Government funding remains a key factor in the feasibility not only of low-carbon steel projects in Europe, but also the expansion of renewables to support them, Kallanish learns from a new report.
The report by Reuters Events notes that decarbonisation technologies such as green hydrogen and direct reduced iron are yet to be widely deployed and require massive investments to build out new infrastructure and reach industrial-scale capacities.
Despite 60 low-carbon steel projects underway, the pace of growth will depend on the availability of affordable renewable energy to power EAFs and produce green hydrogen. These projects will double electricity consumption in the EU steel industry to around 75 Terawatt Hours/year and require an additional 90 TWh of renewable energy to produce green hydrogen via water electrolysis.
These projects will require total capital expenditure of around €30 billion ($33.1 billion) and finding the funds will be a huge challenge, says Adolfo Aiello, deputy director general at Eurofer.
Additional funding is needed amid falling revenues and low production rates in recent years, as well as high costs and strong competition from foreign rivals.
“Once they have installed their first DRI, and if everything goes smoothly at a technical level, economic level and energy level, companies would continue replacing their blast furnaces with additional DRIs,” Aiello notes.
However, further regulatory intervention is required to reduce electricity prices, accelerate green hydrogen infrastructure construction and increase demand for decarbonised steel among lead end-user sectors, he adds.
The report notes a lack of grid connection points for new solar and wind farms as a key barrier to renewable energy growth. Slow approvals is a key issue globally, increasing project costs. A new EU renewable energy directive, the grid action plan, requires member states to streamline permitting procedures. This will require around €584 billion of investments by 2030, it says.
Thyssenkrupp Steel says the main challenge for its planned DRI plant will be securing green hydrogen and renewable energy at competitive prices. It has been granted €2 billion by the EU, while Thyssenkrupp will invest €1 billion.
Prices are high because the necessary infrastructure to produce, transport, and store green hydrogen across EU borders has not yet been built, a Thyssenkrupp spokesperson observes.
The enormous investments required to install green steelmaking technology and convert integrated sites mean that governments must support the cost, the company adds.
Time is of the essence because it can take up to six years to convert old natural gas storage facilities, so that they can store hydrogen, and ten years to build new ones.
Policymakers must also implement measures that support the creation of green lead markets, such as quotas for certain products or as part of public procurement, the steelmaker asserts.
This aligns with a recent policy paper by SteelZero seeking enhanced government led procurement.
The report notes that decarbonising Europe’s heavy industries will depend on whether the EU can meet its goal of producing 10 million tonnes/year of renewable hydrogen and importing a further 10m t/y by 2030.
Independent auditors consider these targets unrealistic, largely due to a lack of funding.
Oleksiy Tatarenko, lead hydrogen analyst at RMI, notes the hydrogen industry has flagged that subsidy packages in the EU are underfunded and too slow to help accelerate project investment decisions.
Steelmakers located away from ports could import green iron from outside the EU and transport to site via conventional methods such as rail, which will be “easier to accomplish than new pipelines for hydrogen”, notes Rachel Wilmoth, senior steel analyst at RMI.
“Some steelmakers see importing green iron as an important first step to decarbonising steel production in Europe in a cost-effective way, while also keeping the current steelmaking expertise and jobs in place,” she concludes.
Carrie Bone UK
