EC clears Germany’s €1 billion Salzgitter decarbonisation aid

The European Commission (EC) has approved Germany’s €1 billion ($992 million) state aid measure to help steelmaker Salzgitter implement green hydrogen into its production processes, Kallanish reports.

The approval on 4 October clears the way for €700m in federal support and €300m for state support. The direct grants will support the construction of an electrolyser, a direct reduction plant and an electric arc furnace for the first stage of development of Salzgitter’s SALCOS project.

The on-site, 100-megawatt electrolyser will produce roughly 9,000 tonnes/year of green hydrogen, which will be used as feedstock in the DRI plant to produce sponge iron. Salzgitter, which has already committed €723m to this initial stage of the project, expects to commission the 1.9 million t/y crude steel production capacity by late 2025.

The three-phase project is designed to include two DRI plants and three EAFs to replace blast furnaces and converters by 2033. When fully operational, this new hydrogen route to steelmaking is planned to cut emissions by 95% or 8m t/y of CO2.

“This [measure] will contribute to the greening of a very energy-intensive and hard-to-abate sector while reducing Germany’s dependence on imported fossil fuels,” comments EC vice-president Margrethe Vestager.

The EC says the aid has an incentive effect “as the beneficiary would not carry out investments in the steel process decarbonisation project without the public support”. It adds that the aid’s positive effects outweigh any potential distortion of competition and trade in the EU, and that the company will return part of the aid received to Germany if the project is “very successful and generates extra revenues”.

Gabriela Farhangi UK