Report says UK falling behind EU in clean steel development

A REPORT by the Energy and Climate Intelligence Unit (ECIU) has found that UK clean steel development is lagging significantly behind the EU.

The report, Stuck on the starting line: how the UK is falling behind Europe in the race to clean steel,  found that there are 23 hydrogen-based steel projects planned or underway in the EU. However, in the UK there are no definitive plans to use hydrogen for steel production, and only a very vague proposal for a carbon capture project.

Decarbonising steel

Steel production is responsible for 15% of UK industrial emissions. While production has become more efficient – with production now 45% less energy intensive than in the 1970s – the use of coking coal as a reducing agent makes it difficult to decarbonise steel production. The report says that hydrogen-based production is seen as the main method of decarbonising steel, via two methods. Hydrogen can either be injected as a reductant in existing blast furnaces, or it can be used to directly reduce iron ore (DRI) to sponge iron which is then converted into steel.

According to European climate NGO Bellona, cited by the ECIU report, if hydrogen is used as a reducing agent in the blast furnace, less coal is needed. Only water is formed after reacting with iron ore, compared to the CO₂ emitted when only coal is used. However, using only hydrogen in the blast furnace isn’t technically feasible, meaning that this process is seen more so as a transition towards DRI using hydrogen as the sole reducing agent for iron ore.

The ECIU notes that hydrogen-DRI is still very energy intensive and would require an electricity demand of around 20 TWh/y. This would equate to around 4 GW of new offshore wind capacity, and would need to be accounted for in future renewable energy procurement rounds.

Slow progress

The UK Climate Change Committee has said that steel sector emissions need to fall by 23% by 2030 compared to 2020 levels. However, the ECIU says that the UK is not making much progress towards that target. For example, the UK Clean Steel Fund won’t begin to allocate its £250m (US$347m) in funding until 2023. The fund was introduced in 2019 and is designed to support new technologies and processes. It will explore three areas: switching to lower carbon fuels; CCS; and energy and material efficiency.

The report noted the UK Government’s aim to improve national infrastructure, a goal that will require millions of tonnes of steel. However in its Industrial Decarbonisation Strategy, it only said that it would “consider the implications” of the CCC’s recommendations for steel decarbonisation targets.

In comparison, there are eight projects planned or underway in the EU that are injecting hydrogen into the blast furnace, along with 14 DRI projects. The report states that Germany’s recent hydrogen strategy, which has allocated €9bn (US$10.7bn) in funding for hydrogen development, is vital for the hydrogen steel projects.

The ECIU cautions that falling behind EU competitors is a major employment risk as there are 33,700 people working directly in the UK steel sector.

Challenges of decarbonisation

The UK steel sector has had decades of underinvestment, according to the report. One barrier identified in the UK Clean Steel Fund consultation is an “unsupportive policy environment”, where the lack of technological pathways and sectoral emissions targets make it unlikely that the private sector will invest. The report noted that a blast furnace can operate for 30 years, making investment cycles in the industry very long.

There are also high energy costs for UK industry compared with Europe. The electricity price was 11.65 p/kWh in 2020, compared to an EU median of 6.32 p/kWh. Lobby group UK Steel estimated that this adds £54m/y to UK steel production costs.

Jonathan Marshall, ECIU Head of Analysis, said: “This stark illustration of just how far and fast the UK is falling behind in the race to green steel should be a wakeup call both to ministers and the communities reliant on jobs in the steel sector.

“EU nations are clearly seeing the opportunities presented by decarbonising their steel sectors; the UK needs to recognise that this is a competitive global market, so sticking with the status quo, or worse, arguing that the sector will remain reliant on coking coal, just doesn’t cut it.”

Cameron Pleydell-Pearce, Deputy Director of the EPSRC-funded SUSTAIN future steel manufacturing research hub, said: “There is a strong and innovative community from academia, RTOs, and industry supporting the UK steel industry via projects such as SUSTAIN, and UK companies are strongly committed to a just transition to net zero.

“However, the ECIU report accurately identifies disparity between the UK and EU when it comes to investment in demonstration projects such as those highlighted. In terms of what we invest in, we must acknowledge that decarbonisation pathways will vary by geography and the products a company produces.

“The report highlights challenges particular to the UK in policy and energy prices, though there are also unique opportunities … particularly in the management and processing of our domestic scrap. With increased investment in the world class community of experts and innovators our steel industry can thrive in a just transition to net zero.”