This marks a genuine milestone on the course to achieving a functioning hydrogen economy in Germany. The energy service provider EWE and Salzgitter Flachstahl GmbH, a subsidiary of Salzgitter AG, have concluded a long-term agreement on the supply of green hydrogen. The contract was signed today at the EWE representative office in Berlin together with Parliamentary State Secretary Gitta Connemann and Lower Saxony's Minister President Olaf Lies.
First major contract for green hydrogen from
Emden
This is the first major purchase agreement for hydrogen from the 320-megawatt production plant that EWE is currently building in Emden and also marks Salzgitter AG's first major contract with a hydrogen supplier. The plan is to supply around 10,000 tons per year via the hydrogen core network as from 2030. The contract, which runs for an initial term of seven years, will market a significant part of the first expansion stage of the plant in Emden and cover around 6.5 percent of SALCOS®'s hydrogen requirements. Further delivery volumes from EWE will therefore also be available for additional industrial partnerships.
The green hydrogen sourced from Emden is to be used in Salzgitter AG's SALCOS® program – Salzgitter Low CO2 Steelmaking. In this context, the use of natural gas in a direct reduction plant is already capable of achieving a 60 percent reduction in CO2 emissions compared to the blast furnace route with coal and coke. However, Salzgitter AG's long-term goal remains the virtually climate-neutral production of steel, which can only be achieved through the use of green hydrogen. Water will be produced, instead of CO₂. In total, up to 150,000 tons of hydrogen per year can be used in the direct reduction plant of the SALCOS® program. Salzgitter AG will produce around 9,000 tons of this itself in a 100 MW electrolysis plant on its own steelworks site.
Ramping up the hydrogen economy in Germany, however, will require additional inputs and efforts. Further the implementation of additional measures is urgently called for in order to make renewable hydrogen an internationally competitive energy source. This includes, for example, the timely and reliable extension of the electricity price compensation for electrolysers and a prompt revision of the green electricity criteria for renewable hydrogen.
With the current supply contract, however, both companies are already entering into a long-term economic commitment on the producer and customer side. This is a strong signal for Lower Saxony as an industrial location: Industry is taking responsibility and concluding robust agreements well before the market for green hydrogen is fully established.
Gunnar Groebler, Chairman of the Executive Board of Salzgitter AG
"With the SALCOS® program, we are incrementally converting our steel production to a virtually CO₂-free route. The use of green hydrogen is a key component in this context. The contract with EWE represents an important step in this direction and strengthens our role as a frontrunner in the transformation of the steel industry. Once again, we have resolved a chicken-and-egg dilemma and made an important business decision. Without initial supply contracts, no German hydrogen economy will develop. However, this agreement is also linked to an urgent appeal to policymakers: The hydrogen ramp-up still faces major hurdles. Comprehensive measures are still needed to close the cost gap and minimize business risks. Otherwise, this contract will remain an exception."
EWE CEO Stefan Dohler:
"A functioning hydrogen economy not only protects the climate. It also strengthens Europe's industrial resilience, makes us less dependent on fossil fuel imports and helps to keep energy competitive over the long term. This agreement is a milestone, but not yet the goal. It shows that supply and demand for green hydrogen can come together. At the same time, there are initial positive signals regarding the regulatory framework. Now we have to use this momentum, initiate further industrial partnerships and build up the market step by step. This will continue to require competitive electricity prices, practicable rules for green hydrogen as well as long-term investment security. Only then will individual projects become a viable market."
Industry taking responsibility for market ramp-up
EWE bundles key parts of the hydrogen value chain – from production to transportation, storage and delivery. As part of the IPCEI "Clean Hydrogen Coastline" large-scale project, electrolysis, storage and pipeline infrastructures are being built in northwest Germany.
In future, the green hydrogen is to be used in Salzgitter AG's SALCOS® program, where it will make a key contribution to virtually climate-neutral steel production.
Reliable framework conditions remain decisive
Delivery is subject to RFNBO certification. The European guidelines on additionality as well as the temporal and geographical correlation of electricity procurement are determining factors. According to current calculations, the existing criteria can significantly increase the production costs of green hydrogen.
Consequently, EWE and Salzgitter AG are campaigning for practicable adjustments to the EU regulations. Specifically, the aim is to extend the transitional periods for additionality and to make the hourly electricity requirements more flexible. Without economically viable rules, many projects will remain stuck at the pilot stage.
Stefan Dohler adds: "If we want individual projects to become a market, we need sensible electricity procurement criteria, functioning lead markets and investment security for large-scale storage facilities. Otherwise, companies will not be able to free up new investments in hydrogen projects."
Politics as enabler
The support on the part of the federal government and the state of Lower Saxony made the conclusion of the contract between Salzgitter AG and EWE possible in the first place.
Gitta Connemann, Parliamentary State Secretary to the BMWE:
"Today, promotion is becoming progress. And from an initial idea, a strong alliance for Germany as a business location has been created. As the contract between EWE and Salzgitter shows, the hydrogen economy is picking up speed. One company is producing, while the other is using hydrogen. This creates a cycle with a future. That is why we, as the federal government, are supporting the conversion of steel production in Salzgitter to the tune of 925 million euros. In this way, we are securing added value and good jobs in a key industry. At the same time, we are supporting hydrogen production in Emden with 267 million euros. After all, hydrogen must not only be used but also be produced in this country. The situation in the world makes it clear: We need more of our own energy sources. Greater independence. Greater security. In this context, hydrogen can make a vital contribution. Now, we need to further improve the conditions. For investments, for planning security and for a strong market – so that initial projects will become a lasting success model."
As Lower Saxony's Minister President Olaf Lies emphasized at the event in Berlin: "The federal state of Lower Saxony is both an energy and industrial location. We combine renewable generation, efficient ports, storage and industry to create an integrated hydrogen economy. With a significant share of the large-scale EU projects planned in Germany for the production of green hydrogen, around 1,800 kilometers of the hydrogen core network in the country and IPCEI funding in the billions, we are creating the foundation for new value creation and secure industrial jobs. The fact that two strong companies from Lower Saxony, EWE and Salzgitter AG, are leading the way here and taking on long-term responsibility is an important signal for Germany as an industrial location. Contracts like this one show clearly that the transformation is becoming concrete. The task now is to further accelerate the ramp-up with reliable framework conditions. And we are supporting this wholeheartedly."
