Steel mill's move to electricity cleans up its act. Could there be dirty repercussions?
Using polluters money to fund an electric furnace, the country will make its biggest ever carbon cut, the Government says. Sounds too good to be true? Olivia Wannan explains. By helping the Glenbrook steel mill to buy an electric-powered furnace, Kiwis could cut nearly 800,000 tonnes of pollution off our collective footprint each year. The Government approved a contribution of up to $140 million towards the furnace and said the deal would protect the planet, jobs and export revenue. By preventing so much carbon, the deal offers great bang for the buck, said Climate Change Minister James Shaw. Its paid for by polluters, the minister argued . Yet the last time the country lost one million tonnes of pollution, we outsourced it: the closure of the Marsden Point petrol-refining factory meant these emissions vanished from New Zealands balance sheet, but were simply added to the tallies of the countries we purchase refined fuel from. And the deal doesnt require new electricity generation to be built to compensate for the mills extra appetite. To understand the national and global impact, we need to look at how steel is currently made, and how the new furnace will change that. Unhelpfully, steel doesnt sit in the ground waiting to be mined. The hardy metal is a combination of iron and carbon. The closest natural resource is ironsand. Its a good start, with plenty of iron. But theres too much carbon and plenty of unwanted tag-alongs including oxygen, which likes to bond with the iron. The Glenbrook mill , owned by Australian steel-maker BlueScope, consumes lots of coal transforming sand into steel. In its kilns, coal releases heat and gases like carbon monoxide which nabs the oxygen and becomes planet-heating carbon dioxide as a result. Next, the process simmers down the amount of carbon. Oxygen is pumped into a furnace that swirls the metal around. The removed carbon plus the oxygen creates yet more carbon dioxide. All up, the steel mill has one of the largest carbon footprints in the country for its size producing more than 1.8 million tonnes of emissions each year, more than 2% of the national total. The new electric arc furnace will replace the swirling furnace. In it, the virgin metal will get its carbon reduced, and other impurities simmered away. But electric furnaces can also be fed scrap steel, which is melted and purified. Scrap steel already has about the right mix of iron and carbon. It skips the coal-hungry kiln stage, reducing fossil fuel use. By using 50% scrap, BlueScope estimates it can close two out of the four kilns. The new process will cut carbon dioxide by 45% saving 800,000 tonnes annually, compared to its average emissions over five years. BlueScopes New Zealand chief executive Robin Davies said the plant will produce the same amount of steel, using a higher proportion of scrap. BlueScope shifted away from scrap steel in 2015, after it purchased Pacific Steel and acquired its electric arc furnace. The Pacific Steel brand started to make its products from virgin metal (requiring those coal kilns) instead of recycled scrap. Davies said the electric furnace was being decommissioned when the sale went through, and would not have met the Glenbrook mills requirements. It was about half the size it would need to be and was installed in the 60s, he added. Although 500,000 tonnes of scrap steel typically leave Aotearoa every year, it isnt waste material. It would have been recycled in offshore electric arc furnaces, said Jill Cooper an industry consultant and the director of Advanced Materials Technologies. However, Cooper isnt too worried that recycling more steel in New Zealand will mean emissions will be created overseas as a result. BlueScope isnt the only steel mill shifting to scrap steel. Its happening all over the world. New Zealand currently sends about a quarter of all steel to landfill, according to a report by Thinkstep. If, say, demand increased, everyone could be encouraged to recover more. Virgin steel-makers are also cleaning up their act, Cooper said. Across the ditch, a factory will use a new electric furnace, plus cleaner ways to pull oxygen away from the iron. Natural gas does the same job for lower carbon emissions . So-called green hydrogen (produced from renewable electricity) pairs up with oxygen to produce water vapour instead of carbon dioxide. Contact Energy will supply the electricity to be consumed by Glenbrooks new furnace. The gentailer operates two hydro dams and five geothermal power stations, is currently building a sixth and plans to expand another . Geothermal stations release some carbon emissions to the atmosphere, though generators can retrofit systems to pipe the gases back underground. After it sells one gas plant to Fonterra in June, Contact will own one power station that requires fossil fuels. It features a gas-burning plant in Taranaki that runs day-to-day and two peaker plants that fire up when consumer demand for electricity spikes. Contacts day-to-day or baseload plant will run at least until the end of winter 2024. From 2027, the electric furnace will draw 30MW of power from the grid, equivalent to 37,500 homes. The Glenbrook mill is already a large consumer of electricity. As well as offering competitive power prices, the BlueScope-Contact deal requires the steel mill to reduce operations at times when demand outpaces supply, such as cold winter mornings. That will reduce the load on the peaker plants. However, the national grid also relies on coal and gas generation for day-to-day power. As well as providing extra electricity during peak periods, the Huntly power plant also burns gas to generate baseload power, and is likely to do so for the rest of the decade. When gas is in short supply, coal feeds the fires. A new electricity-guzzling furnace could delay the phase-out of baseload operations at Huntly. However, a Contact spokesperson said the company would not build new generation to supply the Glenbrook steel mill, with the power to come from our existing portfolio. We have more than $1.1 billion of renewable development under way as well as a pipeline of geothermal, wind and solar projects. Polluter pays? BlueScope will contribute $160m of the $300m upgrade. Davies said the Government co-funding allows his company to bring the investment forward. Using revenue from pollution penalties, the Government will kick in up to $140m. It will put at least $110m towards the furnace, another $10m if the tech is ready in January 2027 and an additional $20m for further emissions reductions. BlueScope is not the first high-emitting company to receive this type of Government contribution to green upgrades. Fonterra , McCain and Silver Fern Farms received funding to replace coal boilers with renewable tech. But until the steel mill, grants of no more than $5m were approved. Launched in 2020, the Government Investment in Decarbonising Industry fund offers businesses up to 50% of the cost when they switch from fossil-fuelled to renewable technology. The National Party opposed the scheme. Energy spokesperson Stuart Smith described it as corporate welfare and was concerned consumers were funding upgrades that should be happening anyway. But he didnt commit to canning it. A National-led government would consider the funds future at the time, Smith said. Minister Shaw defended the $140m contribution, noting it would come from the proceeds of the Emissions Trading Scheme (ETS). Many polluters must purchase and surrender a carbon unit for every tonne of emissions produced. Consumers pay a bit more for petrol, natural gas and coal as a result. In theory, Glenbrook should have been surrendering units and contributing to ETS proceeds since 2010. In that way, the company could be getting some of its money back through the Governments $140m contribution. But a tool designed to reduce, though not eliminate, the financial burden means some large polluters pay no penalties or even profit off the ETS all completely legally. Lawmakers intended that BlueScope and other high-emitting companies would pay 13% towards their annual pollution bill, with the rest of the carbon credits provided free. But the credit-awarding process is notoriously over-generous . BlueScope received nearly 2.2 million free credits in 2021. Stuff requested its carbon footprint from all sources including coal, gas and electricity generation because this could demonstrate whether the company was making the intended contributions. The company declined to provide the data. Because the steel-maker purchases electricity and fossil gas from other companies that surrender carbon credits on its behalf, it is not possible to tell from publicly available data how much of a contribution it makes. A spokesperson did not provide figures for electricity and gas, citing commercial sensitivity. But the company disputed that over- or under-allocation had occurred. ETS revenue predominantly comes from polluters that dont receive free units. Big contributors include fossil fuel extractors such as Todd Energy, fossil fuel importers such as Z Energy, and power generators Genesis and Contact and consequently, the families and small businesses buying petrol, gas and electricity. 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