The newly adopted energy plan - "repowereu" by EU * * aims to end the EU's dependence on Russian natural gas, oil and coal, and accelerate the transformation to get rid of carbon intensive energy. The comprehensive impact of the persistent energy crisis, the future structural changes of the EU energy industry and the more ambitious climate legislation will bring enormous pressure to the EU economy and manufacturing enterprises, and will pose new challenges to the entire EU industrial industry, including the steel industry. The new energy plan will accelerate and promote the transformation of EU energy to hydrogen energy economy and turn challenges into opportunities.

Short term plan (until 2023)

Reduce dependence on Russian fossil energy

In 2021, the natural gas imported by the European Union from Russia accounted for more than 40% of its total natural gas consumption, the imported oil accounted for 27% of the total consumption, and the imported coal accounted for 46% of the total consumption. In the same year, the supply of Russian pipeline natural gas to the EU was 137 billion cubic meters, including 42% through Beixi line 1, 27% through Ukraine, 24% through Belarus and 7% through Turkey. In addition, in 2021, the EU imported 16 billion cubic meters of liquefied natural gas from Russia, accounting for 20% of all imported liquefied natural gas. The European Commission pointed out that in 2021, Europe consumed a total of 412 billion cubic meters of natural gas.

The EU promises to phase out Russian coal by the end of 2022 and maintain supply through other sources (coal from Australia, South Africa and other countries). At the same time, although coal prices are still high and there are climate obligations, coal will still be used as a backup power generation raw material in the EU in the short term. Similarly, the phasing out of nuclear power capacity so far should be postponed.

Medium term plan (to 2027)

Accelerate the construction of photovoltaic and wind energy

The pillar of EU energy security in the medium term is to accelerate the construction of photovoltaic and wind energy, because the technology is mature, and Europe is in a leading position in onshore and offshore wind energy production and solar energy. By 2030, the proportion of renewable energy in the power structure will reach 45%.

A large amount of renewable power can also promote the EU's long-term access to green hydrogen, and European industry and energy will be the pioneers in the use of breakthrough technologies. The output of green hydrogen in the EU will reach 10 million tons, the imported hydrogen will be 6 million tons, and the ammonia will be about 4 million tons. Among the new 10 million tons of green hydrogen, 8 million tons will replace 27 billion cubic meters of natural gas, and the rest will replace oil and coal.

According to the "repowereu" plan, the large-scale production and application of renewable hydrogen will reduce the EU's dependence on importing natural gas, coal and oil from Russia, and will help accelerate the EU's energy transformation.

Long term plan (to 2030)

Accelerate the construction of hydrogen infrastructure

At present, hydrogen energy accounts for less than 2% of Europe's energy consumption and is mainly used for the production of chemical products. Experts remind that at present, almost all hydrogen in the EU is produced by natural gas through steam methane reforming (SMR) and autothermal reforming hydrogen production process (ATR). Among them, the SMR method is a low-cost hydrogen production method. However, since the hydrogen is from natural gas, the hydrogen production process will also emit a large amount of carbon dioxide.

In the field of steel production, hydrogen is considered as an alternative fuel for existing blast furnaces, which can greatly reduce carbon emissions. It will be possible for the modern hydrogen direct reduction iron / electric arc furnace technology to completely eliminate the blast furnace. According to the report, by 2030, the use of green hydrogen in blast furnaces will reach 1.52 million tons. So far, green hydrogen has not been commercially provided to steel enterprises. In the current energy crisis in Europe, it is doubtful whether its future price can be accepted by steel enterprises.

European Iron and Steel Association's suggestions on energy development in EU

The European Iron and Steel Association (Eurofer) said in its report on the "repowereu" plan that the EU policy must guarantee energy supply and accelerate the construction of hydrogen infrastructure to support the transformation of the steel industry. Considering that it takes time to transform the energy industry and overcome all bottlenecks, the EU steel industry will continue to face energy shortages and high prices. In this case, the EU steel industry needs support measures to mitigate all risks and maintain competitiveness, whether it is scarce natural gas supply, high price power or hydrogen. Recognizing the necessity of the plan to solve the energy crisis, Eurofer is seeking many advantages from the European Commission for the European steel industry, such as obtaining long-term power purchase contracts, guarantees against short-term natural gas supply interruption risks, and even incentives for clean energy consumption.

Eurofer introduced that the steel industry needs short-term and long-term measures from the EU, including support solutions other than state assistance, which can bring structural changes to the European energy supply system. Without the participation of strategic industrial energy consumers such as steel, the EU's energy transformation will not be successful. Energy intensive industries need to be included in policy formulation and political discussions at all levels as a key driving factor for decarbonization and independence of the European energy system. Rapid access to green hydrogen in the steel industry will promote the development of the European Hydrogen market. But as long as there is no reasonably priced hydrogen infrastructure, alternative natural gas supply other than Russia will remain crucial. In order to achieve unity, cooperation and cross industry dialogue, the EU energy strategy needs to be revised.

The combined impact of the energy crisis and geopolitical conflict has created more obstacles to the decarbonization of the EU steel industry, because the EU is not ready to deliver a sufficient number of low-carbon energy transport ships. This highlights the urgency of formulating the right policies at the EU level to support the transition to climate neutrality.

The new EU energy strategy should take short-term and medium-term measures to deal with the current challenges, ensure the security of natural gas supply, and quickly implement the previous EU toolbox measures to mitigate the impact of soaring energy prices on European industry.

At the same time, the revision of the EU energy system must include a long-term strategy to ensure that the industrial sector consumes and obtains energy in a low-cost and high efficiency manner as a driving factor for energy transformation. The European Green agreement and the "fit-for-55" package should be adjusted accordingly. The * * th strategic objective is to provide clean energy and provide a large amount of clean energy at an affordable price to achieve climate neutrality and industrial energy goals.

In particular, the EU must make greater efforts to achieve strategic autonomy, ensure the economic flexibility of key industrial sectors such as steel, and promote transformation through the following ways:

☆ give priority to providing hydrogen and power grid for industries that are prepared to consume hydrogen and have high carbon dioxide emission reduction potential;

☆ provide specific tools to guide hydrogen infrastructure investment as soon as possible;

☆ ensure flexible application of the additionality principle and relevant standards of hydrogen production, and avoid setting unnecessary upper limits on production and consumption;

☆ ensure that all low-carbon steel projects using European financing instruments (i.e. ceeag and ipcei) are approved quickly, and provide early investment for the innovation fund;

☆ eliminate the administrative burden of renewable energy projects including hydrogen energy projects;

☆ promote the conclusion of industrial power purchase agreements including hydrogen after 2030.

Axel Eggert, director general of Eurofer, pointed out that the European Commission must take bold measures to develop a coherent framework to support energy intensive industries in the energy transformation. Affordable energy is the key to achieving the EU's goal of climate neutrality, with industrial consumers as key players.

At present, fossil fuels such as natural gas, oil and coal still dominate the energy consumption of the EU, accounting for about 67% of the total energy consumption of the EU. Against the background of energy crisis and non intermittent supply from Russia, Europe faces great challenges in ensuring energy supply at affordable prices in the current and next decade.

Source | world metal guide