Severstal Increases the Share of Renewables in Its Energy Portfolio

(Severstal) Severstal, one of the world's largest vertically integrated steel and mining companies, has taken a strategic decision to increase the share of renewable energy in its energy portfolio, in part by increasing heat generation from biofuels at the operating boiler houses of Karelsky Okatysh, the leading iron ore mining and processing company in Russia. Karelsky Okatysh will gradually increase the share of biofuels in the balance of heat production from 1.2% in 2021 to 13.5% in 2026.

Karelsky Okatysh’s total energy consumption in 2020 was 264,532 Gcal/year. 3,060 Gcal (1.2% of the total consumption) was energy produced using biofuel, while the rest was generated from fuel oil. At the same time, Karelsky Okatysh generates heat from biofuel (wood chips) at its own boiler house. Currently, the use of alternative fuels (natural gas) is not possible at Karelsky Okatysh due to its remote location and lack of infrastructure, but the company sees an opportunity to increase the purchase of high-quality wood chips, including from local suppliers.

Biofuel is any fuel derived from biomass that is grown or obtained from waste. Severstal makes sure to comply fully with international sustainability criteria and certifies biofuels in compliance with the ISCC (International Sustainability and Carbon Certification) requirements. Going forward, Severstal plans to use only certified biofuels, which ensures that chips will only be purchased from responsible suppliers. Implementing projects which use biofuels could lead to a reduction of over 11 thousand tons of CO2-eq./year.

“Severstal has set itself the goal of reducing its environmental impact and contributing to global efforts to achieve the Paris Agreement targets. Our own medium-term goal is to reduce CO2 emissions from 2,063 tonnes / tonne of steel in 2020 to 1,857 tonnes / tonne of steel (or by 10%) in 2030, which will place us in the top 15% of steelmakers with the lowest greenhouse gas emissions in the world. Our ambitious project to diversify our own power generation portfolio is an essential part of this programme. It is important to note that for Severstal this is not just an effort to formally achieve a goal. It is fundamentally important to us that the alternative energy sources we use are certified and really contribute to solving climate problems. With this objective, we urge our supply chain partners to join forces with us, and we recently announced the development of a climate memorandum “Together for a low-carbon future” in support of global efforts to prevent further climate change, which we propose our key suppliers and customers sign”. READ MORE

Excerpt from Bloomberg NEF: By 2050, green hydrogen could be the cheapest production method for steel and capture 31% of the market. Another 45% could come from recycled material, and the rest from a combination of older, coal-fired plants fitted with carbon capture systems and innovative processes using electricity to refine iron ore into iron and steel. This would be a dramatic shift in the type of furnaces and fuels used to produce steel. Today, around 70% of steel is made in coal-fired blast furnaces, with 25% produced from scrap in electric furnaces, and 5% made in a newer, typically natural gas-fired process known as DRI, or direct reduced iron. Converting a significant portion of the fleet to hydrogen would require more DRI plants and more electric furnaces. Blast furnace production would fall to 18% of capacity in this scenario.

“The steel industry cannot afford to wait for the 2040s to start its transition,” said Julia Attwood, head of sustainable materials at BNEF and lead author of the report. “The next ten years could see a massive expansion of steel capacity to meet demand in growing economies, such as India. Today’s new plants are tomorrow’s retrofits. Commissioning natural gas-fired plants could set producers up to have some of the lowest-cost capacity by retrofitting them to burn hydrogen in the 2030s and 2040s. But continuing to build new coal-fired plants will leave producers with only bad options toward a net-zero future by 2050.”

In order to achieve this transformation, there are five key actions for the sector to consider: boost the amount of steel that is recycled, particularly in China; procure clean energy for electric furnaces; design all new capacity to be hydrogen or carbon capture-ready; begin blending hydrogen in existing coal- and gas-based plants to lower the cost of green hydrogen; and retrofit or close any remaining coal-fired capacity by 2050.

Producing green steel from hydrogen and electric furnaces will require massive amounts of clean energy, and a shift to higher grades of iron ore. This could change where most steel is made, or shake up the mining industry. Russia and Brazil both have access to high-quality iron ore reserves and to abundant clean power. Moreover, Brazil is expected to have one of the lowest costs for hydrogen production by 2030, according to research by BloombergNEF. South Africa and India have good iron ore reserves and the potential to produce a large amount of low-cost clean power. The world’s largest iron ore producer, Australia, however, currently produces lower grade ores, and could lose its number one place in the supply chain, if it does not invest in equipment to upgrade its product. READ MORE

Excerpt from Politico's Morning Energy: A DE FACTO CARBON PRICE: National Economic Council Director Brian Deese said the U.S. can get around international climate trade penalties without its own national price on carbon because America’s patchwork of laws, regulations and executive actions effectively amount to a carbon pricing scheme anyway.

“What you’ll find is … the United States increasingly being able to harmonize our approaches with other jurisdictions that are doing a more explicit carbon pricing approach because our policies are getting us into a similar place,” Deese said at an event hosted by asset management firm Lazard.

Congress has so far not moved forward on a national pricing scheme, though Democratic lawmakers have been working with the White House to get a a legislative framework off the ground to bring the U.S. more in line with the EU’s carbon trading system. Trade experts fret that without a matching pricing scheme, the U.S. could run into major trade difficulties with the EU. But Deese said an October pact with the EU for developing steel and aluminum carbon tariffs could be “a model” for future climate and trade endeavors. The nations had not agreed on specifics, but set aside differences over national carbon prices in order to confront dirtier steel made in China. Zack Colman has more for Pros. READ MORE