Stockholm (NordSIP) – The steel industry has been the source of much soul-searching in Sweden, a country that prides itself both for the quality of its steel as well as for its environmental credentials. However, because coking coal is an essential component of steel production, the industry is one of the largest emitters of CO2. Fortunately, there seems to be increasing hope that the dilemma will soon be resolved.
This week, H2 Green Steel (H2GS) announced the construction of a giga-scale green hydrogen plant as an integrated part of the steel production facility in Boden and Luleå, in northern Sweden. Production will begin in 2024. H2GS hopes to have an annual production capacity of five million tons of high-quality steel by 2030. Henrik Henriksson, currently CEO of Scania, will lead the company.
H2GS was founded in 2020 by Vargas, an investment company established in 2014 by Carl-Erik Lagercrantz and Harald Mix, which previously invested in Northvolt and Polarium. “We want to accelerate the transformation of the European steel industry. Electrification was the first step in reducing carbon dioxide emissions from the transportation industry. The next step is to build vehicles from high-quality fossil-free steel,” says Carl-Erik Lagercrantz, Chairman of the Board of H2GS and Northvolt.
“We’re delighted that Henrik Henriksson will spearhead this pioneering venture. As CEO of Scania, Henrik has been one of the most visionary and active leaders for the business community in leading action on climate change and making progress towards a world without fossil emissions. We now begin an incredibly exciting journey together,” says Harald Mix, Chairman of the Board of Vargas.
The total financing for the first phase of the project amounts to approximately €2.5 billion, which will be raised through a combination of equity and green project financing. Morgan Stanley, Societe Generale and KfW IPEX-Bank, are acting as financial advisors to H2GS. Sweco is advising in the engineering and permit process.
HYBRIT, a partnership between steel producer SSAB, mining company LKAB and Vattenfall launched in 2017, was an inspiration for H2GS. According to H2GS’s press release, “an important source of inspiration for the initiative is the groundbreaking HYBRIT project and its founders SSAB, LKAB, and Vattenfall. H2GS looks forward to a close collaboration with the HYBRIT-founders, sharing the vision to position Sweden at the forefront of fossil-free steel production.”
HYBRIT also aims to decarbonise the steel industry by replacing coking coal (traditionally used in steel production to convert iron ore to iron) with hydrogen made from fossil-free electricity (primarily wind power) and water. A process called direct reduction will replace the current blast furnace process. Instead of producing pollution, the by-product will be water, which in turn can be recovered for the production of hydrogen gas.
At the end of August 2020, the partners announced HYBRIT would begin constructing the world’s first pilot plant for fossil-free steel. “Today, you are laying the foundations that will enable the Swedish steel industry to be entirely fossil- and carbon dioxide- free in 20 years. Together we can rebuild Sweden as the world’s first fossil-free welfare nation,” Swedish Prime Minister Stefan Löfven said on that occasion.
According to H2GS, “Sweden offers unique opportunities for fossil-free steel production, with good access to fossil-free electricity, the best quality iron ore in Europe, and a specialized and innovative steel industry. Fossil-free electricity and its conversion to hydrogen are key components. (…) So-called green hydrogen, which is produced using electricity, has rapidly become an energy solution that is attracting considerable investment as society quickly takes steps to achieve climate goals.”