BRIEFING CONTAINS COMMERCIALLY SENSITIVE INFORMATION – INTERNAL ONLY
Ref. Ares(2023)2540231 - 10/04/2023
Meeting with
ThyssenKrupp
31.3.23
Meeting with ThyssenKrupp Steel (“TKS”)
Occasion: Commissioning of TKS’ first H2-DRI plant
Scene setter
You are meeting
ThyssenKrupp Steel Europe (“TKS”). Previous to joining TKS,
The occasion for your meeting is the recent commissioning of TKS of the construction of its
first hydrogen-based direct reduction plant (“H2-DRI”) integrated into the companies
Duisburg site, Europe’s largest integrated steel site. The construction of the facility was
commissioned to SMS Group, a German world leader in the metallurgical machine and plant
engineering sector, on an Engineering-Procurement-Construction (“EPC”) basis. The order
volume for SMS Group alone has a value of over EUR 1.8 billion.
The plant will rely on American Midrex Flex DRI-technology. Midrex, next to Danieli, is one of
only very few license providers for H2-DRI. The facility will have a production capacity of 2.5
million tonnes of directly reduced iron (DRI) per year and is planned to start production as
early as 2026, saving 2.5 million tonnes of CO2 annually.
The German Federal State of North Rhine-Westphalia, which is home to both the steel site
and the construction company, is supporting the project with up to EUR 700 million.
ThyssenKrupp intends to use Direct Reduction technology (H2-DRI) replacing coal with
green Hydrogen as both reduction agent and fuel in the steel production process. So far, H2
DRI technology is only in operation at a single pilot-scale plant in the EU, the HYBRIT plant
in Sweden (funded by the Innovation Fund first Large Scale Call).
The Commission expects that around 30% of EU primary steel production can be
decarbonised by 2030, requiring 1.4 million tonnes of hydrogen and investments of around
EUR 18 billion.
Speaking points
Congratulation on the investment and commissioning decision.
Possible interesting questions to
:
How much clean hydrogen will the facility require and how do you intend to procure
that hydrogen? Is TKS aware of the upcoming H2 auctions under the Innovation
Fund?
Europe’s competitive advantage in the medium term may not lie with being a major
cheap hydrogen producer, but rather with being an innovative technology provider.
How can Europe become a major provider for green steel technology?
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BRIEFING CONTAINS COMMERCIALLY SENSITIVE INFORMATION – INTERNAL ONLY
Meeting with
ThyssenKrupp
31.3.23
Which business and licensing models will we need upstream of actual steel
production? How can Europe catch up with US and Chinese OEMs / license
providers?
Does TKS consider developing its own IP or licensable processes on the basis of the
Duisburg project?
What were the key factors in selecting SMS Group as the provider of Engineering-
Procurement-Construction?
Defensives
There were no specific questions posed in the meeting requests. Possible areas of
questions:
2) Which regulatory and financial environment does the EU provide to support first
movers in the industry transition?
The EU has the ambition to provide the regulatory and financial framework conditions for
making green steel production successful in Europe and allowing Europe to become a
technology leader in this area. We believe that financial support alone cannot solve the
problem of decarbonising industry and that in the medium term green industrial production
needs to be supported by the market and a reliable regulatory environment.
The
EU ETS provides the backbone of internalising the carbon costs of energy
intensive products and giving a market advantage to green alternatives.
The
Carbon Border Adjustment Mechanism will further ensure that high
environmental standards in the EU do not lead to carbon leakage at the expense of
the competitiveness and survival of industry within the EU.
Standardisation and Certification allow to create markets and green premiums for
clean technologies in the first place. The EN-Standard for steel sets out CO2
accounting rules and enables the application of a life-cycle approach.
Green Public Procurement and other demand-side regulation such as the
Construction Products Regulation and the 2023 Commission proposal on
Eco-
design for Sustainable Products present an additional lever to create markets for
green steel.
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Meeting with
ThyssenKrupp
31.3.23
3) What financial support mechanisms are available to support first movers in the
steel sector?
The
Innovation Fund is already supporting one of the world’s most innovative steel
projects and stands ready to provide large scale funding necessary for the upscaling
of breakthrough technologies. Carbon Contracts for Difference will make use of
possible competition on an EU level and support the commercial roll out of deep
decarbonisation technologies in industry. At a carbon price of 75 EUR, the IF will
provide over 40billion EUR in funding until 2030.
Various
Research and Innovation programs, most notably the new Research Fund
for Coal and Steel (RFCS) big ticket calls and the Clean Steel Partnership support
R&I initiatives from pilot to demonstration phases
The
Invest EU Programme is leveraging an EU guarantee of 26 billion EUR, and
channelling parts of the volume into the Green Transition facility, which also supports
investments in low-carbon steel.
The
Sustainable financing taxonomy aims to align financial flows with global
climate goals.
The
Recovery and Resilience Facility is providing member states with the ability
and incentive to “build back better”, in allocating at least 37% of investments towards
green transition
Background
Importance of the steel sector for the green transition:
-
Steel is a key building block of the green and digital transitions. Steelmakers
participate in wider value chains including sectors that are crucial for the EU
competitiveness, like construction, automotive, mechanical engineering, energy
generation and networks, mobility, and defence.
-
The decarbonisation of the steel industry is a priority to achieve climate neutrality by
2050. We need a competitive European steel industry to continue on its
decarbonisation pathway.
-
Steel is infinitely recyclable, and its residues and waste energies can become
valuable resources, thus contributing to a circular EU economy.
-
The EU steel industry has already reduced emissions by 26% since 1990 and we
welcome the progress achieved so far.
-
But 2050 is just one investment cycle away for a sector like steel, which has long-
lasting capital assets. Therefore, the next five years will be crucial to develop and
scale-up clean breakthrough technologies and deploy abundant and affordable
renewable energy.
-
Green hydrogen is a key enabler. There are already important demonstration
projects in place that look at how to decarbonise steel via hydrogen.
-
Following the Ukraine crisis and the crisis in the EU energy sector, the RePowerEU
is supporting use of hydrogen for primary steel production – 30% of primary steel
with green H2 by 2030.
-
The Hybrit pilot in Sweden is a successful example showing that near-zero steel is a
reality. Funding from Innovation Fund: € 143.000.000.
-
The Commission is keen to move from demonstration projects to large commercial
projects within the next ten years.
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Recent allocation of public funding under the IPCEI is targeting the steel industry;
2nd hydrogen IPCEI approved in September includes hydrogen use for steel.
Other EU Initiatives supporting the European steel sector:
The Clean Steel Partnership (CSP)
Public-private co-programmed European partnership under Horizon Europe, started
in 2021.
The Clean Steel Partnership is developed in the context of the EU goal and policies to
achieve climate neutrality by 2050 -the European Green Deal, the Clean Planet for All
strategy and the Paris Agreement.
General objective of the CSP is to develop technologies at TRL8 to reduce CO2
emissions stemming from EU steel production by 80-95% compared to 1990 levels.
This has to be achieved while preserving the competitiveness and viability of the EU
steel industry and making sure that EU production will be able to meet the growing
demand for steel products.
The investments for the period 2021-2027 are:
The RFCS Programme
RFCS is a EU funding programme supporting research and innovation in the coal and
steel sectors. The RFCS has its own legal bases and stands outside the Multiannual
Financial Framework.
The RFCS was created in 2002 to continue supporting research in the coal and steel
sectors in order to keep the related industry competitive and sustainable.
It is funded via the revenues generated by the European Coal and Steel Community
(ECSC) in liquidation assets.
In 2021 the legal base was revised. There are 3 innovative aspects of the new RFCS
legal base:
o The full alignment with the policy objectives of the European Green Deal:
decarbonisation, climate neutrality and twin transformation (digital and
green).
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Meeting with
ThyssenKrupp
31.3.23
o The possibility to launch dedicated calls on top of the standard annual call to
help the transformation of the steel and coal industrial sector in line with the
policy priorities. These are the Big Tickets, supporting breakthrough
technologies for steel making and the just transition for coal, for an annual
cumulative EU funding of 71 million EUR.
o The possibility to better use the financial interest and make use of the assets,
to ensure a financial annual allocation to manage the standard RFCS calls for
proposals of at least EUR 40 million. This will give stability and predictability
to the programme.
The annual call budget is:
Contact point:
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