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UK expands IETF funding to steelmakers; to launch Clean Steel Fund

Highlights

IETF funding may help cut cost of energy bills

Clean Steel Fund may be launched 2023 for decarbonization

UK steelmakers and other energy-intensive industries will be able to bid for a share of GBP 220 million ($300 million) in government investment to help to cut their carbon emissions and the cost of their energy bills, the UK government announced Sept 22.

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Announcement of a new funding phase of the Industrial Energy Transformation Fund comes as the UK government is pledging to reduce its reliance on fossil fuels and to push the country towards clean energy. The IETF expansion is one of several government initiatives being taken to assist the steel industry in its modernization and decarbonization: these include the Clean Steel Fund now expected to be available to the sector in 2023.

The Department for Business, Energy & Industrial Strategy (BEIS) said in a statement the government is ready to put up GBP 220 million in the second phase of its IETF to "support green projects that help businesses across England, Wales and Northern Ireland clean up their industrial processes, improve their energy efficiency and reduce their carbon emissions."

Applications for the funding will open Sept. 27 and close Dec. 6.

"With innovation and investment across the economy, we can power the UK's green industrial revolution. But we know for the most polluting and energy-intensive businesses, this will mean a big shift in the way they operate...", prime minister Boris Johnson was cited as saying on the launch of the fund's second phase, coming weeks before the UK-hosted COP-26 climate summit.

Through grants of up to GBP 30 million, companies can use the fund for actions taken up to 2025, including installing more efficient boilers, developing technologies for industrial carbon capture, fuel switching and recycling waste heat into renewable electricity.

The new funds are on top of around GBP 70 million already made available to businesses through the first phase of the IETF.

Boosting domestic scrap processing

In this first phase, running from July 2020 to July 2021, in the steel sector Celsa Manufacturing (UK) obtained GBP 3 million for its Cardiff steelworks to install a static VAR compensator for its high voltage electric arc furnace, which will allow the 1.2 million mt/year capacity mill increase its production while consuming the same amount of energy as previously.

The Celsa project will also enable increased domestic scrap processing in what is "a highly beneficial project to the UK as a whole, since currently 7-8 million mt of UK scrap is exported, processed outside the UK, and then reimported needlessly," according to a BEIS statement. This will also bring a "natural reduction in carbon associated with the extra transport of scrap around the world," it said.

Overall, industry is accountable for 16% of the UK's emissions today and these must be cut by two-thirds by 2035 in order to set the UK on the path for ending its contributions to climate change by 2050, according to BEIS.

Several government funds

The IETF is one of several mechanisms the UK government is now offering the steel industry to assist in its modernization and decarbonization.

One of these is the Clean Steel Fund, which continues in development, meaning it has not opened for projects yet, a BEIS spokesperson told S&P Global Platts in an email. The CSF, which will offer GBP 250 million in funding, was originally announced in 2019. It "will support the decarbonization of the steel sector, supporting its transition to new low carbon technologies and processes," the spokesperson said.

According to a recent parliamentary statement, the CSF may be launched in 2023. "Based on previous evidence, complex decarbonization projects have long lead-in times and take time to set up. Due to this and other factors, the steel sector indicated in response to the 2019 Call for Evidence that their preference is for the CSF to be launched in 2023," the statement said.

Other recent and ongoing funding work by the UK government to support the country's steel sector includes: providing more than GBP 600 million in relief since 2013 to make electricity costs more competitive; providing guidance to ensure UK steelmakers have the best chance of competing for, and winning, contracts for all public procurement projects; and establishing a steel pipeline on national infrastructure, anticipated to require around 5 million mt of steel over the next decade, according to the BEIS spokesperson.

In addition, the government provided an emergency loan to Celsa Steel (UK) Ltd in July 2020 to allow the company to continue trading, safeguarding a key supplier to the UK construction industry and securing more than 1,000 jobs, and provided an indemnity to the official receiver which supported the successful sale of British Steel, safeguarding more than 3,200 jobs.

From November 2020, the government is providing GBP 22 million to deliver a five-year year R&D program to help the UK steel and metals sector improve efficiencies, slash emissions and ultimately boost the UK's competitive edge globally, according to the spokesperson.