Written Evidence Submitted by Tata Europe (HNZ0096)

On 29 March 2021, the Chair of the House of Commons Science and Technology Committee wrote to four British steel manufacturers asking for information on:

 what actions they were taking to contribute to the 2050 UK Net Zero target, including: o if they had set any specific emissions reduction targets; o if they had produced a roadmap for emissions reductions;  what role they saw for low-carbon hydrogen in decarbonising the UK steel industry;  how much they were investing into research on hydrogen currently;  any ongoing research into this area that they were involved in; and  what support the Government could best provide to support them in decarbonising their business.

Reproduced below is the response that was received from , on 18 April 2021.

Introduction

Tata Steel strongly supports the growing momentum behind industrial decarbonisation and is intent on making a substantial contribution to the UK’s goal of achieving carbon neutrality by 2050. We welcome the opportunity to contribute to the Committee’s inquiry on this important topic, particularly with the publication of the Hydrogen Strategy on the horizon.

For the industry to fully contribute towards lowering the UK’s emissions targets, various barriers to the adoption and operation of low-carbon technologies, including hydrogen, must be overcome, including significant capital investment and higher ongoing operational costs.

About Tata Steel Europe

Tata Steel is one of Europe’s leading steel producers, with steelmaking in the Netherlands and the UK, and manufacturing plants across Europe. The company makes high-quality strip steel products for demanding markets such as construction, automotive, packaging and engineering.

Tata Steel is the largest steelmaker in the UK, with an annual turnover in excess of £2bn and supplying to nearly 2,000 customers across the UK. We provide a vital foundation for many of the UK’s key strategic supply chains, particularly the automotive, construction, engineering and packaging industries. Tata Steel is a steel, technology and innovation partner to household names including Nissan, BMW, JLR, IKEA, Heinz and others.

In the UK, Tata Steel employs more than 8,000 people directly, 2,500 direct contractors and an additional 20,000 in the supply chain. The company spends £1bn annually across its UK supplier base. Steel jobs are highly skilled, with salaries up to 36% higher than regional averages.

In addition to our steel making facilities in , Trostre, in Llanelli, is home to production of tin-plated and chromium-plated steel for packaging customers; Corby and Hartlepool produce tubes for application in construction and engineering; Llanwern, near Newport, produces galvanised strip for the automotive and construction sectors; while the Shotton site, in Deeside, and Catnic, in Caerphilly, produce a range of high-end building products for the construction sector. Tata Steel Europe’s contribution to the 2050 UK Net Zero target

Today, Tata Steel Europe is one of the leading and most CO2 efficient steel companies in the world. Our stated ambition is to produce steel in a CO2-neutral way by 2050 at the latest, and to have reduced 30% of our CO2 emissions by 2030.

We are recognised by the World Steel Association as Sustainability Champions for our commitment to sustainable development and the circular economy. We were also founder participants in worldsteel’s Climate Action programme for CO2 emissions data collection. Tata Steel Europe is developing detailed plans for transitioning to a future steelmaking footprint based on low CO2 technologies, whilst maintaining product quality and continuing to deliver for customers in strategic sectors such as automotive. This strategy is based on optimising existing technologies during their remaining lives whilst readying our overall investment strategy such that it is well placed to move towards a future hydrogen economy. In the UK a range of new technologies are under consideration and none of these have been ruled out, including low-carbon hydrogen. We are investing in a mix of technologies, as well as working with governments to obtain access to large-scale infrastructure (such as CCUS) that can decarbonise existing steelmaking processes as part of a managed clean growth transition. Candidates include operating our existing blast furnaces in conjunction with CCUS technology options, direct reduction of ore with hydrogen, electric arc furnaces.1

Collaboration with industry and academia

Tata Steel’s annual RD&T spend is the largest in the UK steel sector and is anchored through partnerships with Swansea and Warwick Universities, as well as through our industrial and academic partnerships under the South Industrial Cluster (SWIC). In addition, ongoing and leading research programmes continue with Imperial College, Cambridge, Sheffield, Cardiff and others with research into the electric vehicle supply chain of the future and the creation of zero carbon buildings as well as more fundamental research into future steel making technologies. These relationships are cemented through our commitment to the Engineering Doctorate Programme at Swansea University (55 places) graduate recruitment across all disciplines and a vibrant apprenticeship programme at Port Talbot and across the company.

Tata Steel is working with Swansea University’s Reduced Industrial Carbon Emissions (RICE) initiative and the University of South Wales’ Sustainable Environmental Research Centre (SERC), researching how to take the carbon dioxide emissions and use it to make high value products and industrially important chemicals.2 In conjunction with Tata Steel, the RICE project is constructing a large-scale CO2 separation demonstration system that aims to capture (and separate) carbon dioxide from complex industrial flue gasses and turn it into chemicals such as green hydrogen.

Tata Steel is a leading member of the SWIC deployment project, which is exploring a range of approaches to decarbonising industry in South Wales. The UK Government awarded £20 million in the 2021 for the project to enter Phase Two,3 which will involve engineering studies into:  The production and distribution of hydrogen from both renewable energy and imported LNG which is distributed by repurposing the existing gas network

1 Further information on options for decarbonisation is available via the Energy Transitions Commission (https://www.energy-transitions.org/sector/industry/steel/) 2 https://www.rice.cymru/en/ 3 Next phase of project to decarbonise industry in South Wales receives funding | Tata Steel in Europe (tatasteeleurope.com)  Cleaner electricity production using carbon capture and/or hydrogen-rich natural gas  Industrial carbon capture, usage, and storage technologies along the South Wales coast as well as the transportation and shipping of CO2  Large industry decarbonisation through fuel switching (substituting one energy source for a greener, cleaner alternative), process efficiencies and the production of cleaner transportation fuels.

The permit process has started for a carbon capture installation at our IJmuiden plant, in the Netherlands, with a link to transport pipelines to the North Sea. The Athos partnership provides for the construction of an infrastructure to enable this CO2 storage. Athos is a joint initiative of Gasunie, Energie Beheer Nederland, Tata Steel and the Port of Amsterdam.4 Plans include using by-product gases from the blast furnaces to produce 100,000 tonnes of hydrogen a year which would be used to help make steel and to supply a national future hydrogen network.

Together with Nobian and the Port of Amsterdam, Tata Steel is investigating setting up a 100 MW hydrogen plant on the IJmuiden site in the Netherlands. This plant will produce up to 15,000 tonnes of green hydrogen per year with sustainable electricity. Tata Steel will, as one of the launching customers, use the green hydrogen to produce steel in a more sustainable way.

HIsarna

Tata Steel has developed and is currently trialling its HIsarna technology to make steel in the future with 20% less CO2 emissions, which when used in conjunction with CCS could reduce CO2 emissions by 80%.5 HIsarna is an alternative to the blast furnace process. To be able to make liquid pig iron in a blast furnace, it is necessary to pre-process ores and metallurgical coal (the raw materials) into sinter (light chunks of iron ore), pellets (marbles of iron ore) and coke. The HIsarna process makes these steps superfluous: in the HIsarna installation, the raw materials can be used in powder form and be directly converted into liquid pig iron.

The HIsarna test installation was built on the Tata Steel site in the Netherlands in 2010, and in 2018 the installation became part of the production chain. Tata Steel is considering building a second larger test plant in India. If testing on an industrial scale proves successful, it will take about five to ten years before the technology can be put on the market commercially.

Role of low-carbon hydrogen in decarbonising the UK steel industry

The steel industry has already come very close to optimising its carbon intensity with existing technology; further decarbonisation of steel production will need to be driven by the development of new low-carbon technologies.

Whilst there are multiple technological pathways for the transition from conventional to low- carbon steel production, more than one of them will require secure and abundant supplies of low- CO2 hydrogen. The question is not whether hydrogen will play a role, but when and under what conditions.

It is possible for hydrogen to play a key role in both of the main processes of steel production utilised in the UK. Within the blast furnace/basic oxygen furnace (BF/BOF) configuration,

4 https://athosccus.nl/project-en/ 5https://www.tatasteeleurope.com/ts/sites/default/files/TS%20Factsheet%20Hisarna%20ENG%20jan2020%20 Vfinal03%204%20pag%20digital.pdf operated by Tata Steel at our Port Talbot facility and the predominant production method in Europe, hydrogen could potentially be used as an additional substance in the reaction, improving efficiency and lowering carbon emissions to some extent. Hydrogen can also be utilised as part of the direct reduced iron (DRI) method alongside scrap within electric arc furnaces (EAFs).

When considering timescales for the transition of steelmaking it should be noted that while hydrogen-based steel production has been performed in lab tests and several steel companies have experimented with using some hydrogen in their blast furnaces, no company yet has a fully hydrogen-based steel production. Tata Steel anticipates large-scale use of hydrogen could be an option from approximately 2040. To meet ambitious timescales for decarbonisation of the steel industry outlined in the Climate Change Committee’s Sixth Carbon Budget, action needs to be taken in the intervening period with a view to transitioning when technology and availability facilitates hydrogen use at scale.

Hydrogen-based steelmaking cannot be retrofitted onto existing production routes, and as such, the capital expenditure would be much higher than retrofit CCUS. CAPEX estimates range from £1.5bn – £2.2bn for an operation of 3 million tonnes, close to the current level of production at Port Talbot steelworks.6 All low-carbon technological options have higher operating costs, especially relative to European competitors, due to requiring greater electricity consumption and UK industry being subject to higher electricity prices than continental counterparts.

Ultimately, no single solution exists for the decarbonisation of steel. As a major point source of CO₂ emissions, a steelworks is an ideal candidate for CCS where such a local solution is being developed with the support of government. This could also produce large quantities of blue hydrogen for use in the local region. The alternative to CCS is to invest in EAF technology and migrate to green feedstocks as they become available. These green feedstocks could include intensely processed scrap, green hydrogen DRI, natural gas DRI+CCS, blast furnace pig iron+CCS or even direct electrolysis of ore.

It should be noted that switching fuels to directly reduce iron using hydrogen while there is unabated natural gas power generation in the UK does not reduce the UK’s carbon footprint overall, so ‘greening’ the grid is important alongside decarbonisation of industries such as steel. National, private and multi-sectoral partnerships are needed to invest in green electricity generation, green hydrogen and CCS networks – and no option should be ruled out.

Government support

Almost every aspect of the UK Government’s decarbonisation plan is steel intensive – steel will be needed in significant volumes for renewable energy, low-CO2 transportation, large- scale hydrogen and CCUS infrastructure. It is beyond doubt that the UK will need steel to meet its net-zero targets – the only questions are how and where it will be made. Steel must compete in a highly competitive global market, and unlike other industries the steel industry is not able to pass the capital investment costs necessary for the enabling infrastructure of the hydrogen economy onto its customers. Unilateral investment for producers is not commercially viable without significant policy intervention.

The UK needs to recognise the profoundly positive role a domestic steel industry can play in enabling the UK to reach net-zero whilst also developing green jobs and green export business. Decarbonisation cannot be achieved through de-industrialisation. The UK steel

6 Vogl, V., Åhman, M., & Nilsson, L. J. (2018). Assessment of hydrogen direct reduction for fossil-free steelmaking. Journal of Cleaner Production, 203, 736-745 sector should not be subject to constraints that its international competitors are not faced with. Carbon leakage can be prevented by placing robust low-CO2 stipulations at the heart of product policy and public procurement policy.

Access to affordable green hydrogen

Industrial decarbonisation relies on abundant, competitively priced (versus that in other countries) low-CO2 electricity and hydrogen supply. The UK can compete globally within the steel sector, but it must have the means and assurance of level playing field, including access to infrastructure and energy that is needed to allow the whole of UK society to successfully decarbonise. Access to large volumes of cost effective hydrogen will be one of these key elements.

The upcoming Hydrogen Strategy is an opportunity to set out a realistic vision for the development of the hydrogen economy, including in steel production, which gives the certainty needed to incentivise investment. It should accelerate the pace of deployment of low carbon hydrogen to position the UK ahead of other European countries that have more progressed strategies. Business models should incentivise early movers in the transition from fossil fuels to hydrogen, while allowing for operational capacity for blending of fuels to create resilience and reduce risk for users.

The UK Government’s 10-Point Plan for a Green Industrial Revolution and Industrial Decarbonisation Strategy represent positive steps, making clear that hydrogen will be central to the UK’s emissions reduction efforts. However, large-scale public funding will be needed to put in the place the enabling infrastructure for the transition to low CO2 steelmaking using hydrogen. Government should incentivise technology development and deployment in renewables and green hydrogen, but the business models must allow companies such as ours to be competitive.

Tata Steel supports the principle of industrial decarbonisation in geographic clusters, where companies can share the cost and risk of investments in large infrastructure schemes and new technologies, supported with well-targeted public investment. The initial £20m released for industrial decarbonisation in South Wales Industrial Cluster at the 2021 Budget must be followed by further Government investment in building an accessible network of hydrogen technologies in the region.

Electricity prices

All options for decarbonising the steelmaking process lead to increased electricity consumption. Yet steel companies operating in the UK are subject to significantly higher electricity prices than our European counterparts, typically 86% more than competitors in Germany and 62% than in France.7 Hydrogen-based steel production would increase the entire sector’s electricity demand by over 800% if based on green hydrogen. Lower industrial energy prices in the UK are essential in helping our industry make step changes to decarbonise, a challenge in common with other countries.8

Market for green steel

As a globally traded material, a key consideration for the steel industry over and above our own technology transition is the UK’s policy framework for decarbonisation within an international context. Current UK Government policies do not account for the carbon

7 UK Steel (February 2021), Closing the Gap 8 https://www.reuters.com/article/nordics-hydrogen/rpt-high-costs-to-hamper-green-hydrogen-deployment- in-nordics-analysts-idUKL1N2M00CA embedded in goods imported by and consumed in the UK. Importation of 7 million tonnes of steel equates to approximately 14 million tonnes of CO2. Under current reporting norms and the structures of the UK’s Climate Change Act, these emissions are not considered when determining the UK’s national emissions.

The UK should seek to lead by example, but also prevent further offshoring of domestic production in a counter-productive attempt to reduce apparent national emissions. Government intervention to support steelmakers with the additional cost of carbon reduction - such as a “contracts for difference” approach, use of UK ETS revenues or carbon border adjustments - will make a positive difference. This is particularly significant given that steelmakers anticipate that operational costs would be much higher for a decarbonised steel process than traditional forms of steel production – in addition to significant CAPEX requirements already outlined.

(April 2021)