Steel industry supports federal clean energy moves

Canada’s steel industry welcomed this week’s federal budget incentives for clean energy, measures which should also help to bolster the economy in Hamilton.

The sector “is pleased to see this budget significantly expand the climate tool kit to support heavy industry’s competitiveness as Canada moves toward a net-zero economy,” said Catherine Cobden, CEO of the Canadian Steel Producers Association.

One of the most important themes in the budget — the need to build a national net-zero electricity system by 2035 — is an important policy goal for heavy industries like steel and cement which will become increasingly dependent on large supplies of emission-free energy. The clean energy transition is also a key feature of the city of Hamilton’s manufacturing strategy.

Canada’s electricity system is already more than 80 per cent emission-free due to the country’s large hydro, nuclear and renewable generation. But Canada will need to at least double its power capacity by 2050 to meet added demands for electric vehicles, home heating and manufacturing. With so much additional demand, there are fears utilities like Ontario Power Generation will simply crank up their gasfired plants, hugely ramping up CO2 emissions.

This poses a problem for Hamilton since steel, the heart of the manufacturing industry in the city, is in the process of switching to electricity-heavy production.

With federal and provincial aid, ArcelorMittal Dofasco plans to switch from CO2-intensive blast furnace technology to lower-emission natural gas and electric arc furnace production by 2028, which is expected to place huge additional demand on Ontario’s electricity grid.

The new natural gas furnace can also be powered with hydrogen once an ample, clean hydrogen supply becomes available. But that would also massively increase the need for renewable power in Ontario since low-CO2 hydrogen requires large volumes of electricity for its production.

Under the new budget, the government seeks to address these and other power supply problems through an electricity credit program. It will spend $25.7 billion for a 15 per cent credit on clean electricity projects over a decade. The credits will help defray costs for wind, solar and hydro projects, gasfired generation with abated emissions, nuclear projects, batteries, pumped storage and power grid equipment.

It will be available to private companies and non-taxable entities such as Crown corporations, public utilities and Indigenous-owned companies. Offering it to Crown corporations is an important feature of the program since electricity in most provinces is provided through provincially-owned power utilities.

Indigenous-owned corporations are also expected to play an important role as they commit part of their large land tracts for electricity generation and storage. The Oneida Energy storage project, 40 kilometres south of Hamilton, is a good example of what can be done. When operational in 2025 it will be Canada’s largest power storage project at 250 megawatts.

The clean electricity credit will end in 2034, which is in line with the federal government’s commitment to create an emission-free national grid by 2035.

In addition to the clean electricity credit, the budget also includes a 15 to 40 per cent tax credit to build hydrogen production plants. This could encourage OPG and private power companies to build hydrogen capacity in Ontario, which would be a key enabler of ArcelorMittal Dofasco’s transition to hydrogen and the creation of a potential hydrogen hub in Hamilton.

The cost of doubling the electricity grid by 2050 will be enormous. In Ontario alone, it’s estimated at $400 billion. So even at $26 billion over 10 years across Canada, the federal clean electricity program is not nearly enough to pay for this expansion.

But together with other incentives, the government is betting that it can spark private companies and provincial utilities to invest in this transition, which will also help to safeguard Hamilton’s economic future.