The steel industry will become a key player in the future green electricity consumption market.
In September of this year, Chinese President Xi Jinping delivered a video address at the UN Climate Change Summit, announcing China’s new round of Nationally Determined Contributions (NDCs), which include the goal of reducing the country’s economy-wide net greenhouse gas emissions by 7% to 10% below peak levels by 2035—and striving for even better results. This marks the first time that China has set an absolute emission reduction target covering the entire economy and encompassing all greenhouse gases. As the new round of NDCs progresses, the green and low-carbon transformation of the steel industry—a sector that is among the most energy-intensive and carbon-emission-intensive in the industrial sector—will become a key factor in helping China achieve its emission reduction targets.
In fact, as early as March of this year, the “Opinions on Promoting the High-Quality Development of the Green Electricity Certificate Market for Renewable Energy,” issued jointly by the National Development and Reform Commission and four other departments, pointed out that efforts should be accelerated to increase the proportion of green electricity consumption among enterprises in industries such as steel, nonferrous metals, building materials, petrochemicals, and chemicals, as well as data centers and other key energy-consuming entities and sectors. By 2030, in principle, this proportion should not be lower than the average level of the national renewable energy power consumption responsibility weight.
After the requirement for the proportion of green electricity consumption in key energy-consuming industries was introduced, how can steel companies meet their green electricity consumption targets?
On November 27, Greenpeace, an international environmental organization, and the Tsinghua-Sichuan Institute for Energy Internet jointly released a report titled “The Progress, Challenges, and Recommendations for Green Electricity Consumption in China’s Steel Industry” (hereinafter referred to as the “Report”). Through an analysis of the key drivers and consumption patterns of green electricity use in China’s steel industry, the Report systematically organizes and compares the key participation points and development trends of three major green electricity consumption models: green power trading, green certificate trading, and self-built/invested new energy projects, providing valuable reference for the steel industry’s practical implementation.
Carbon Emission Reduction: From a "Bonus Question" to a "Mandatory One"
According to relevant literature, the steel industry consumes over 400 billion kilowatt-hours of electricity annually. As the cornerstone of China’s industrial development, the green transformation of the steel industry is also critical to China’s achievement of its climate goals and energy transition. Currently, China’s steel production relies predominantly on the “blast furnace-converter” long-process steelmaking method. The electricity consumption per ton of steel in this long-process method ranges from approximately 200 to 400 kilowatt-hours. Given the large-scale production volume of long-process steelmaking, its impact on the industry’s total electricity consumption is significant. Coupled with the growing development of short-process steelmaking, the proportion of electricity used by the industry is set to rise further. Under this trend, how to promote the large-scale application of renewable energy in the steel industry and address the challenges posed by indirect emissions reductions resulting from fluctuations in electricity demand has shifted from a “bonus question” to an “essential question” that determines the industry’s future survival and competitiveness.
Huang Hanrong, Director of Greenpeace’s Climate and Energy Program, stated: “The steel industry is one of the major sources of carbon emissions in China’s industrial sector and represents a critical battleground for China’s efforts to promote a green industrial transformation and achieve its climate goals. By increasing the share of green electricity consumption, the steel industry can not only enhance its own emission reduction effectiveness but also support the long-term development of renewable energy from the demand side, thereby fostering integrated development between renewable energy and traditional industries. At present, steel companies face multiple challenges in consuming green electricity; however, more importantly, these challenges also harbor new opportunities for growth. For steel enterprises, taking the lead and formulating flexible and diversified green electricity consumption strategies will help them gain a competitive edge and successfully navigate the transition ahead.”
The report analyzes, from multiple dimensions—including direct and indirect drivers, compliance requirements, and incentive mechanisms—the external key factors driving the steel industry’s current adoption of green electricity consumption.
Zheng Ying, the lead author of the report and a specially appointed researcher at the Tiangong Think Tank Center of the Tsinghua-Suzhou Institute for Environmental Innovation, stated: “There are two main driving forces behind steel companies’ procurement of green electricity: one is an external impetus driven by policy compliance requirements and market competition pressures, and the other is an intrinsic motivation fueled by technological innovation, management improvements, and cost optimization. Currently, both policy compliance and market competition are continuously providing external impetus for the steel industry to embrace green electricity consumption. In the next stage, steel companies will need to further enhance their proactiveness and unleash even greater intrinsic momentum, building lasting and sustainable competitive advantages in areas such as technology innovation and commercialization, process iteration, and energy management upgrades. Ultimately, only when these external and intrinsic drivers converge into a unified force can they jointly forge a green development future for steel enterprises.”
Green Electricity Consumption in the Steel Industry: Challenges and Opportunities Coexist
Faced with direct or indirect driving forces from policies, markets, and other factors, Chinese steel companies have been actively participating in various green electricity consumption models in recent years. Currently, the green electricity consumption models adopted by Chinese steel companies can be broadly categorized into three types: green power trading, green certificate trading, and self-built/invested new-energy projects. This report summarizes several case studies of green electricity consumption by Chinese steel companies and conducts a comparative analysis—focusing on key dimensions such as cost and financial aspects, technical requirements, safeguards for green rights and interests, and long-term development trends—of the advantages and salient features of these three primary green electricity consumption approaches.
Among these efforts, Cai Yuanji, Deputy Director of the Power Market and Carbon Market Research Institute at the Tsinghua-Sichuan Energy Internet Research Institute, noted that for the steel industry, exploring new energy models such as direct green electricity connections—enabling nearby consumption of renewable energy—is particularly promising. “Steel enterprises, especially those engaged in short-process steelmaking, have relatively high electricity consumption shares and adjustable load profiles. In regions rich in new energy resources, steel companies possess significant potential to explore nearby consumption models. Much progress has already been made in addressing issues related to the allocation of responsibilities and costs for such models, and in the future, we can sustainably guide the steel industry to reasonably pass on costs downstream.”
China’s rapidly growing green electricity market provides strong support for the steel industry’s demand. The continuously expanding installed capacity of renewable energy and the increasingly robust and well-established mechanisms for green electricity consumption will offer solid backing for the steel industry’s uptake of green electricity. By deploying renewable energy sources, the steel industry not only meets its own needs for green energy consumption and supports its low-carbon transformation strategy but also contributes to the long-term development of renewable energy.
Currently, green electricity consumption by steel enterprises still faces certain practical challenges. For example, the strategic deployment of green electricity consumption places higher demands on steel enterprises' comprehensive capabilities in procurement and management. Rising cost pressures may dampen steel enterprises' intrinsic willingness to consume green electricity. Meanwhile, the mechanism for passing on green electricity costs along the value chain remains unclear. Additionally, more specific policy guidance is needed on how green electricity consumption by steel enterprises can be aligned with policies such as carbon markets, and how the required proportion of green electricity consumption should be allocated and implemented across individual enterprises.
Therefore, in the face of the steel industry’s potential for green electricity consumption and the urgent need for transformation, coordinated efforts from all parties are required.
In terms of policy, it is necessary to “unblock mechanisms” and implement “precise incentives.” First, we need to continuously refine incentive measures for steel enterprises’ consumption of green electricity, encouraging them to actively participate in green power consumption. Second, by fostering consensus on green electricity consumption throughout the upstream and downstream segments of the industrial chain, we can guide the proper allocation of green electricity costs. Finally, we can facilitate the integration and implementation of green electricity consumption mechanisms relevant to the steel industry, ensuring that its environmental benefits are “visible and clearly quantifiable.”
In terms of steel enterprises, it is essential to adopt both “strategic alignment” and “proactive breakthroughs.” Enterprises should set green electricity consumption targets and develop diversified green electricity consumption strategies, taking into account their own needs as well as external requirements. They should also enhance their energy management capabilities and closely monitor policy developments and market trends. It is crucial to pay attention to how the green value embedded in green electricity-produced products can be realized in the consumer market. By fostering collaboration across upstream and downstream sectors, steel enterprises can boost their willingness and ability to consume green electricity. Finally, enterprises must continue to drive technological upgrades and promote the integration of green electricity with core steel production processes.
