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Electricity price crisis ‘hampering UK steel sector’s net-zero transition’

Steel accounts for around 3% of the UK's annual emissions

The organisation, convened by manufacturing sector organisation Make UK, will today (12 July)  publish a report outlining its vision for aligning the steel sector with the UK’s 2050 net-zero target. The sector is targeting a 95% reduction in emissions within this timeframe and will then ‘net’ the residual emissions using approaches such as offsetting.

“There is not one single technology” upon which the sector will need to rely to reduce emissions, UK Steel has stated. Instead, it will need to properly plan for the implementation of multiple technologies such as hydrogen fuels, carbon capture and storage (CCS) and electrified processes.

On electrified processes, UK Steel is warning that most firms see high industrial electricity prices as a “key barrier” to investment. The trade body acknowledges the importance of continuing production in the UK but notes that the UK’s steelmakers are currently paying some 60% more than their counterparts in EU member states for electricity.

UK Steel’s director Gareth Stace said that high electricity prices for industrial players are “strangling investment”.

Alongside the tech-based solutions noted above, the sector will need to improve energy efficiency and material efficiency. To this latter point, UK Steel’s Stace said: “We export much of our scrap steel only to reimport it, meaning there is fertile ground for electric arc steelmaking.”

UK Steel is calling on policymakers to take note of its technology pathway vision and adequately support the adoption of emerging technologies. And, in addition to this financial and technical support, the organisation is calling for measures to close the green skills gap; promote the first-mover advantage the UK would gain from creating a net-zero steel sector, and ensure a competitive market in which imported, high-emission steel does not undercut domestic net-zero materials.

Stace stated: “Some argue that to bring down our emissions, we simply import our steel. Such a choice would be devastating to steelmaking communities and do nothing to bring down global carbon emissions. We cannot offshore our emissions and hope that others will do the decarbonisation. We must have a steel sector that is prosperous, decarbonised, and domestic.”

The UK Government did agree last month, on the recommendation of MPs on the Environmental Audit Committee (EAC), to consult on a new carbon tariff to ensure that British manufacturers of low-carbon goods are not being undercut by low-cost, high-emission imports.

EAC chair Philip Dunne MP welcomed the Government’s decision and urged Ministers to use the results of the upcoming consultation to launch a CBAM “as soon as possible” – certainly by the end of the decade. Timelines remain to be seen amid the search for the next Conservative Party leader following Boris Johnson’s resignation.

Policy temperature check

UK Steel has stated that the outgoing UK Government has made “real, tangible progress” in future-proofing the nation’s steel sector – a process which includes working across the value chain to reduce climate impacts.

But the EAC is, separately, warning this week that the administration’s stated ambitions on decarbonising steel are not yet being supported with appropriate funding, legislation and regulation.

The Committee has this week received a letter from Business and Energy Secretary Kwasi Kwarteng, responding to its work examining policy progress on ‘greening’ the steel sector.

Kwarteng wrote: “The decarbonisation of UK industry is a core part of our ambitious plan for the green industrial revolution to create sustainable and significant economic development across the UK. In light of this, BEIS continues to work with companies, who are developing their own decarbonisation strategies, to understand the trajectories of their plans and to support them as they make commercial decisions on the optimum route for their sites.”

His letter names initiatives including the work to create a Hydrogen Business Model, first flagged in last year’s Hydrogen Strategy and this month reiterated in the Energy Security Bill. On hydrogen, Kwarteng also flags increased funding for blue and green production in the UK, to help deliver the 10GW by 2030 capacity target.

Responding to the immediate energy price crisis piece and concerns around how this could hamper electrification, the letter states that “Ministers and officials continue to engage with industry to further understand the impacts of high energy prices. Our priority is to ensure costs are managed and supplies of energy are maintained, and we aim to ensure the UK remains an attractive investment destination”.

Nonetheless, the EAC is concerned that BEIS is not adequately supporting the uptake of technologies and processes proven to provide emissions reductions in the near term nor shielding the sector sufficiently from skyrocketing energy prices.

An EAC statement issued to media representatives reads: “Many of the innovations that Ministers are currently pinning their hopes on could take years before they result in any meaningful drop in emissions. There is also no indication that an alternative is in sight to the use of coking coal in the sector, which could dramatically reduce the use of fossil fuels in steel production. These unanswered questions risk setting the UK back compared with other national steel industries where progress towards green production is accelerating, not least in light of soaring energy costs for existing technologies.”

The EAC did “commend” the UK’s commitment to exploring net-zero-related issues, but warned that Ministers do not currently “fully grasp” the scale and practicalities of the UK steel sector’s net-zero transition.

© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.

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