the Energy Transitions Commission highlights the key actions needed by industry and government to enable a first wave of near-zero emissions primary ore-based steelmaking projects in the UK. ETC said “Currently, such projects face a gap to a viable investment case, so urgent action is needed to create certainty for investors and financiers to make final investment decisions and take this vital step in the net-zero transition. The necessary breakthrough iron and steelmaking technologies are available today, and the UK can join countries around the world in pioneering their deployment.”ETC said “The right conditions for encouraging project proposals and enabling FIDs in the UK are within reach. Crucial actions include implementing effective carbon pricing on steel imports as well as domestic production, lowering electricity prices to make scrap recycling more economical, premium forward off take agreements, guarantees to manage technology risk, and direct government support, particularly for the high upfront costs of developing breakthrough projects. All these actions are feasible in the short term and could unlock a first wave of breakthrough steel investments in the UK.”Key conditions for a viable investment caseA final investment decision represents a critical point in the steel investment process, signaling a firm financial commitment upon which contractors can proceed with procurement, construction, design, and engineering works. FID status, therefore, represents a vital step to realizing a steel project in the real world. This report demonstrates that progressing UK breakthrough steel projects to FID is possible. Creating the conditions to enable this will rely on the following interventions by government, industry, buyers, and financial institutions:Effective carbon pricing – The UK government is reported to be considering support measures totaling £600 million to maintain and green production at the country’s existing integrated steelmaking sites. Investing to transition the sites to breakthrough technologies would be a good use of this funding, but not if the resulting plants remain systematically uncompetitive with steel imports that face lower or zero carbon costs. Implementing a UK carbon border adjustment mechanism (or equivalent measure) to ensure both steel imports and domestic production face the same progressive carbon pricing would be essential.Lower electricity prices to enable scrap recycling – Lowering electricity prices would help reduce a key cost driver for breakthrough steel production. In particular, it would reduce the electricity costs associated with recycling steel, enabling breakthrough projects to better leverage the UK’s supply of scrap steel, which is currently underutilized and exported in volumes of around 8 million tonnes per year.Premium forward off take agreements – Forward purchase agreements from steel buyers, involving an initial price premium commensurate with the costs of producing breakthrough products, will be important for firming up revenue streams for breakthrough projects and underpinning their investment case.Guarantees for technology risk – Financial guarantees, normally backed by government or public financial institutions, would help de-risk the uncertainty associated with novel breakthrough technologies and gives the financiers the confidence to commit to FIDs.Government funding – Breakthrough projects that preserve iron making capacity in the UK will likely require a level of direct government support. Subsidies for their high upfront capital expenditures would allow government to provide adequate support in a one-off mechanism. Subsidies for operational expenditures, chiefly for green hydrogen, would also be very impactful but would involve a longer-term commitment on the part of government.Cross-value chain collaboration is needed, particularly government intervention
the Energy Transitions Commission highlights the key actions needed by industry and government to enable a first wave of near-zero emissions primary ore-based steelmaking projects in the UK. ETC said “Currently, such projects face a gap to a viable investment case, so urgent action is needed to create certainty for investors and financiers to make final investment decisions and take this vital step in the net-zero transition. The necessary breakthrough iron and steelmaking technologies are available today, and the UK can join countries around the world in pioneering their deployment.”ETC said “The right conditions for encouraging project proposals and enabling FIDs in the UK are within reach. Crucial actions include implementing effective carbon pricing on steel imports as well as domestic production, lowering electricity prices to make scrap recycling more economical, premium forward off take agreements, guarantees to manage technology risk, and direct government support, particularly for the high upfront costs of developing breakthrough projects. All these actions are feasible in the short term and could unlock a first wave of breakthrough steel investments in the UK.”Key conditions for a viable investment caseA final investment decision represents a critical point in the steel investment process, signaling a firm financial commitment upon which contractors can proceed with procurement, construction, design, and engineering works. FID status, therefore, represents a vital step to realizing a steel project in the real world. This report demonstrates that progressing UK breakthrough steel projects to FID is possible. Creating the conditions to enable this will rely on the following interventions by government, industry, buyers, and financial institutions:Effective carbon pricing – The UK government is reported to be considering support measures totaling £600 million to maintain and green production at the country’s existing integrated steelmaking sites. Investing to transition the sites to breakthrough technologies would be a good use of this funding, but not if the resulting plants remain systematically uncompetitive with steel imports that face lower or zero carbon costs. Implementing a UK carbon border adjustment mechanism (or equivalent measure) to ensure both steel imports and domestic production face the same progressive carbon pricing would be essential.Lower electricity prices to enable scrap recycling – Lowering electricity prices would help reduce a key cost driver for breakthrough steel production. In particular, it would reduce the electricity costs associated with recycling steel, enabling breakthrough projects to better leverage the UK’s supply of scrap steel, which is currently underutilized and exported in volumes of around 8 million tonnes per year.Premium forward off take agreements – Forward purchase agreements from steel buyers, involving an initial price premium commensurate with the costs of producing breakthrough products, will be important for firming up revenue streams for breakthrough projects and underpinning their investment case.Guarantees for technology risk – Financial guarantees, normally backed by government or public financial institutions, would help de-risk the uncertainty associated with novel breakthrough technologies and gives the financiers the confidence to commit to FIDs.Government funding – Breakthrough projects that preserve iron making capacity in the UK will likely require a level of direct government support. Subsidies for their high upfront capital expenditures would allow government to provide adequate support in a one-off mechanism. Subsidies for operational expenditures, chiefly for green hydrogen, would also be very impactful but would involve a longer-term commitment on the part of government.Cross-value chain collaboration is needed, particularly government intervention
