A couple of weeks ago I did a post on the economics of killing Huntly, essentially about how the government's internal carbon price of $150 / ton made a strong economic case for them to fund windfarms to put all coal and gas-fired power plants out of business. At the time, I did some thinking about the Glenbrook steel mill as well, and a new update on green steel production in Europe has prodded me into finally putting it in a post.
The Glenbrook steel mill is one of New Zealand's dirtiest emitters, producing over 1.6 million tons of CO2 a year. The cost to the government is even higher: weirdly, we subsidise it by 2.1 million tons a year. At the government's internal valuation, that's worth $315 million a year.
According to Bluescope Steel's 2020 annual report (p 66), the total value of their New Zealand assets - including Glenbrook, Pacific Steel (which processes some of Glenbrook's output), and the Waikato North Head ironsans mine - is $625 million. Its unclear if this is US or Australian dollars, but we're basicly in the ballpark of being able to buy the entire operation and shut it down for two years worth of subsidy. The mill employs 1400 people, so the effective carbon subsidy we are paying for these jobs is $225,000 per worker per year. We could buy it, kill it, pay everyone involved a quarter of a million dollars to find something else to do, and still be better off within four years. And because Glenbrook is one of the dirtiest steel plants in the world, producing over 2.5 tons of CO2 per ton of steel rather than the usual 2, the world would be better off even if we shut it down and moved to importing steel from overseas (so if BlueScope "threatens" to do so, we should be welcoming the move).
That's a pretty compelling case for shutting it down. But there's an alternative: modernising the plant to use hydrogen and electricity, rather than coal and natural gas. For a ballpark of the costs, the Swedish project is spending US$3 billion (~NZ$4.25 billion) to make a plant producing 5 million tons of clean steel a year. Glenbrook produces ~600,000 tons a year, so assuming the cost downscales (it won't, but its fine for a ballpark calculation), we could do this for around half a billion NZ dollars - or two years carbon subsidy. We'd also need a hydrogen production plant, and ~100MW of renewable generation to power it, but from the Huntly case, that's ~$300 million, or another years subsidy. So for a similar price to the kill price we could clean up the plant, keep the jobs, avoid social disruption, and make the global environment better off by helping to lead the way on clean steel production. And that seems like a pretty good deal to me. The problem is likely to be convincing BlueScope - but then, if they threaten to shut down in response to high carbon prices (which they are), offering cleanup funding in exchange for equity seems like an obvious move.
