Spain Aims to Take the Lead in Europe's Steel Decarbonization Efforts
Spain is in a position to lead the race to produce green steel, according to an independent report conducted for the Commission for the Energy Transition. The report suggests Spain, Portugal and Italy create a hub of green steel to supply Europe, where steel production is responsible for 9% of global CO2 emissions and 7% of emissions in Europe. The solution proposed is to use renewable hydrogen from clean energy sources to produce steel. Spain has good infrastructure for producing and transmitting electricity, making it easier and faster to start projects and start exporting steel. However, manufacturing green steel will not be easy.
The steel industry in Spain is one of the most recycling in Europe, recycling around 70-75%. Steel is produced in 22 plants, with 50 rolling and first transformation facilities. The report proposes the injection of natural gas mixed with green hydrogen to replace natural gas and progressively increase the percentage of hydrogen. To promote the development of green steel, the ETC report proposes a series of measures, including the government's direct subsidies to cover the high initial costs of equipment. Spain already has tools like the Industrial Decarbonization Part to support such projects. Public banks and governments also need to give guarantees to investors and private banks that lend capital to these types of projects. In conclusion, a concerted effort from all stakeholders is needed to overcome the challenges and accelerate the transition to a more sustainable steel industry. Incidentally, several projects are already underway in Spain to produce sustainable steel.
ArcelorMittal has inked a memorandum of understanding with the Spanish Government, which will lead to a €1 billion investment in decarbonization technologies at ArcelorMittal Asturias plant in Gijón. European Commission has granted the company €465 million to begin decarbonizing its blast furnaces in Spain. At the center of this investment plan is a 2.3 million metric tons green hydrogen direct reduced iron unit that will be coupled with a 1.1 million metric tons hybrid electric arc furnace. The Gijón DRI plant will also supply the company's Sestao plant, located approximately 250km away, which is already entirely based on the electric arc furnace route. As a result, ArcelorMittal Sestao will be the world's first full-scale steel plant to achieve zero carbon-emissions by 2025 while producing 1.6 million metric tons of steel.
In February 2023, Hydnum Steel, a newly formed company, announced its selection of Puertollano in Ciudad Real Province, Spain as the location for its first plant, pioneering sustainable steel production in Europe. With a first phase investment of €600 million, the project's total cost could exceed €1 billion. The facility will operate entirely on non-fossil fuels, incorporating green hydrogen as production increases. Spanning 1.3 million square meters, the site's ample land availability and existing hydrogen production projects, including the National Hydrogen Centre, influenced the decision. The town's ideal suitability for producing renewable energy, particularly solar and wind power, and its strategic location near logistics hubs in central, southern, and eastern Spain, as well as Portugal, solidified Puertollano as the top option. Hydnum Steel aims to capitalize on the town's unique ecosystem to create synergies, ultimately boosting the local economy. Hydnum Steel's investment partner, Helvella Holding, and technology partners, Siemens, Abei Energy, and Russula Corporation, have been selected for the project, but the company is open to involving additional participants, given its significant scale. Hydnum Steel has already initiated talks with various financial and technology companies, along with the regional government of Castile La Mancha in Spain, to explore potential collaborations through the Strategic Project for Economic Recovery and Transformation and the Industrial Decarbonisation grants.
The HY2DEC project has been incorporated into the Missions Program of the Spain’s Center for the Development of Industrial Technology, following its impressive performance in the latest edition of the program held in March 2023. With a total budget of €5.9 million, HY2DEC aims to research new technologies for the production and utilization of green hydrogen, thereby contributing to the decarbonization of the intensive industry in Spain. The project is expected to be completed in 2025, by which time the participating entities will have conceptualized the scalability and industrialization of the prototypes developed. The project consortium will be led by Spain’s leading stainless steelmaker Tubacex and include participation from six other Spanish companies, namely Torrecid, Técnicas Reunidas, GHI Hornos Industriales, Gecsa Conductores Y Conexiones Especiales, Orchestra Scientific and Kerionics. In addition, seven research organizations will contribute to the project, including CEIT, ICIQ, ICP (CSIC), IKERLAN, INCAR (CSIC), ITQ (CSIC) and TECNALIA.
Another notable project is the joint venture between Iberdrola and Swedish start-up H2 Green Steel, which aims to build a large renewable hydrogen plant on the Iberian Peninsula to power an iron ore direct reduction furnace. The plant is expected to begin operations in 2025 or 2026 and will produce 2 million metric tons of iron with minimal impurities to be transformed into sustainable steel.
Iberdrola is also collaborating with Boston Metal, a spinoff of the Massachusetts Institute of Technology to develop a groundbreaking technology that separates iron ore from oxygen through electrolysis to create emission-free steel from renewable electricity. This innovative solution simplifies the production process and significantly reduces costs. Moreover, it is a modular technology that can be applied to other metals such as vanadium, niobium, and cobalt. This method consumes 20% less energy than conventional production methods and has already been validated in the laboratory. Construction of an industrial-scale demonstration steel plant is expected to begin in 2024, with a commercial plant following in 2026.
Overall, these initiatives highlight the significant progress being made in Spain towards decarbonizing the steel industry. As a result of these and other similar projects, Spain is well-positioned to become a leading producer of sustainable steel.
Despite the promising developments in green steel production, there are still challenges to be addressed. As pointed out by Mr. Andrés Barceló, the General Director of Unesid, the steel industry employers, producing renewable steel and finding buyers for it are the main challenges. At present, the production of hydrogen at a competitive price and in sufficient quantities is not yet possible. Without a market for these products, buyers will be difficult to come by, says Mr. Barceló. Furthermore, establishing a carbon tax for steel imports is crucial to level the playing field. Otherwise, European green steel projects will struggle to compete with high-emission steel imported into the EU, warns Mr. Barceló.