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France unveiled a plan to ensure it has homegrown hydrogen
production and technology in its industrial zones, starting with
those of Luxembourg-based global steel and mining group
ArcelorMittal.
On 4 February, France's French Environment and Energy Management
Agency (ADEME) published a proposed strategy for Decarbonization of Industry and
a Steel Plan.
Efforts for greening industry and building a domestic cleantech
sector will receive €5.6 billion ($6.4 billion), secured from the
€30 billion purse of funds France is using to reach its 2050 carbon
neutrality goal, France 2030.
The roadmaps mostly look to slash emissions manufacturers or
construction firms create when producing metal, cement, lime, or
glass.
Supporting the market for such new technology, the government
intends to set up Carbon Contracts for Difference (CCFD) for use in
the sectors that have roadmaps.
"Mature" technologies in the form of low-carbon heat and energy
efficiency for industrial decarbonization will get €1 billion, and
"innovative" hydrogen or carbon capture technologies will receive
€4 billion.
Last year, France updated its Hydrogen Strategy, raising
domestic green and low-carbon hydrogen production targets to the
equivalent of between 6.5 GW and 10 GW of electrolysis capacity, according to Brussels-based
consultancy HINICIO.
Europe is set to outspend all other regions in setting up
low-carbon hydrogen production, with approximately $196 billion by
2030, according to a recent IHS Markit forecast. Demand in Europe
and globally is being driven by the industrial, chemicals, and
transportation sectors, according to the forecast.
Green steel agenda
Since the steel roadmap was published last May, the sector has
been tasked with slashing its CO2 emissions by 31% by 2030 in
comparison with 2015 levels.
Via the Steel Plan, the government seeks to work with
steelmakers and trade unions to create the strategies and subsidy
frameworks to see this through.
In the first instance, the French government promised to spend €1.7 billion
to decarbonize ArcelorMittal's French sites at Fos and Dunkirk.
The Dunkirk site will use a new Direct Reduced Iron (DRI) unit
to transform iron ore using hydrogen instead of highly-polluting
coal, and the Fos site will install an electric arc furnace to move
away from coal and towards electrification.
The refits are set to have a green payoff: a 40% reduction of
ArcelorMittal's CO2 emissions and 10% reduction in all industrial
GHG emissions in France. In France, ArcelorMittal will use carbon
capture and use (CCU) and carbon capture and storage (CCS) "to
achieve carbon neutrality in France by 2050," according to the French
government's industry advisory body, which wrote the Steel
Plan.
ArcelorMittal insists the changes can't happen without the
government funding. "This support makes possible the extremely high
investments we need to make to decarbonize steelmaking on our
Dunkirk site, Europe's largest steel-producing site," said Matthieu
Jehl, CEO of ArcelorMittal France.
Steelmakers are set to use CCFD subsidies to build technologies
that mitigate rising carbon market costs, as well as recycled scrap
in steel production to further cut their carbon footprint.
In the future, the government must make sure the industry has
access to cheap green electricity as energy makes up 40% of steel
operating costs, and that it has access to "carbon-free hydrogen"
which can be produced onsite. To that end, the plan calls the
construction of electrolyzers near steelworks "essential to the
roadmap."
Ahead of the announcement, ArcelorMittal had already started
building in its own CCU technology project called Carbalyst, and invested in a technology
company, LanzaTech, that aims to recycle carbon from steel
production to create ethanol that can be used as fuel.
Hydrogen, CCS, energy efficiency, electrification
projects
As part of the proposal, the government called for industry
proposals for greening existing industrial zones using
decarbonization plans and demonstrator projects.
It launched four calls for proposals that will
develop technology projects and scale up domestic cleantech supply
chains.
Two of the calls aim to make manufacturing zones greener with
the help of existing technologies, but the other two will set up
innovation projects.
Projects should cut carbon in various industrial processes, for
example using ovens, cooling equipment, natural gas-fired
electricity generation, heat exchangers, ventilation, or compressed
air pumps.
Such processes could be made green using hydrogen alongside CCS
or CCU, or carbon infrastructure. Funds for electrification using
renewable energy, energy efficiency, and lower-carbon chemical
inputs are also available.
The latest call for industrial greening projects builds on
existing programs in 2020 and 2021 that funded industrial energy
efficiency, electrification, and lower-carbon materials.
France's industry accounts for about 20% of its GHG emissions,
and the chemicals, cement, and mining/metals sectors contribute 72%
of those emissions. At the national level, France is pursing CCFDs
to fulfill its own 2019 carbon neutrality pledge, as well as its
2020 National Low Carbon Strategy and a legal target of 20-40% of
industrial hydrogen consumption sourced from green/low-carbon
hydrogen by 2030.
Accordingly, France will rely on European funding tools such as
the Innovation Fund and research investment fund Horizon for the
Steel Plan.
CCFDs and hydrogen
At the same time, ADEME issued a consultation which focuses on
the proposal for contracted subsidies encouraging businesses to
invest in low-carbon tech—CCFDs.
Such contracts are intended to encourage investment in
low-carbon technology meant to offset the expected rise in carbon
prices. They have been proposed in both Germany and the UK, and are already in place in
the Netherlands.
The consultation asks industry about the levels of support
needed for CCFDs. "The responses from contributors will make it
possible to develop and implement systems of support that best meet
the needs of the actors and the expectations expressed by the
stakeholders to secure the achievement of our climate and
industrial objectives," the government said.
France has prior experience with this. France is one of the
European countries that used non-carbon CFDs to grow its renewable
energy industry.
It foresees the CCFDs as part of a longer-term support framework
that extends Relaunch France, its €100-billion pandemic recovery
plan, which earmarked the €30 billion for a green transition. In
particular, it is hoped CCFDs will secure a market for French-made
green and low-carbon hydrogen technology.
France plans on being careful with new EU guidelines on state
aid so that a CCFD regime for steel can be set up "quickly,"
government officials said.
France is also banking on private capital investments that it
expects will be plowed into industry as a result of new EU Taxonomy guidelines, which
recently encouraged blending gas with hydrogen, the government's
advisory body said.
The government framed the Steel Plan to fund green steel as a
response to international "subsidies, dumping, protectionism," and
the EU's carbon neutrality policy.
Likewise, the EU and US governments are aiming to restrict
access to their markets as places to sell abundant Chinese steel,
in the autumn announcing a trade deal on green
steel, while lifting some of the "protectionist" tariffs that
they levied against each other during the presidency of Donald
Trump.
Posted 10 February 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability
