Salzgitter has secured post-2025 supply of 50 MW/year of wind-generated electricity for 15 years to power its carbon-neutral steel production due to begin on scale from the mid-2020s, the German steel group said Nov. 23.
Steel coil, strip and sheet rolling mill Salzgitter Flachstahl signed a corresponding power purchase agreement with German energy company EnBW.
The 900 MW He Dreiht offshore wind farm in the North Sea that is due to come online at the end of 2025 will supply Salzgitter’s production of green hydrogen, which will be used to make carbon-free steel.
In October 2022, the European Commission approved a Eur1 billion fund to help Salzgitter Flachstahl decarbonize its steel production, including through the construction of a 100 MW electrolyzer, which will produce 9,000 mt/year of green hydrogen. The electricity Salzgitter has committed to purchase from EnBW is meant for that plant.
The agreement further safeguards the steel company’s transformation program, called SALCOS, or Salzgitter Low CO2 Steelmaking. The project’s first implementation stage represents an investment of Eur700 million ($725.31 million), the largest since the steel producer’s listing in 1998.
Producing green hydrogen using sustainably generated energy is a core element of SALCOS. Salzgitter, which embarked on research into the use of hydrogen in steelmaking in 2016, plans to switch its steel production to hydrogen-based processes from end-2025 and become carbon neutral by 2033.
The amount of power Salzgitter has secured — 50 MW/year or 438 GWh/year — could suffice to feed the production of only 6.5% of the 1.9 million mt/year of carbon-neutral steel that the group has targeted, as production of a metric ton of steel may need about 90 kg of hydrogen and generating a kilogram of hydrogen needs roughly 39 kWh power.
To make all 1.9 million mt with zero carbon emissions, the company will need roughly 6,670 GWh, or 6.67 TWh, of renewable energy, the equivalent of 1.3% of German annual power demand at this point, S&P Global Commodity Insights estimates.
Salzgitter has become the third big off-taker for He Dreiht wind farm, which is being built without state funding, according to EnBW board member Georg Stamatelopoulos. “PPAs are a key element of the energy transition as they secure the necessary investment while also enabling energy-intensive companies to achieve ambitious climate targets,” he said.
The other significant PPAs that EnBW has secured for He Dreiht comprise the ones with Frankfurt Airport operator Fraport and major German chemicals company Evonik.
However, the final investment decision concerning the construction of this farm is yet to be made, something EnBW plans to do in 2023.
Salzgitter has been a partner for the renewable energy sector for several decades now having become a full-line steel supplier to the industry. Its Ilsenburger Grobblech mill has been manufacturing heavy plates for onshore wind farm projects since 1996 and increasingly for the offshore market since 2010.
Steel pipes are another product the group makes specifically for wind turbines, including precision pipes for nacelles and large-diameter pipes for farm substructures.
Platts, part of S&P Global, assessed domestic hot-rolled coil prices in Northern Europe at Eur610/mt ($632/mt) ex-works Ruhr Nov. 22. The assessment was down Eur5 on the day and by a third since the start of 2022.
— Ekaterina Bouckley, Andreas Franke
