Energy and Climate Politics
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Steel's contribution to a low carbon Europe 2050 (BCG)
The steel industry as an energy-intensive sector
The production of steel is energy-intensive. The steel industry in Germany continuously seeks to increase its energy efficiency, and leads in international comparisons. It is dependant, however, on competitive electricity prices.
The steel industry is a particularly energy-intensive sector. Coke and coal are used in blast furnaces to chemically reduce iron ore to pig iron. Re-heating and heat treatment furnaces are heated with natural gas. Electricity is required for powering electric arc furnaces that melt scrap to new steel and for operating rolling mills. The steel industry uses about 22 terawatt-hours of electricity every year. That is 9% of Germany’s industrial consumption and 4% of total consumption in the country. About 27 terawatt-hours of natural gas are consumed annually here.
International leader in energy efficiency
Given the major significance of energy costs steel companies continuously seek to improve their energy efficiency. The introduction of certified energy management systems has advanced significantly. The sector reduced its primary energy consumption per tonne by 39.2%, to 17.9 gigajoules, between 1960 and 2012. Together with Japan, the steel industry in Germany is an international leader in energy efficiency, especially against competitors in the up-and-coming threshold countries such as China and Russia.
By-product gases are used in integrated energy supply systems
One special aspect of the steel industry is the intensive exploitation of energies derived from by-product gases. The process gases – coke oven gas, blast furnace gas and converter gas – inevitably produced in the coking plant, blast furnace and oxygen steelworks are used in other plants in the integrated steelworks to generate heat and electricity. This reduces the consumption of fossil fuels and cuts CO2 emissions.
Energy efficiency made more difficult by process-related limits
The opening up of energy efficiency potentials is, however, becoming increasingly difficult and expensive for the companies. On the one hand, the decrease in consumption in blast furnaces and electric steelworks is now approaching it process-related limit. On the other hand, countervailing effects are increasingly occurring, increasing energy consumption per product unit. These include pollution targets, increasing product demands, decreasing raw material qualities, or additional costs involved in the extraction of raw materials.
Increased electricity costs threaten competitiveness
The steel industry’s electricity costs have risen considerably in recent years due to energy and climate policies. The increasing costs of renewable energies, in particular, are responsible, as well as the effects of the emission rights trading system in force since 2005. Such burdens threaten international competitiveness. Electricity prices in Germany are already the highest in Europe. In many countries, France or Italy for example, special tariff systems apply for energy-intensive industries, leading to much lower prices. Measures to limit burdens, such as the special compensation system embedded in the Renewable Energy Sources Act (EEG) are thus indispensable for the steel industry.