market Challenges
Despite promising initial strides in the project, Hy Stor faced an unexpected setback when it abruptly canceled a preliminary supply agreement with Norwegian electrolyzer manufacturer Nel. Electrolyzers are essential for splitting water into hydrogen and oxygen using renewable electricity, offering a greener alternative to the carbon-heavy methods currently in use. This cancellation followed Hy Stor’s April agreement with Nel to reserve over 1 gigawatt of alkaline electrolyzer capacity for what was envisioned as the Mississippi Clean Hydrogen Hub. However, by September 30, Nel announced that Hy Stor had terminated the deal.
Acknowledging the significant market headwinds facing the green hydrogen project, Hy Stor outlined the challenges in terms of both project timeline and economic feasibility. Eric Reidel, managing director for Connor, Clark & Lunn Infrastructure, which controls Hy Stor, highlighted the longer-than-anticipated timeframe required to bring the lead project to fruition. As a result, Hy Stor chose not to make the imminent capacity reservation payments needed under the Nel agreement. Despite these setbacks, Reidel remained optimistic about Hy Stor’s future due to its unique asset base, including a vast portfolio of salt domes and land rights on the Gulf Coast.
Uncertain Timelines and Policy Ambiguities
With no revised timelines currently available, the future of the hydrogen hub remains shrouded in uncertainty. Clean hydrogen is pivotal for reducing emissions in industrial sectors such as steelmaking and aviation, but it remains an expensive endeavor. Even though production costs are expected to decline over time, storage and distribution continue to pose significant challenges for years to come, according to a recent Harvard University study. This indicates a prolonged journey ahead for the clean hydrogen sector to navigate these economic and logistical obstacles.
The uncertainty also extends to U.S. clean hydrogen policy, specifically regarding tax credits under the Inflation Reduction Act. Key rules for determining project eligibility for 45V tax incentives are still pending and are unlikely to be finalized until after the November election. This delay has consequently postponed billions of dollars in investments in clean hydrogen projects. Without clear policy frameworks, stakeholders in the green hydrogen sector face increased difficulties in planning and executing large-scale initiatives, further complicated by evolving regulatory landscapes.
Impact on Mississippi’s Green Steel Ambitions
Hy Stor’s project delays have cascading effects, particularly impacting SSAB’s green steel initiative in Perry County, which relies heavily on Hy Stor’s hydrogen supply. SSAB plans to implement Hybrit technology at a new Direct Reduced Iron (DRI) facility, converting raw iron ore into iron briquettes using locally produced hydrogen. This technology is groundbreaking as it replaces traditional methods with greener alternatives and only SSAB’s Hybrit pilot plant in Sweden currently uses green hydrogen commercially for ironmaking.
Although SSAB has yet to specify the scale of the Mississippi facility, it is worth noting that typical DRI facilities produce about 2 million metric tons of iron annually. Furthermore, SSAB plans to extend its green steelmaking operations to Montpelier, Iowa. The delays in Hy Stor’s hydrogen hub raise substantial concerns about SSAB’s timelines and overall strategy for green steel production within the United States, potentially affecting the broader effort to decarbonize the steel industry.
Broader Industry Challenges
The challenges faced by green steel projects are not isolated to Mississippi alone. Internationally, other ventures have encountered similar hurdles. For example, Thyssenkrupp in Germany is reconsidering its $3.3 billion hydrogen-fueled ironmaking plant due to escalating costs. Similarly, U.S. steelmaker Cleveland-Cliffs experienced a brief suspension of its green steel project in Ohio, largely due to market resistance from automakers and steel buyers towards the higher costs associated with lower-carbon steel. These challenges reflect a broader industry struggle with economic feasibility and market acceptance.
Despite these obstacles, both SSAB and Cleveland-Cliffs have been selected to receive up to $500 million each from the Department of Energy (DOE) to construct these innovative commercial facilities. Cleveland-Cliffs has already advanced to phase one, receiving DOE funds for preliminary design and engineering work. In the long term, these projects aim to rejuvenate the U.S. primary steel industry while significantly reducing emissions and pollution.
The Road Ahead for Green Hydrogen
The green hydrogen project in Mississippi, aiming to power SSAB’s green steel initiative, represents a significant stride in the broader mission to decarbonize heavy industries. Green hydrogen is seen as a key element in reducing carbon emissions from industries that have traditionally relied on fossil fuels. However, Hy Stor Energy’s project has encountered substantial challenges, bringing to light the intricate obstacles associated with the transition to green hydrogen. These challenges are not just technical but also involve significant market uncertainties and policy ambiguities that complicate the overall effort. The unpredictability of the market can make it difficult for companies to justify the investment needed for green hydrogen production. Meanwhile, unclear or evolving policies can create an uncertain regulatory environment, further hindering progress. Nevertheless, tackling these issues is essential in the pursuit of a sustainable and decarbonized industrial sector. The initiative in Mississippi serves as a crucial case study in overcoming these barriers to achieve large-scale adoption of green hydrogen across various heavy industries.
