'EU steel industry will need more subsidised green H2 than European Hydrogen Bank can provide': trade body
Sector needs five millions of tonnes of green hydrogen a year, says Eurofer
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Steel producers need green hydrogen to cleanly extract iron from ore through the direct-iron reduction (DRI) process, in place of coke-fired blast furnaces, so as to minimise their 7-8% contribution to all global carbon emissions.
It will need to cost no more than €2-3/kg ($2.13-3.19/kg), a spokesperson for industry association Eurofer said, which implies the need for significant subsidies. The cost of green hydrogen in Europe is expected to be in the region of €4.50-6/kg, according to analyst S&P Global Platts.
Europe’s first DRI plants are due to come on line in 2025-27, with at least two incumbent German developers putting out tenders for thousands of tonnes of green hydrogen by 2027-28.
And while some customers may be prepared to pay a green premium for green hydrogen-derived steel (H2 Green Steel has pre-sold 40% of its 2.5-million-tonne capacity with premiums of 20-30%), the industry needs other regulatory incentives, Eurofer insists.
“We need green lead markets in the EU, via public procurement and product regulation, for example, vehicles [and] construction,” the association’s spokesperson explained.
Eurofer’s comments come after its director-general Axel Eggert, told a conference in Poland that it could take up to 25 years to fully decarbonise Europe’s steel industry due to the scarcity of green hydrogen, meaning that Polish-produced coke is set to be used for many years to come.
Producers bid for a fixed-price per-kg premium in a closed auction up to a ceiling price of €4.50/kg, with the lowest eligible bids (weighted against a range of other criteria such as sustainability) picked first, continuing until the budget is exhausted.
The aim is to give domestic green hydrogen developers the revenue certainty they need to secure project financing.
Germany’s H2Global, to which Berlin has promised around €5bn, works in a similar fashion for imported green hydrogen and derivatives, with the addition of a double-sided auction that offers short-term supply contracts for offtakers alongside long-term supply contracts for producers.
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