The European Commission (EC) has approved the application for EUR 1 billion (USD 989m) in public funding to be provided to Salzgitter AG (ETR:SZG) so it could decarbonise its steel production processes by upgrading an existing facility and building a large-scale green hydrogen plant.
As part of the SALCOS – Salzgitter Low CO2-Steelmaking project, the German steel producer intends to build a direct reduction plant at its site in the city of Salzgitter, Lower Saxony, replace the blast furnaces currently operated there with an electric arc furnace (EAF), and install a 100-MW electrolyser for the production of around 9,000 tonnes of green hydrogen per year to be used as feedstock in the direct reduction plant. All three components of the project are expected to become operational in 2026.
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The EC has assessed the measure under the 2022 Guidelines on State aid for climate, environmental protection and energy (CEEAG) and determined that it has a limited impact on competition and trade within the EU. In addition, the positive effects resulting from the state aid have been found to outweigh any potential distortion of competition and trade in the EU, the announcement says.
“This EUR 1 billion measure enables Germany to support Salzgitter's plans to decarbonise its steel production processes by using and producing renewable hydrogen. This will contribute to the greening of a very energy-intensive and hard-to-abate sector while reducing Germany's dependence on imported fossil fuels,” said Margrethe Vestager, executive vice-president in charge of competition policy.
Salzgitter said separately that subject to a positive, conclusive review and decision by the national funding authorities, the company will get up to EUR 700 million in financing support from Germany’s federal government and an additional EUR 300 million from the federal state of Lower Saxony. Those funds will be added to the EUR 723 million of capital Salzgitter has decided to invest in the project, therefore securing financing for the first development stage of SALCOS, the company added.
Salzgitter already placed the first order for central plant components in August. Its unit Salzgitter Flachstahl GmbH awarded a contract to Primetals Technologies for the engineering, supply and erection of the first EAF and the development of technical infrastructure. Plant assembly is scheduled to begin at the end of 2024.
(EUR 1.0 = USD 0.989)
Image by Salzgitter AG.
