The European steel industry’s 60 decarbonization projects in the pipeline this decade will reduce the industry’s direct and indirect CO2 emissions by a third, or by 81.5 million mt, Axel Eggert, director general of steel association Eurofer, told a Clean Steel Partnership webinar June 1.
The projects represent Eur31 billion ($33 billion) in capex, and their operational costs are estimated at 55 billion euros, with uncertainty regarding hydrogen and green electricity prices underpinning the high figure.
As a result, a ton of green steel could initially be 35%-100% more expensive than its blast furnace-route analogue, but in time it is expected to become competitive, according to Eggert.
To make it attractive at all, Eurofer suggests creating lead markets for green steel and using contracts to cover the difference and other risk-sharing instruments. Introducing incentives for green steel use in downstream sectors would help too, with its end-users feeling like they get a bonus when they choose green steel.
Public procurements and contracts can create lead markets for green steel products too given their large — 20% — share in EU total spending.
Time to decide, steelmakers say
For now, steel plants need to make investment decisions on decarbonization projects; they say they need to proceed with decisions this year at the latest in order to achieve their 2030 emission targets, but uncertainty hangs over the projects because of the lack of aid for the transition.
There are many programs to fund industrial projects, innovation and Important Projects of Common European Interest, but while the Clean Steel Partnership is already running well, the other schemes remain underfunded, or approval of projects is slow or delayed, Eggert noted.
Whether they will have access to competitively priced energy, in particular electricity and hydrogen, also holds some back. For the EU steel industry to achieve carbon neutrality by 2050, it will need 400 TWh/year of electricity, just over half (230 TWh/year) of which to be used on the production of 5.5 million mt of hydrogen.
To put it in perspective, Eggert said 400 TWh/year equates to the electricity consumption of France and is seven times more than what the steel industry purchases from the grid today, but in the near future this would be the requirement of only one sector, which will be competing for decarbonized electricity with many others.
“These are massive amounts, and infrastructures are not at all available today, which is a problem for companies to take investment decisions,” Eggert said.
Natural gas option limited
Building the necessary infrastructure is becoming even more crucial given the Russia-Ukraine war, which points to a need to speed up the rollout of this new infrastructure as Europe and its steel industry may not be able to rely on sufficient supply of natural gas.
“We thought we could use natural gas [to help reduce the carbon footprint of blast furnaces] at least until 2030 or beyond until hydrogen starts to be introduced more and more into steel plants, but we will need hydrogen probably much sooner now,” Eggert said.
Blast furnace-based plants produce their own electricity from their off-gases, but this will not be the case in the future given the needs of hydrogen in the same gases, and this means the BF mills will take more electricity from the grid, which calls for big infrastructure measures as well.
Compared with the total human-made CO2 emissions, the figures seem to be small in the EU — the union’s steel industry emits 0.2 gigatons of CO2, but the sector’s share within the EU is significant — 6% of the total, or 25% of the industrial emissions.
Most of these are concentrated on 20 sites, mostly those equipped with blast furnaces, which account for 5% of the union’s CO2 emissions, and the trick is to decarbonize these sites.
30% emissions reduction by 2030
The EU steel industry has collectively committed to reduce emissions by 30% by 2030 versus 2021 but is seeking ways for this to be achieved as cost efficiently as possible.
Eurofer is advocating for greenhouse gas emission benchmark-based free allocation of CO2 allowances, compensation of indirect costs and complementary carbon adjustment as the elements that will help through the transition; the EU parliament is expected to vote on its proposals soon.
The association estimates the EU steel mills’ shortage in free emission allocation at Eur3.5 billion/year, expecting it to increase to Eur13.8 billion/year by 2030.
— Ekaterina Bouckley
