The European Steel Association (EUROFER)’s latest report on the EU Electrification Action Plan has warned that Europe’s steel sector cannot remain globally competitive without access to affordable, reliable clean electricity. The association emphasized that electricity prices for European steelmakers are structurally higher, typically double or triple those paid in competing regions.
Between 2018 and 2023, the EU lost 34 million mt of steel output, a decline EUROFER illustrated through a steep trend line closely aligned with periods of high electricity prices. Unlike the US and China, where industrial power costs remain comparatively low, Europe’s price structure inhibits industrial recovery and prevents long-term investment planning.
Decarbonization requires massive new clean power volumes
Despite nearly flat industrial electricity demand through 2025, decarbonisation trajectories require rapid expansion of clean energy. Today, the sector consumes around 75 TWh/year. By 2030, EUROFER expects the sector to need over 165 TWh of fossil-free electricity and 2.12 million mt of green hydrogen annually.
These inputs are necessary to support more than 60 planned low-carbon steel projects that collectively target 80 million mt of emissions reductions by 2030. EUROFER cautioned that these projects remain viable only if competitively priced electricity is secured.
PPAs fail to provide price stability for heavy industry
EUROFER stated that renewable power purchase agreements (PPAs), intended to deliver long-term price predictability, continue to track fossil-indexed wholesale markets. Forward price curves for wind and solar show that renewable valuations rise and fall in line with volatile short-term markets.
A major structural barrier is the high cost of shaping and firming intermittent renewable output. Steel production requires continuous baseload power, whereas solar and wind supply fluctuates dramatically. Buyers are forced to cover shortfalls at marginal prices set by fossil generators, resulting in high balancing costs. These dynamics remain one of the primary impediments to widespread industrial PPA uptake.
Dedicated industrial power contracts and expanded PPA guarantees needed
To resolve structural pricing barriers, EUROFER has proposed a carve-out in subsidized renewable contracts, which will allow industrial buyers to access electricity at generation-based pricing plus a fair margin, not wholesale-indexed prices, and scaled-up EU guarantee mechanisms for PPAs. Evidence shows PPA guarantees can cost €500,000 per MW, making long-term deals unaffordable without government-backed credit support.
EUROFER welcomed the European Investment Bank’s new €500 million guarantee facility but warned it covers only a fraction of the steel sector’s needs.
Indirect ETS costs require full compensation to avoid further price pressure
Because fossil plants will continue to set marginal prices for years, steelmakers will remain fully exposed to indirect EU Emission Trading System (ETS) costs. Modelling suggests EUA prices could reach €100-150/mt by 2030, significantly increasing electricity expenses for electro-intensive users.
EUROFER called for maintaining full indirect ETS cost compensation, strengthening existing the Clean Industrial Deal State Aid Framework (CISAF) crisis-relief measures, extending support measures beyond 2030 and expanding eligibility and increasing discounted electricity provisions.
EU system costs outpace global competitors, tariff reductions needed
Comparative analysis showed that Europe faces far higher system-cost components than the US or China, particularly network tariffs and grid infrastructure capital recovery charges.
For industrial users, network tariffs already represent one-third of the electricity bill and are expected to rise 50-100 percent by 2050. EUROFER argued that tariff reductions for electro-intensive industries are justified due to their stable baseload profiles, which help stabilize overall grid operations.
Finally, EUROFER highlighted that, without structural changes that prevent fossil generators from consistently setting marginal prices, the cost reductions needed for competitive low-carbon steelmaking will not materialize.