2 billion euros would already go directly to Tata Steel, because of the sustainability of the group. But the Dutch state may also commit to a large amount of additional subsidies. This includes future subsidies to get a biomethane market off the ground, subsidies for a CO2storage project and compensation for , matters on which the success of the steel factory’s sustainability plans depend.
This could involve hundreds of millions in additional costs every year until 2040, researchers from the Foundation for Research on Multinational Enterprises (SOMO) wrote today. The state would probably incur costs for this, even without further agreements with Tata Steel, but the steel factory plays an important role in the developments in question.
In the run-up to final customized agreements, Tata Steel and outgoing minister Sophie Hermans (Climate and Green Growth, VVD) signed last September a statement of intent. It states that the state will release a maximum of 2 billion euros in one-off subsidies to make Tata Steel more sustainable. Half of the existing polluting installations will be replaced by a sustainable production process. Tata Steel itself would contribute 2 to 4.5 billion euros.
Also read
Much of the agreements between Tata Steel and the state is still loosely formulated
The declaration of intent also discusses several related projects and developments. This includes Aramis, an underground storage project for CO that is yet to be developed2 in the North Sea, where Tata Steel would become a major user. The steel factory’s sustainability plans also rely on a switch to biomethane, but the market for this fuel is barely developed in the Netherlands and Europe. The declaration of intent also contains some grounds for termination. For example, Tata Steel can still avoid the declaration of intent if the costs of using the electricity grid rise too much.
The state does not officially commit itself to the projects and developments mentioned via the declaration of intent. It is stated that the state will make “reasonable efforts” to get these things off the ground. It is still uncertain to what extent all agreements in the declaration of intent will also end up in the final customized agreements, which will probably only be made in September 2026, under a new minister.
Developing the market for biomethane
Developing a market for biomethane in particular will probably require a lot of effort from the state, the SOMO researchers write. To get this market off the ground, the price of biomethane must not be much higher than that of natural gas. As long as volumes are low, this is not the case, and the state will have to step in. SOMO estimates these costs for 2032 to 2040 at 195 to 330 million euros per year.
SOMO estimates possible compensation for increased network costs at 60 to 87 million euros between 2027 and 2040 and to reduce CO2Getting the Aramis storage project off the ground would require around 34 million euros per year. In total, SOMO comes up with the necessary ‘preconditions’ at annual costs of 375 to 580 million euros. This also includes 61 to 88 million euros for offshore wind energy, for which a lack of industrial customers is currently a problem.
“We have not included another potentially major cost item, namely the processing of steel slag,” says researcher Boris Schellekens of SOMO. “We cannot estimate the costs of this because there is no public data available. It is clear that the regulations on processing steel slag are becoming increasingly strict, and since large volumes are involved, the costs will not be small.”
It is important for Tata Steel to be able to compete on a level international playing field, the company says in a response. The high costs of using the electricity grid in the Netherlands and rules surrounding the processing of steel slag are important topics for discussion in this context.
The ministry has stated that it cannot comment on SOMO’s calculations
The steel factory says it will also take responsibility for projects on its own site, but not for infrastructure outside of it, such as a storage location for CO2and that it is known that the government has an important role in new technologies in the energy transition. As far as Tata Steel is concerned, policy efforts to get a market for biomethane going can also be made Europe-wide.
The ministry has stated that it cannot comment on SOMO’s calculations because it concerns business-sensitive information. The ministry emphasizes that the grounds for termination formulated for the declaration of intent do not apply to the final customized agreements, which are binding. The issue of network costs is already emphatically on the political agenda, regardless of this tailor-made process.
Also read
The ministry and Tata have been secretly negotiating a greening deal for three years: reconstruction of turmoil, doubt and frustration
NEW: Give this item as a gift
As an NRC subscriber you can subscribe every month 10 items give as a gift to someone without an NRC subscription. The recipient can read the article directly, without a paywall.
Why you can trust NRC