Last month, you may have caught wind that Ørsted secured a deal with Dillinger for first access to its lower emission heavy-plate steel for wind turbine foundations.
Steel is key to the renewable energy revolution
This is big news. Steel already accounts for 5-8% of global energy demand. And we're going to need 2000GW of renewable capacity to achieve a net zero steel industry. But at the same time, steel is essential for energy infrastructure like wind turbines. So, while renewable energy companies like Ørsted help drive the clean energy transition, they must also reduce carbon emissions in their steel supply chains.
This partnership highlights the importance of being a first mover. With emerging trade barriers like the EU's CBAM, investing in lower emission steel positions Ørsted for a future net zero steel economy.
Getting the deal done
So how did Ørsted go about making this agreement? How have they embedded the SteelZero commitment into their operations? We wanted to know more. So we sat down with their Decarbonisation Manager Mie Prehn Nygaard to get into the detail. Check out the 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)