Habeck and Weil hand over funding notice worth nearly one billion euros for low carbon and hydrogen based steel products under the SALCOS project

Federal Minister for Economic Affairs and Climate Action Robert Habeck together with Lower Saxony Minister-President Stephan Weil today handed over a funding notice worth nearly one billion euros to Salzgitter AG for its SALCOS project. Salzgitter AG is investing more than two billion euros in new plants, which will reduce carbon emissions by a total of around 46 million tonnes over several time periods (2041 at the latest). The Federal Ministry for Economic Affairs and Climate Action is providing funding for Salzgitter for this transformative large-scale project as part of the first Important Project of Common European Interest (IPCEI) for hydrogen. 30% of this funding will be contributed by Lower Saxony.

Federal Minister Robert Habeck said: “I am very pleased to be handing over this funding notice worth around one billion euros to Salzgitter AG today. Salzgitter’s ambitious project demonstrates that the steel industry, our largest industrial carbon emitter, can be decarbonised using modern technology. It also ensures the future of Germany as a steel-producing country and will safeguard a great number of jobs in the long term. The substantial amount of funding we are providing will allow Salzgitter to now move towards implementing this flagship project. This is an essential step in the transition to green steel.”

Minister-President Stephan Weil said: “Today is a good day for Salzgitter and for the whole state of Lower Saxony. The funding provided in a joint effort by the Federal government and the state will ensure the future of German steel production in the long term. Designing new climate-friendly processes requires large amounts of renewable energy and green hydrogen. Lower Saxony provides excellent conditions for this, being Germany’s most important are for wind energy generation and offering ports that can be used for the import of green hydrogen. In terms of renewable energy, we have an edge over the states in the south of the country. In order for SALCOS and other energy-intensive production methods to maintain their competitiveness, affordable energy prices will be key during a transition period. We thus need clear decisions to be taken at the Federal level to deliver an affordable industrial electricity price.”

Under the SALCOS project, a hydrogen-ready direct reduction plant, an electric arc furnace for the production of 1.9 million tonnes of crude steel, and a 100 MW electrolyser will be set up in the town of Salzgitter. This is the basis for transitioning to the hydrogen-based direct reduction method at a later stage, which will allow part of the conventional furnace route to be replaced. This will be key for the company to produce meaningful amounts of green steel in the near future.

The steel industry currently accounts for around 30% of industrial emissions in Germany and thus faces a particularly great challenge as it decarbonises. At the same time, it is an important basic materials industry and as such plays a key role in industrial value chains. The Federal Ministry for Economic Affairs and Climate Action is therefore providing support via a range of different programmes for making the steel sector and other energy-intensive industries more climate friendly. These include the ‘Decarbonisation in Industry’ programme, the IPCEIs and, going forward, carbon contracts for difference.