An overhaul of EU state aid regulations for energy and environment planned this year or next could result in the European Commission (EC) permitting the payment of subsidies to producers of fossil-free steel, also for wind turbines, a high-ranking EU official said.

“We need to be able to promote renewable energy, a circular economy, clean steel production, and sometimes you need state aid for that,” Diederik Samsom, head of cabinet of the European Commission’s executive vice president Frans Timmermans, said during a webinar on a flagship report by wind industry group WindEurope on wind energy and the economic recovery.

Samson replied to a comment by Manuela Ripa, a member of the European Parliament from the Ecological Democratic Party (ÖDP) in Germany’s Saarland, a traditional steel making region, who warned the already very costly European production of the huge pieces needed in the wind industry could become even more expensive through fossil-free manufacturing.

“What if we now introduce a new production of steel without coke coal, and based on renewable electricity? What if the resulting steel becomes more expensive, what if we do not introduce a carbon border mechanism to support emissions-free steel production?” Ripa asked.

“In other words, we need to have a coherent, systemic approach. It includes to produce the steel needed for additional installation based on emission-free methods, hopefully produced in Europe.”

A consortium led by Swedish utility Vattenfall recently has started operations on a first pilot plant for fossil-free steel, using green hydrogen from renewable energy. Germany’s RWE and Thyssenkrupp also are working on similar hydrogen-based technologies in steel production.

But it is clear that replacing coke and pulverised coal with the green gas in steel makers’ production processes will be rather pricey at first.

“It goes without saying that this will be more expensive, and the extra cost – not only in capex but also in opex – will need to be covered. Not forever, of course, but at least for a transition period,” Ripa demanded.

The EC’s Samsom stressed that not every EU country has the same possibilities to provide state aid to companies.

“Germany is much better equipped to do that than, for example, Eastern or Southern Europe,” he said, adding that the EU needs to balance the objective to create a renewable and sustainable future with that of a just, fair and evenly distributed European economy.

“I am convinced we can, but it is a complicated knot we have to untie here,” he said.