The government has launched pilot projects aimed at decarbonizing the steel sector using green hydrogen under the National Green Hydrogen Mission (NGHM), the Ministry of New and Renewable Energy (MNRE) has said.

The steel industry accounts for around 7% of greenhouse gas emissions annually and is one of the most polluting industries worldwide.

The program aims to support the deployment of green hydrogen and its derivatives as fuel in the iron and steel-making process. It has an outlay of ₹4.55 billion (~$54.8 million) until the financial year 2029-30.

The pilot projects will be implemented through the Ministry of Steel (MoS) and nominated executing agencies.

The program aims to gradually substitute fossil fuels to use 100% hydrogen in the Direct Reduced Iron (DRI) process of steelmaking. The process involves the direct reduction of iron ore into metallic iron using reducing gases generated from natural gas or coal.

The program also aims to use green hydrogen and its derivatives in the blast furnace method of steelmaking. This method, which involves the reduction of iron ore using coke and limestone in a high-temperature environment, generates substantially more carbon dioxide emissions and consumes more energy than the DRI process.

The government, however, recommends blending small percentages of hydrogen, given its higher costs. The blending proportion can be gradually increased as cost economics improves with time.

The program will primarily fund capital equipment required to use green hydrogen in the steel-making process. Expenses to produce green hydrogen or land will not be funded.

Additionally, the funding of the approved projects will not exceed 50% of the total cost. However, the funding may be increased to 70% for a consortium of independent steel producers and the DRI industry.

The central financial assistance will be disbursed in three stages: Issue of letter of award (20%), milestone-based disbursement (70%), and completion (10%).

The pilot projects aim to validate the technical and economic viability of using green hydrogen in the steel industry. They will help assess operational issues, safety, infrastructure needs, and regulations required for scaling up deployment.

The executing agencies selected for the projects will then share quarterly reports of the pilot projects to disseminate findings, best practices, and lessons learned.

A steering committee under MoS and MNRE will monitor the program, and project appraisal and selection will be done through a transparent process.

The government hopes that the use of green hydrogen and its derivatives in the steel sector, through the proposed pilot projects, will lead to the development of necessary infrastructure like refueling stations, storage, and distribution networks.

Just last week, the MNRE greenlit pilot projects aimed at decarbonizing the shipping sector using green hydrogen, with an outlay of ₹1.15 billion (~$13.9 million) until FY 2025-26 under the National Green Hydrogen Mission.

Last month, MNRE released an implementation framework to incentivize the production of 200,000 MT of green hydrogen annually.