Last month, you may have caught wind of the news that our SteelZero member and world leader in renewable electricity generation, Ørsted, secured an agreement with steelmaker Dillinger to have first offer for its lower emission heavy-plate steel to use in its offshore wind foundations. So why is this such an important moment of progress worth celebrating?
The rollout of renewable energy will be at the heart of the steel transition
They're two sides of the same coin. Steel is responsible for 5-8% of global energy demand - we'll need some 2000GW of renewable energy capacity to get the steel industry to net zero. At the same time, energy companies rely on steel to help generate, transport and transmit their products - think of the steel that’s needed to go into wind turbines and their foundations.
So, while they're enabling the clean energy transition, we also need renewable energy companies like Ørsted to remove carbon emissions from the steel in their supply chains. By making agreements such as the one with Dillinger, they’re doing just this.
It's exactly the action we need to see from members
The renewable energy sector and steel sector can work together to drive a net zero future by implementing specifications, engaging with suppliers to secure the supply of lower emission steel, and working towards the commitment of net zero steel. This critically underlines the value of being a first mover. Ørsted is reaping the rewards of being part of the leading group of businesses globally that signalled their demand and are creating the market for net zero steel.
With incoming trade barriers and emerging lower emission steel trade zones such as the EU’s CBAM and Global Arrangement on Sustainable Steel and Aluminum, climate risks and regulations for businesses are only intensifying. By investing in lower emission steel, Ørsted put themselves at the front of the line to set themselves up for the future net zero steel economy.
So the deal underlines the value of making credible, transparent commitments, operationalising them into your business strategy and working with your suppliers toward securing the steel you need, thereby setting your business up for the future net zero economy.
Getting the deal done
How did Ørsted go about making this agreement? How did they embed their SteelZero commitment into their specifications and supplier engagement to support their ability to procure lower emission steel? We wanted to know more. So we sat down with Decarbonisation Manager Mie Prehn Nygaard from Ørsted to get into the detail and uncover the answers. Check out the short Q&A below.
Q. How did you go about securing this deal with Dillinger?
A. "Dillinger is a long-standing supplier to Ørsted and over the last couple of years we have been working together on reducing carbon emissions from steel production. Foundations are one of the largest sources of emissions in an offshore wind farm’s lifecycle, accounting for 21% of carbon emissions, so incentivising our heavy-plate steel suppliers like Dillinger to transition to renewable technologies is key to reach our net zero target.
Our steel suppliers have told us very clearly that long-term offtake collaboration is key, because this strengthens the business case for suppliers to make the upfront investment. Simply put, it’s much easier to start work on a capital-intensive new product if you have a strong indication that a customer wants to buy it. And it is exactly this type of certainty that we are trying to create for a key supplier."
Q. Has being a SteelZero member helped support your engagement with your steel suppliers?
A. "We have used our Steel Zero commitment actively in our supplier engagement. The commitment breaks down companies’ net zero ambitions and enables focused attention to a key hot spot like steel. The commitment provides clear direction and a milestone on our net zero journey - both for us as a company and in our engagement with suppliers."
Q. What learnings would you share with other businesses looking to secure lower emission steel for their business?
A. "I believe our success is founded on our strong supplier relationships and the work of our procurement colleagues, who have successfully conveyed the value of transitioning to our suppliers from both an environment and business point of view. When we started our journey, only very few suppliers had decarbonisation plans in place, and no lower emissions products were offered in the market. In order to incentivise transitions and investments, we started with very simple demand signals.
We made decarbonisation part of our regular supplier relationship management processes and we communicated clear but simple supplier expectations, like using renewable electricity and setting science-based targets. All of this aimed to bring our suppliers with us on our net zero journey. Here a few years later, we're now starting to see our suppliers take on the first decarbonisation investments. To build on our demand signals and accelerate the new technologies, what we can now do is to build certainty for supplier investments by developing and entering into long-term offtake agreements."
Join our webinar to learn more
Interested in finding out more about how the renewables and steel sectors can work together to drive progress towards lower emission steel? Join our webinar on Friday 19th April, where we’ll hear from not only Ørsted and Dillinger, but also from fellow renewables member Siemens Gamesa to gain actionable insights on the above and more.
Register here: SteelZero: Green Steel in the Renewable Energy Industry | Climate Group (theclimategroup.org)
