In this issue: Green Steel, Timescales and CEM-14/MI-8

Signal from MPP | Issue No. 2307-3?

In this issue: Green Steel – what we’ve learned from value chain incubation; Timescales – our snap survey of project lead times from decision to commission; Clean Energy Ministerial – MPP hosts policy roundtable in Goa.

Mission Possible Partnership is a movement of climate leaders and companies driving industrial decarbonisation across the entire value chain of the world’s highest-emitting sectors: aluminium, cement, chemicals, steel; aviation, shipping, and trucking.?We’re charting the inventive steps and radical collaboration to enable commercial-scale First Projects in this decisive decade.

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1. Steel Decarbonisation?

Coordination is Key to Confidence????

Bringing together clean energy suppliers and steelmakers has opened new doors up and down the steel value chain??

FIRST PROJECTS from industry pioneers including SSAB and HBIS show that near-zero emissions primary (ore-based) steel production is possible. Flagship commercial-scale clean plants have since broken ground in Sweden, Germany, and Canada. All of these projects are claiming a first-mover advantage, while leaders such as SSAB and Stegra have secured advance purchase agreements to lock in buyers for their first green steel.?

Through our work with an array of global steel companies, MPP has developed a portfolio of services and capabilities to support green value chain incubation for the steel sector. A valuable consequence of this work to date has been to bring key actors in different parts of the value chain together, notably clean energy suppliers and steelmakers. ?

Our work to build the business case for decarbonisation includes:?

• Comparative analysis of clean technologies. MPP teams assess the evolving techno-economics of alternative decarbonisation pathways, chiefly clean hydrogen options versus natural gas with carbon capture. ?
• Policy review and support. MPP is mapping the policy landscape across multiple geographies to assess the prospects for new incentives and other policy levers. In the US, we have provided detailed guidance and scenario planning to unlock federal funding under the Inflation Reduction Act (IRA).?
• Value-chain coordination. With partners including the Energy Transitions Commission and Breakthrough Energy , MPP convened a series of roundtables to explore cross-value chain challenges and investment opportunities in green steel, covering topics such as energy supply, offtake, policy, and financing arrangements. ?

Steel contributes approximately seven per cent of global CO2 emissions. In common with other ‘hard-to-abate’ sectors, obstacles to rapid decarbonisation include high investment costs and complex value chains which typically frustrate the absorption of a green cost premium for low-emissions products. ?

Leading steel companies, including Chinese producers that account for about half of global production, have committed to cutting their emissions and announced first zero carbon steel plants – Faustine Delasalle , Executive Director, MPP

Fig. 1. Faster decisions are critical to scale pipeline for low- or near-zero emissions steel?

MPP’s industry-endorsed Steel Transition Strategy shows that a real-economy threshold of 70 near-zero emissions primary steel plants need to be operational by 2030 to put the global industry on a Paris Agreement-aligned pathway to net-zero by 2050. To date, three projects have broken ground following a final investment decision to proceed. ?

Deployment of near-zero emissions primary steelmaking technologies, primarily direct reduced iron (DRI) production with clean hydrogen, is underway in multiple regions. We calculate that the current pipeline to 2030 of planned production capacity needs to more-than-double in the coming years if the industry is to decarbonise within a 1.5 degrees-aligned sectoral carbon budget. ?

Recent analysis has shown that first movers in Southern Europe, France, the UK and the US would be within reach of a viable investment case. An overview of opportunities in these regions from the Energy Transitions Commission, an MPP founding partner, is available here: Unlocking the First Wave of Breakthrough Steel Investments.?

2. Speed and Scale?

MPP calls lead times for announced green industrial plant?

Faster consents and smart fiscal incentives narrow the time lag from final investment decision to new operational plant?

DECARBONISATION begins with Project No. 1. But the criteria for final investment decisions on subsequent projects, No. 2 to 10, and 10 to 100, are tougher.?Lead times to commission new green plant require decisions within 2-3 years to meet the 2030 targets mapped in MPP’s Sector Transition Strategies.

MPP is building the evidence base for strategic interventions to drive deployment of green industrial technologies at scale. These vary by region and industry. Key levers include energy supply, effective carbon pricing on domestic production and imports, and measures to improve material efficiency. In summary:?

• Policy interventions to support renewable energy supply or reduce green price premiums in long-term offtake agreements contribute to a viable investment case for zero or?near-zero emissions technologies. Subsidies and fiscal guarantees help to de-risk novel technologies.?
• Effective phase-in of the EU Carbon Border Adjustment Mechanism will support the investment case for segments, notably in southern Europe, including green steel production in Spain. Fiscal incentives for capital expenditure and subsidising forward offtake agreements are key to unlocking greenfield opportunities.?
• In the United States, a combination of financial grants, subsidies and tax credits under the Inflation Reduction Act have transformed the project economics for new clean hydrogen capacity. Cheaper renewables and increasing indirect electrification are improving the business case across the power-to-liquids value chain.?

Fig. 2. Lead times from concept to operations for green steel plant?

MPP is working with companies and policymakers to identify enabling factors for faster decision-making, but how fast can they take effect??In a straw poll of MPP experts, our sector leads for aviation, shipping and steel flagged significant variations in projected lead times for green industrial plant:?

• Aviation: A combination of project tracking combined with new data from the Energy Transitions Commission implies?project lead times between four and seven years from final investment decision to the start of operations at new SAF plant ?
• Shipping: A useful parallel can be drawn with the timeline from order to delivery of operational fleet. Factoring in design, construction and shipyard capacity, delivery of clean?vessels powered by alternative fuels such as ammonia or methanol can take between three and five years from point of order??
• Steel: Investment forums hosted by the Energy Transitions Commission estimated lead times of three-to-four years for new green steel projects. At this juncture, based on our work to foster dialogue across the full value chain in different steel-producing regions, a more conservative assumption is five or even six years ?

New Hydrogen capacity - especially green hydrogen, from a production process powered by renewables - is a critical energy carrier for indirect electrification of many hard-to-abate industrial processes. Project lead times for green hydrogen plant vary according to location and scale. ?

We estimate typical lead times to commission?mid-sized electrolysers for hydrogen production at three-to-four years. REFHYNE , Europe’s biggest hydrogen?electrolysis?plant with capacity of 10 megawatts, was commissioned in 2021 at the Wesseling site of Shell’s Rhineland after four years in development. A similar?timeframe is cited for ongoing projects in the Netherlands and Norway, although five-to-six years is a realistic estimate for bigger projects. ?

3. CEM-14 / MI-8?

MPP to convene roundtable at Clean Energy Ministerial, Goa?

Meeting will assess policy levers to accelerate First Projects?

Government officials and industry leaders gathered for this month’s CEM-14/MI-8 meeting in Goa will join MPP for a roundtable session on hard-to-abate sectors on July 22. A key priority is to chart a course for effective coordination spanning?industry, investors and policymakers, to accelerate first deep decarbonisation projects from concept to implementation.?

Sanjiv Paul , MPP Senior Fellow and Tata Steel vice-president for safety, health and sustainability at Tata Steel, will join Manosij Ganguli , MPP Global Director of Sector Transitions, and policy lead Edward Boyd in the coastal state in southwestern India. The MPP team will present analysis and recommendations for five cross-cutting polity levers, to include: ?

• Clear signalling for a long-term trajectory, notably by setting targets and bans?
• Stimulating?early demand through differentiated markets for green products, mandates and public procurement?
• Carbon taxes, border tariffs and removal of fossil fuel subsidies?
• Fiscal and other mechanisms to de-risk investments and reduce technology deployment costs?
• Regulatory reform, planning and consents procedures; harmonisation of standards, definitions and certification schemes.?

We’ll share more details from this roundtable in next edition of Signal From MPP.?

The Mission Possible Partnership is a movement of climate leaders and companies driving industrial decarbonisation across the entire value chain of the world’s most carbon-intensive heavy industry and transport sectors: aluminium, cement, chemicals, steel; and aviation, shipping, trucking. These ‘hard-to-abate’ industries account for a combined 30 percent share of global carbon dioxide emissions.

How fast those sectors reach net zero emissions will make or break the world’s chances to stay well below a 2°C rise in global temperatures by mid-century. MPP and partners have developed sector-specific roadmaps to decarbonise these sectors, with quantitative 2030 targets endorsed by more than 200 companies.

MPP’s work to date has demonstrated that there is a technical and economic path to net zero in each of those sectors, by deploying technologies which are available or near market-readiness. Working with stakeholders in policy, industry, energy supply, demand and finance, MPP is supporting a portfolio of first commercial-scale decarbonisation projects in this decade. ??