In December 2024, SSAB announced it had achieved regulatory approval to green its steel plant in Luleå, Sweden, where the current blast furnace-based production system will be replaced with a new mini-mill fed by an electric arc furnace once it and the rolling complexes are running at full capacity. The mini-mill will run on fossil-free electricity and be supplied with a mix of fossil-free sponge iron produced with the HYBRIT technology (hydrogen reduction of iron ore) and recycled scrap as the raw material. The change is said to reduce Sweden’s CO₂ emissions by 7%. Another new mini-mill is planned to be built in Raahe, Finland.

Plans to convert its Nordic steel strip production in Oxelösund, Sweden, with a new electric arc furnace and raw material handling facility are well-advanced, and production is scheduled to start at the end of 2026. The SEK6.2bn (€540mn) project will see construction of a 190-tonne capacity electric arc furnace, said to be one of the biggest in the world, featuring a 9.3 metre diameter upper shell. Powered by a 280 MVA transformer, ‘it’s the most powerful digital electric arc furnace ever designed’, according to Andrea Lanari, Vice-President Metallurgy Steelmaking at SMS Group. Its power feed been designed specifically not to disrupt the country’s electricity grid. When completed, it will reduce Sweden’s CO₂ emissions by 3%.

To the south, Romanian aluminium producer ALRO has purchased a heat treatment furnace with electric heating from SECO/Warwick, which will replace three furnaces powered by natural gas. And at the BASF Verbund site in Ludwigshafen, Germany, what was claimed to be the world’s first demonstration plant for large-scale electrically heated steam cracking furnaces was inaugurated in April 2024.

The demonstration plant produces olefins, such as ethylene and propylene, and will test two different heating concepts. In one furnace, direct heating applies an electric current directly to the cracking coils. While in the second furnace, indirect heating uses radiative heat of heating elements placed around the coils. The two electrically heated furnaces together process around 4 t/h of hydrocarbon feedstock and consume 6 MW of renewable energy.

The demonstration unit in Ludwigshafen will be operated by BASF. Linde plans to commercialise the decarbonisation technologies under the new trademark ‘Starbridge’. The project received €14.8mn of German public funding.

Projects like these show how heavy industry can decarbonise cost effectively, despite serving internationally-competitive markets, according to European electricity trade association Eurelectric. ‘If we want to retain energy-intensive industry in Europe, we need to think about how to produce on competitive terms; [for that], electrification is key,’ said Secretary-General of Eurelectric Kristian Ruby at the Brussels, Belgium, launch of its Power Barometer in October 2024.

He quoted a report from Germany’s Fraunhofer Institute, stating that 90% of industrial heat could be electrified.

Can such investments only be made at a cost to consumers, in the form of higher electricity prices?

The risk of high energy prices in Europe harming the competitiveness of its businesses was highlighted last year in the Draghi report. But that was based on 2023 figures, and the Secretary-General pointed out that demand since then has, surprisingly, fallen.

Earlier this month, Eurelectric reported that the EU closed 2024 with lower electricity prices on average. In 2024, wholesale day-ahead market prices came down to €82/MWh compared to €97/MWh in 2023. This average was even lower – €76/MWh – up until 4Q2024 when a surge in gas prices, high winter demand, scarce solar and windless days brought the prices up, causing several spikes in Germany, Hungary, Romania and Sweden to name a few.

A more worrying figure, according to the trade association, is that power demand has dropped in Europe by 7.5% from 2021–2023. While energy efficiency will have played a part in that – ‘a good thing’ according to Eurelectric – ‘over half’ was due to demand destruction from industrial uses offshoring outside of Europe.

‘There is a fundamental conundrum that policymakers need to solve. We need to speed up the transition from fossil fuel to clean energy. On the other hand, we need to do so [in a way that] the needs of the energy-intensive industries for a competitive price of electricity are met’ – Kristian Ruby, Secretary-General, Eurelectric

In its latest press release, Eurelectric reported that German industry’s power consumption decreased by 13% in 2023 compared to 2021, and is expected to have sunk further in 2024, since industrial production declined 4% year-on-year. Evidence for demand destruction comes from the International Energy Agency, with demand data from Eurostat figures. There has been a reduction of more than 100 TW in industrial activity. That is backed up by news reports of decisions to close down energy-intensive industry, such as aluminium smelters in Slovenia and Germany.

Where that is not happening, according to Ruby, is in countries like Norway, whose smelters are powered by indigenous hydroelectricity.

As to why European industry isn’t electrifying, he identified three barriers.

First is cultural change and inertia in traditional energy sectors. (On the other hand, those that do electrify their equipment and processes can take advantage of a secondary benefit at the same time as digitalisation.)

The second barrier relates to disparities in development across Europe. A Romanian steel plant with 1950s production technology cannot compete in innovation projects with plants in Sweden, which have a different starting point. Similarly, more developed countries, particularly in the north and west of Europe, push out new legislation quicker than those predominately in the south and east, which need not only funding but also support to develop their bureaucracy. Europe needs to do more on addressing those disparities, said Ruby.

Another striking disparity across the 27 members of the European Union is the competitiveness of renewables against gas. ‘We need to shift tax pressure so electricity is the energy delivery mechanism of choice. Unless that is fixed, it’s difficult to convince the industry to switch.’

Thirdly, as some big emitters are quitting the European scene, others are facing the nearly unprecedented supply situation seen this past year of negative power prices.

‘When you reach 65% renewables in the market, made of wind and PV, the market stops working in a good way and there are negative prices. It looks nice but is very bad for industry – it creates volatility,’ said Stefan Håkansson, Chief Clean Energy Officer of GFG Alliance. ‘A steelmaker needs a continuous power feed. Steelmakers are paying trading credits to hedge their power portfolio and are killing industry.’

This month, Eurelectric reported that the incidence of negative prices broke a new record in 2024; there were 1,480 separate instances, and they were registered 17% of the time in at least one bidding zone.

While negative prices are not necessarily always bad, they do complicate running a sound business, Ruby admitted. This issue could be solved by developing grid infrastructure. ‘We assess that we need 200 GW in 2030; we’re now at 50 GW. That’s an indication of how much needs to happen to deal with the flexibility challenges.’

He continued: ‘Right now there is a compelling case to bring in more storage into the market, because of the swings. If you can be paid to take electricity when others don’t want it, and dispatch it when needed, [there] should be in principle a good business case there. That’s where the grid dimension comes in, and being allowed to bring new assets online. We do think there should be other push measures or incentives for capacity markets to provide some visibility on cash flows for storage.’

Summarising the 2024 Power Barometer, Ruby said: ‘There is a fundamental conundrum that policymakers need to solve. We need to speed up the transition from fossil fuel to clean energy. On the other hand, we need to do so [in a way that] the needs of the energy-intensive industries for a competitive price of electricity are met; they need to have a business case to build something.’

‘We want demand; we want a stable framework that allows them to continue to invest. These things may sound simple, but they are not trivial. New policymakers are coming in. I have been reassured that the EC has gone into implementation mode on power market design. But the devil is in the detail. If policymakers take a brute force approach to bring down power prices, they will destroy certainty. But if it can be carefully crafted, there is a chance that we will have arrangements that will bring down the price of energy while making the industry more competitive.’

• Further reading: ‘Electrifying Europe: Zeroing in on challenges and opportunities’. Europe’s power sector is going through an evolution unlike ever before. With the opportunities and challenges that come from such evolution, however, the current picture is mixed, writes Cillian O’Donoghue – Policy Director at Eurelectric.
• Find more about why the all-electric future of the European Union’s (EU) energy system will be a significant challenge for the electricity sector.