Global energy and electricity provider Iberdrola and Swedish green steel startup H2 Green Steel (H2GS) announced today an agreement to build a 1,000 MW plant for the production of green hydrogen, with an estimated investment of €2.3 billion.

The plant will be used to power a steel ore reduction furnace for the production of steel with a 95% reduced carbon footprint.

As manufacturers globally aim to decarbonize their supply chains, demand for fossil-free steel is expected to increase significantly. Steelmaking is one of the biggest emitters of CO2 globally, and one of the more challenging sectors to abate, with total greenhouse gas emissions (GHG) from the sector accounting for 7% – 9% of direct emissions from the global use of fossil fuels. The use of green hydrogen to fuel the production process is seen as one of the key potential solutions to help decarbonize the sector.

Founded in 2020, H2GS aims to build the world’s first large-scale fossil-free steel plant. Earlier this year, the company announced plans to build a greenfield steel plant in northern Sweden, with the project including a giga-scale green hydrogen plant as an integrated part of the steel production facility. H2GS recently completed a Series A equity financing, raising $105 million from a consortium of financial and strategic investors..

Today’s announcement envisions a 1 GW green hydrogen plant located on the Iberian Peninsula, with the possibility of locating a steelmaking facility capable of producing between 2.5 and 5 million tonnes of green steel plate per year on the same site.

Kajsa Ryttberg-Wallgren, EVP Head of Business Unit Hydrogen at H2 Green Steel, said:

“The project in Boden in northern Sweden has shown that there is a strong demand for green steel from a broad customer base. The collaboration with Iberdrola will strengthen and refine our Boden platform, infrastructure and project execution. With two European locations, we will make an even greater impact, be closer to customers and be able to meet the demand of a growing market. Together with Iberdrola, we are creating a broader European platform for the green hydrogen economy.”

Iberdrola has significantly ramped its focus on energy transition initiatives and renewable energy development over the past few years. The company recently unveiled a $75 billion capital plan including massive investments in renewable energy, and plans to nearly double its renewables capacity by 2025. Last year, Iberdrola also launched a green hydrogen-focused business unit, aiming to position the company as a leader in the emerging technology.

Millán García-Tola, Iberdrola’s Global Head of Hydrogen, said:

“The partnership with H2 Green Steel expands the range of partnerships we have around the world to maximise the benefits of green hydrogen. We also work with fertiliser producers, oil refineries, transport providers and even whisky distilleries.  The challenge of achieving zero emissions requires both vision and action in many industrial sectors. With the development of green hydrogen, companies continue to demonstrate that they have the necessary ambition.”

Under the new agreement, Iberdrola and H2GS will jointly operate the plant’s electrolyser, while Iberdrola will supply renewable energy to the plant, and H2GS will operate the production of green molten steel and all downstream metallurgical processes.

Henrik Henriksson, CEO of H2 Green Steel, said:

“We are proud and delighted to partner with Iberdrola to scale up green steel manufacturing. Large-scale green hydrogen production will be essential for heavy industry’s transition to more sustainable ways of operating. By sharing the common goal of reducing emissions in hard-to-decarbonise industries, starting with steel in Europe, we are taking a truly global and innovative approach to green hydrogen production. Iberdrola brings invaluable experience, technology and know-how, which will enable us to scale up our green steel projects.”

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