The government’s potential silver bullet for its steel dilemma—a Direct Reduced Iron (DRI) plant using green hydrogen—is already being shot down as “financially dubious.” “Industry sources have cast doubt on the financial viability,” and a closer look reveals why.
First, the technology is enormously expensive. Building a DRI plant is a massive capital project in itself. The government is already struggling to find the money for the “base” plan of new electric arc furnaces (EAFs), as its £2.5bn fund is “drawn down” by bailouts.
Second, the fuel source—”clean hydrogen”—is not yet a mature, affordable commodity. Green hydrogen (made with renewable electricity) is in its infancy. The infrastructure to produce and transport it at an industrial scale barely exists, making its cost per unit astronomically high.
Third, it creates a new, complex supply chain. The government would not only be funding the EAFs and the DRI plant, but it would also be reliant on securing a massive, stable, and cheap supply of both iron ore and green hydrogen to feed it.
This is the “arrangement” that sources doubt. It’s a hugely complex, multi-billion pound gamble on an emerging technology, all to save a “primary steelmaking” pledge. Given the simpler, cheaper (though job-cutting) option of EAFs-only, the financial skepticism is well-founded.