Green Business

RWE and ArcelorMittal ink major wind farm and green hydrogen deal

Written by pgex7

A series of new offshore wind farms and hydrogen facilities to supply the renewable energy and green hydrogen required for low-emissions steel production in Germany are set to be built following the signing of a memorandum of understanding between energy company RWE and steel producer ArcelorMittal.

In a statement the two firms said the partnership would “drive forward the production of carbon-neutral steel”, enabling a plan to replace coal with wind power and green hydrogen as the main source of energy in steel production at ArcelorMittal’s steelmaking sites in Germany.

To decarbonise its production sites in Bremen, Hamburg, Eisenhüttenstadt, and Duisburg as planned, ArcelorMittal Germany needs renewable energy at a large scale and RWE and ArcelorMittal are now assessing options for joint participation in tenders for offshore wind farm sites in the North Sea, the firms said.

“Electricity from renewable energies and green hydrogen must become the hallmark of industrial production in Germany,” said Sven Utermöhlen, CEO Offshore Wind, RWE Renewables. “Industry needs both in large quantities as soon as possible in order to achieve its climate targets. That is why we are planning one of the most ambitious expansion projects for offshore wind farms and electrolysers in Germany, together with ArcelorMittal. If the regulatory framework is right, we want to be successful together in the bidding for offshore areas.”

The companies said the plans would require an amendment to Germany’s “Wind Energy at Sea Act” (WindSeeG) to avoid so-called “negative bids” in offshore wind tenders, which RWE Renewables said would make financing wind farms more challenging and send the wrong pricing signals to the market by making wind power unnecessarily expensive.

Under the new partnership RWE and ArcelorMittal said they would also work together on the development of green hydrogen, by jointly looking for areas where electrolysis plants can be built to supply the steel production sites in Bremen and Eisenhüttenstadt. The firms said the process would start with the development of a 70MW pilot plant by 2026, but they stressed that there was a clear intention to increase to Gigawatt-scale projects in the long term.

“ArcelorMittal Germany is embarking on a radical transition to ensure we reach our CO2 emissions reduction targets, meaning that the energy used to make steel will need to be clean energy,” said Reiner Blaschek, CEO ArcelorMittal Germany. “The partnership we have announced with RWE today is significant for a number of reasons: it will provide us with the renewable, affordable electricity and green hydrogen that we need to produce low-emissions steel while remaining competitive in a global market. It also offers vital security in the supply chain, by integrating the supply of energy and hydrogen into our business.”

The news comes as a new report warned that steelmakers that do not embrace new, lower carbon technology risk sitting on stranded assets of up to $518bn.

The potential write down is predicted if steelmakers continuing to invest in fossil fuel-based Blast Furnace-Basic Oxygen Steelmaking (BF-BOS) which uses coking coal to remove oxygen from iron ore to ultimately create new steel.

The insight is one of the key findings of Global Energy Monitor’s new Global Steel Plant Tracker report, which highlights how Asian are particularly planned at risk of stranded assets as 80 per cent of the BOF steelmaking capacity under development globally in China and India. An additional 14 per cent of the BF-BOF steelmaking capacity under development is planned for Indonesia, Vietnam, and Malaysia.

According to the World Steel Association, steelmaking is responsible for between seven and nine per cent of global greenhouse gas emissions yet. But while BF-BOS production is responsible for as much as 2.2 tons of CO2 emissions per tonne of steel produced, other far less intensive carbon steelmaking processes are now available and are proving attractive to customers and policymakers looking to slash their carbon emissions.

Electric arc furnace (EAF) steelmaking uses either steel scrap or direct reduced iron (DRI) – also known as sponge iron – or a combination of these materials as the primary feedstock. DRI production turns iron ore into iron using a reducing gas such as carbon monoxide produced from natural gas or coal or hydrogen produced from natural gas, coal, or using an electrolyzer that relies on electricity to split water into hydrogen and oxygen. Scrap-based EAF production results in just 0.3 tonnes of CO2 emissions per tonne of crude steel produced, while natural gas-based DRI-EAF production results in approximately 1.4 tonnes of CO2 emissions per tonne.

Hydrogen-based DRI-EAF production, meanwhile, results in an average of 0.71 tonnes of CO2 per tonne of crude steel made.

The technology is at the heart of the emerging green steel market with firms such as Volvo and BMW already contracts for low carbon steel signing produced by firms such SSAB, H2 Steel, and Salzgitter AG.

BMW has a stated goal of meeting over 40 per cent of demand at its European plants by 2030 with low carbon steel. The move is expected to reduce carbon emissions by up to 400,000 tons per year.

“Transitioning to less carbon-intensive steelmaking is a big part of countries meeting their net zero goals. We need to stop investing in coal-based blast furnace basic oxygen equipment and speed up the shift towards electric arc furnace steelmaking,” said Caitlin Swalec, project manager for the Global Steel Plant Tracker.

The report recommends three main actions the industry must take if it is to align with international efforts to reach net zero by 2050. These include “aggressively shifting” steelmaking capacity from the dominant blast furnace-basic oxygen furnace (BF-BOF) steelmaking route to electric arc furnace (EAF) steelmaking; outfitting all remaining BF-BOF plants with the best available technology (BAT) or retiring them; and focusing on novel low-emissions and net zero steelmaking technologies, including hydrogen-DRI production. These technologies need “rapid development, scaling up, and deployment,” the report adds.

Last month the Environmental Audit Committee (EAC) of MPs similarly warned that the future of the UK’s steel industry is under threat unless investment is made in new technologies to decarbonise production, describing the government’s green steel initiatives to date “vastly underpowered”.

The select committee’s report compared to the UK’s steel industry unfavorably with the rapidly accelerating efforts in other countries. For example, in January Swedish steelmaker SSAB unveiled a £3.56bn plan to ‘largely eliminate’ CO2 emissions right across its manufacturing sites inside just eight years using green hydrogen technology as a fuel, and now RWE and ArcelorMittal look set to join the green steel trend as well.

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