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Green ‘conversion’ of Tata Steel will cost taxpayers billions

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Tata Steel in IJmuiden aims to make the Netherlands’ ‘hydrogen economy’ a ‘one-stop shop.’ That virtuous desire is not unrestricted. The new Rutte cabinet’s climate strategy is predicated on a commitment to spend $15 billion on hydrogen. Currently, no less than half to two-thirds of the sum should be allocated to Tata Steel’s “greening.”

The hydrogen concept was conceived by the FNV trade union, which is hoping for government help. As well as Tata herself. But neither Tata nor the FNV can say how much exactly.

That isn’t the only thing that is up in the air. The supply of green hydrogen, green power, CO2 prices, subsidies, and licenses should all come into place in the next years to allow Tata’s objectives to be realized.

Last week, Tata had ‘by feel’ taken over the plan from the FNV. ‘We haven’t done all the numbers again,’ said Annemarie Manger, sustainability manager of the firm in IJmuiden.

That is why we are discussing the billion-dollar circus here in Wynia’s Week, and why Tata should not only go green, but also maintain the steel production in the Netherlands.

Tata would not be totally coal-free until the early 1930s, even under the most hopeful scenario. At least one blast furnace will continue to burn coal until then. The firm will require around 380,000 tons of green hydrogen per year to replace both furnaces.

A lot of ‘green’ power is required to produce so much green hydrogen. To give you a sense of scale, 3.8 million houses could be provided with power with the same capacity.

Not only are pig iron blast furnaces being phased out, but the present basic oxygen factory, where pig iron is processed into steel, is also being phased out to make way for an electric arc furnace. According to the German firm Roland Berger, which was contracted by Tata Steel and FNV Metaal to assess the hydrogen plan at the end of last year, the company’s annual power usage will climb from 0.6 to 5.6 terawatt-hours.

Natural gas consumption is on the rise as well. The iron furnaces that will be acquired will run on hydrogen for 80% of the time and gas for 20% of the time. This would need three times the amount of natural gas that Tata now utilizes.

Gas is less polluting than coal. Residents in the neighborhood of the plant will no longer be bothered by poisonous chemicals and metal emissions. However, because carbon is still required to create steel, Tata continues to release carbon dioxide (CO2). 2.4 million tons per year in the best-case scenario. This brings the total to 12.6 million tons.

Gasunie and TenneT, both state-owned utilities, plan to pump hydrogen through the current natural gas network. The port of Rotterdam, Dow Chemical in Terneuzen, Yara in Sluiskil, Chemelot in Limburg, and Eemshaven in Groningen would all be connected to the new hydrogen network at first, in addition to Tata. The first phase will set you back 1.5 billion euros.

The hydrogen must come from industries in Eemshaven and on the Maasvlakte, which get their green energy from North Sea wind farms. Without green power, there will be no green hydrogen. A so-called electrolysis capacity of about 4 gigawatts (GW) is required to fulfill Tata’s hydrogen consumption.

Equinor, Gasunie, Groningen Seaports, RWE, and Shell are hoping to provide 4 GW of capacity at Eemshaven by 2030. ThyssenKrupp will construct the world’s largest hydrogen plant for the time being. In Rotterdam, that business is building a 200 megawatt (0.2 GW) electrolysis plant for Shell.

As a result, significant extra development is necessary to reach the 4 GW target. Even if it succeeds, Tata will not be able to operate at full capacity. More businesses are requesting hydrogen.

‘We have the objective to be able to utilize as much green hydrogen as feasible right away,’ says Tata Steel spokesman Ariane Volz. We’ll utilize natural gas or blue hydrogen if that doesn’t work since we don’t have enough supply. ‘

Natural gas is used to make ‘blue’ hydrogen, just like ‘grey’ hydrogen. The main difference is that most of the CO2 produced during this process (about 80%) is tapped and stored below and beneath the seabed, rather than being blasted straight into the atmosphere.

However, CO2 storage beneath the North Sea is exactly the proposal that Tata scrapped in September 2021 in favor of green hydrogen. And why should the corporation acquire blue hydrogen when natural gas can be used more cheaply? With Tata, the previous cabinet’s goal of phasing out natural gas in the Netherlands is no closer. Tata’s own goal of reducing CO2 emissions has been pushed back.

As a result, green energy is required. Ad van Wijk, the professor who co-founded the FNV’s ‘Green Steel’ strategy with former Hoogovens CEO Piet Joustra, is optimistic. “If you wish, you can accomplish it.” Putting 280 to 340 of the biggest available wind turbines at sea will raise overall capacity by 4.2 to 6.8 GW. In one smooth swoop, you’ll have at least twice as much offshore wind capacity, enough to produce twice as much green hydrogen. The funds are available, and the technology is available; the issue, according to Van Wijk, is that the government is hesitant to issue permits.

Environmentalists have worries as well. Although the Urgenda climate organization endorses Tata’s hydrogen proposal, co-founder and professor Jan Rotmans believe Tata’s timetables are unrealistic. ‘Fifteen years is just possible,’ he adds, pointing out that the Dutch plans for further offshore wind farms are only intents, no definite plans. Just for Tata, a wind farm the size of the Noordoostpolder must be built. Even still, Rotmans doubts that Tata will be able to eliminate coal before 2040.

And it’s merely about the green power required for hydrogen production. Tata’s new electric arc furnace would ideally run on renewable energy as well.

Everyone agrees that Tata’s hydrogen proposal will cost the Dutch government, and hence the Dutch taxpayer and energy user, billions of euros. Just keep track of the numbers.

Only Tata and other major users require 1.5 billion euros from Gasunie and TenneT to connect to hydrogen.

The new ovens are expected to cost Tata 3 billion euros, according to FNV Metaal. Tata hasn’t said how much of the $3 billion it would keep for itself. The FNV appears to be banking on the government to cover the entire 3 billion dollar price. Tata IJmuiden had a 4.5 billion yearly turnover in 2019.

The expenses of 4 GW of electrolyzers, the least necessary to supply solely Tata with green hydrogen, were computed at the request of NRC. They range from 3.5 to 11 billion dollars. It is estimated to be worth $5 billion by the Ministry of Economic Affairs.

VVD, D66, CDA, and ChristenUnie have agreed to invest a total of 15 billion euros in “high-quality renewable energy carriers.” That’s hydrogen in its natural state. The Tata proposals would get between half and two-thirds of that money.

Is that the end of it? Tata’s financial projections are dependent on a number of assumptions, including natural gas and CO2 prices in Europe. Roland Berger’s feasibility study is just a few months old, but it already appears that the agency underestimated both prices, according to TNO hydrogen specialist Lennart van der Burg. Gas and CO2 have both increased in price. The latter is advantageous to Tata since it makes coal more expensive to burn and hydrogen more appealing. However, higher gas prices are an issue. Tata will need at least three times as much natural gas, as we have witnessed.

A CO2 tax at the European Union’s borders is also part of the hydrogen strategy. It will almost certainly happen, although perhaps not in the way Tata Steel anticipates. The Dutch government, for example, favors a European-wide CO2 tax rather than a complex ‘border adjustment,’ which would include calculating exactly how much CO2 is released in the manufacture of each imported product.

In any event, green steel’s cost-competitiveness necessitates (once again) a sort of protectionism. If anything goes wrong — renewable hydrogen becomes more expensive, gas prices continue to climb, and the CO2 tax is implemented too slowly – Tata may want even more assistance. The government has already invested so many billions by that time that it is unlikely to withdraw out abruptly. Tata Steel might be infiltrating a state-owned enterprise.

According to the union, this is the case. The subsidy that Tata sought to request for CO2 storage has been canceled, according to Cihan Lacin, director of FNV Metaal. ‘The House of Representatives must now ensure that this subsidy may be utilized for other, and in this case, better, greening programs,’ says the report. (Money must be transferred from one subsidy pot to the next.) Then, that released subsidy may be used for something quite unrelated.

Lacin, in any event, deems the hydrogen plan “the only proper approach for the firm, the employees, the environment, and the climate” and labels it “the only active role for the government.”

Both Tata Steel’s environment and the climate will take several years to fix, but the FNV anticipates that the majority of IJmuiden’s 8,300 full-time employment will be retained. In addition, Tata Steel employs over 30,000 suppliers.

If Tata does not innovate, those employees would be lost to other countries. Automobile manufacturers, as well as food industries that purchase packaging steel in IJmuiden, will continue to request steel.

The risk is that this will happen anyway. According to climate expert Rotmans, even if Tata’makes more sustainable’ on schedule, ‘in 10 years’ time, they will have constructed a lot of new plants in China and India.’

Arnes Biogradlija
Creative Content Director at EnergyNews.Biz

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