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A tale of two steel mills, and yet they’re the same one » Yale Climate Connections

The new solar array not far from where the Arkansas River winds through Pueblo, Colorado, is unlike any other in the world: It powers a steel mill. Just about all of it. 24/7. That’s a first.

Consider this: 750,000 solar panels on 1,800 acres of sun-drenched high plains providing 300 carbon-free megawatts to EVRAZ steel.

Steel had long been the backbone of Pueblo’s economy from the time the first mill was built in the late 1800s. So it’s no small irony that a renewable and non-emissions source of power is being used for a carbon emissions-intensive industry, one built on iron and coal in a city that has evolved from a one-time blue collar Democratic bastion to more conservative in recent decades.

The Pueblo experience may provide lessons for other communities around the world that, like Pueblo, have feared losing their traditional economic base and jobs long-rooted in fossil fuels.

A ‘win, win, win’ proposal … if only …

The Pueblo experience also offers something of a blueprint for others to consider regarding the importance of communication, trust, and imagination. In Pueblo’s case, a bit of lucky timing also helped. But the process still required bringing together folks who likely don’t routinely agree. They included players from several often-opposing industries, elected and non-elected community and civic leaders, the state, and also active and engaged local residents.

“Each of them had something the other desired,” says Dave Ferryman, senior vice president of EVRAZ North America’s Pueblo business unit. “We had what I would call a win, win, win proposal. If we could get the parties to agree.”

Pueblo’s steel mill has cycled through owners, boom times, bad times, bankruptcies, new beginnings, and more. When it was acquired by EVRAZ in 2007, the operation was already using an electric arc furnace instead of a traditional blast furnace. An arc furnace makes new steel out of old steel – everything from old washing machines to – in EVRAZ’s case – the remnants of Mile High Stadium in Denver, onetime home of the Broncos NFL football team. That process knocks down carbon emissions by up to 75%.

But an arc furnace needs a lot of power – more power than anything else in Colorado.

“We’re the largest energy consumer in the state of Colorado,” Ferryman says. “That’s not necessarily something we’re proud of, but a necessity for our business. So we need energy; we need affordable energy.”

That need was particularly strong given a new mill EVRAZ was planning to build to manufacture rails for train tracks in 320-foot sections instead of the customary 80-foot rails. Without more affordable power than it had, EVRAZ might decide to build the new mill in one of the other states it was actively considering. “There was a lot of concern locally that this could be the beginning of the end for Pueblo steelmaking,” Ferryman says.

But something else happening at the same time changed the whole trajectory.

Xcel Energy, Colorado’s largest power provider, had been supplying electricity to the mill complex from three coal plants – Comanche 1, 2, and 3. The prices tended to be high and also inconsistent.

Xcel didn’t know the steel mill was considering moving when the State of Colorado issued a mandate in 2017 requiring power providers to get to 80% carbon-free power by 2030. The first step Xcel wanted to take was to close Comanche 1 and 2 in 2023 and 2025 respectively, about 10 years earlier than planned.

“It was important to start talking with our community about that transition,” says Hollie Velasquez Horvath, who handles state affairs and community relations for Xcel in Colorado and has family in Pueblo. “So we just started having meetings.”

What Xcel heard at those meetings was that, along with concerns about losing jobs at the Comanche plants, Pueblo was worried the steel mill would simply up-and-leave.

Bringing all parties together seemed like the only way forward.

EVRAZ needed affordable energy. Xcel needed carbon-free power. Pueblo needed to keep its industry and the jobs and tax base that came with it.

The answer was literally sitting in EVRAZ’s backyard, those 1,800 sun-bathed acres.

“We have a lot of land that really isn’t good for agriculture, or much anything else – just very desert-type environment in and around our facility,” Ferryman says. “But a lot of sunshine and a lot of land.”

The solution was solar.

“The conversations weren’t necessarily driven by the climate side of it, but the solution came from that,” says Jeff Shaw, president and CEO of the privately-run Pueblo Economic Development Corporation, PEDCO. “We had to get guaranteed lower rates. And this was the way we can do it.”

Complexity of deal yields to time, effort, and ‘a little creativity’

It was a complicated deal though. “The most complicated one we’ve ever worked on in 40 years,” Shaw says.

In addition to EVRAZ and Xcel, the parties included solar developer Lightsource BP. Half-owned by BP, the company was tapped to build, own, and operate the installation – now known as Bighorn Solar. Also involved were the city of Pueblo; the county of Pueblo; PEDCO; and others.

Each put in time and effort to understand the nuances of difficult technical and financial processes. It took more than a little creativity to get through some unique twists and turns, starting with the mill’s power being supplied by Xcel, but not the city’s power.

In addition, it took a bit of doing to convince EVRAZ that solar was going to make more sense than coal for a 24/7 operation.

‘We had to find a way … or risk losing the mill.’

Further complicating the conversation: The steel mill is actually located in Pueblo County, not in the city. So to tap the city’s dedicated tax fund for capital or economic development, PEDCO had to figure out a way for the city to annex a portion of where the new rail mill would be located.

“Necessity is the mother of invention,” says Terry Hart, a county commissioner at the time. “We had to find a way to make this work, or we stood the chance of losing the steel mill.”

Residents of the community had to be involved early and at every step.

“We had to educate them on what they were doing, why they’re doing it, the economic impact of the mill that it has right now, and then what the projected economic impact would be after expansion,” Shaw says. “Overall, the community was wildly supportive.”

With all that, the deal took less than two years to pull together. Some $95 million in a variety of incentives was secured, and so too was a 20-year fixed rate power purchase agreement for EVRAZ.

Since the fall of 2021, two years after the deal was announced, Bighorn Solar has been providing power to EVRAZ.

“The best thing that Pueblo did was not put up a roadblock and decide at that moment when we started talking with them that they were going to fight this plan and fight the realities that coal plants were being decommissioned and coming offline,” Horvath of Xcel says. “Instead, they engaged.”

Lots of winners, the climate among them

Pueblo is among several winners, as are efforts to address climate change. Coal has basically been eliminated from the mill. The third Comanche coal plant still running the mill and online only since 2010 now is to be retired in 2034 – 36 years ahead of schedule. Combine those carbon savings with the solar power and savings from mined iron and coal no longer needed, and the mill will produce 1/30th the carbon it might have otherwise.

Xcel has two more solar installations under construction in the area – 550 megawatts of grid power and storage. They will produce tax revenue, jobs, and the kind of climate change-consciousness and cleaner environment more and more businesses and residents seek when choosing where to locate.

EVRAZ, having gotten a consistent energy price, has stayed, and its planned new mill is under construction.

The local community college is getting money for job training, and in addition to the mill jobs increase, there will now be jobs for solar installation.

Xcel says it is already applying the lessons of Pueblo to help retire two coal units in another part of the state. And they’re talking to their large customers about sustainability goals and making positive impacts on climate change. “So for them to have a large utility-scale solar farm that generates a majority of their power, man, what a great story,” Horvath says.

Pueblo County now appears to have the solar bug. It’s hoping to land solar industry manufacturing and supply chain companies. It’s planning to build a net-zero jail with a solar array that will generate electricity for the jail and for the grid.

Had the folks in Pueblo looked only at their existing businesses and customers, Ferryman says, chances are EVRAZ would have moved, and Xcel might have never come up with an alternative after shutting down the coal plants.

“When people come together that don’t necessarily work well together,” he says, “If you can get the parties to sit down and talk, you can find alternatives that end up being wins for everyone. And that’s really what happened here.”

The lesson, says Chris Wiseman, a Pueblo County commissioner: “Just be open to any ideas.”

“You’ve got to trust each other,” he says. “We have our little scrapes from time to time because competing governmental entities do, but when it comes down to what we need to create jobs and create a better environment in Pueblo I think for the most part we’re all on the same page. ”

From Shaw of PEDCO, who says he couldn’t have envisioned the Pueblo scenario even five years ago: “The easy lesson is if it can be pulled off for a large steelmaker, there’s really no industry that it can’t work for.”

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