Subsidise green steel with cheaper energy deals, says think tank
Renewable developers should offer cheap electricity for steel producers to enable them to ramp up production to meet the UK’s green ambitions, a leading climate think tank has argued.
A potential ‘energy for steel’ arrangement would see project owners of wind and solar farms offer cheap electricity directly to steel producers – through a power purchase agreement – and in return receive green steel, both at favourable rates.
This would support the offshore wind sector’s commitment to source more domestic steel by 2030, as outlined in its sector deal with government four years ago.
New findings from , exclusively shared with Morning Wire, suggests that the UK will need as much as 26 per cent more steel by 2030 – with two thirds of growth driven by renewable and low carbon infrastructure, such as electric vehicle charging points and wind turbines.
Building additional renewable power generation will create an additional demand of 900,000 tonnes each year up to 2030, the think tank estimates.
Green Alliance is calling for fresh moves to be made to meet this demand domestically rather than undermining supply security with increased dependence overseas vendors.
As it stands, much of the UK’s supply is imported in the form of finished components, as the UK’s crisis-stricken industry has limited production capacity relative to the size of the country’s economy.
Further domestic production would require a lot of energy, while electricity prices for large industries in the UK are some of the highest in Europe.
However, Green Alliance’s modelling shows that domestic production would have the capacity to meet most future demand, including from steel-hungry net zero infrastructure, if it was used more efficiently.
Wind turbines have a typical lifespan of 25 years, meaning that more ‘circular’ models of steel production in this industry would also have benefits.
Green Alliance believes that producers could sell steel for turbines with an option to buy it back at the end of life – providing a guaranteed source of high-quality scrap steel for electric arc furnaces.
Verner Viisainen, policy analyst at Green Alliance, said: “The UK steel industry could overcome concerns about its competitiveness and have a bright future, if the government supports it appropriately and the industry realises the opportunities emerging in a decarbonised, lower-waste steel market.
“Our modelling shows that new net zero infrastructure is likely to boost domestic demand for steel, which can be met by UK steelmakers provided they integrate with new markets effectively. This includes reducing the significant waste in steel-intensive industries – like construction and motor manufacturing – where there are profits to be made from recycling and reuse.”