Swedish startup H2 green steel has announced its plans to raise more than €1.5 billion in equity to build steel mills that emit virtually zero emissions.
The startup, backed by high-profile investors such as Mercedes, Maersk and Spotify’s CEO, is building a “green steel” factory in Boden, northern Sweden.
The construction of the plant will be financed by more than €5 billion in debt and equity. The startup said in October that it received it support of European financial institutions €3.5 billion in debt financing, making it one of the most capitalized climate technology projects in Europe.
H2 Green Steel confirmed today that it is now in the process of securing the rest €1.5 billion equity financing and works with Morgan Stanley advisors, Financial Times reports.
Traditionally, steel is made by combining iron ore with coke (a type of coal) at extremely high temperatures. The burning coke produces carbon monoxide, which converts the iron ore into ‘pig iron’, the basis of steel. The only problem is that when the coke burns, a lot is produced CO2. In fact, the steel industry as a whole is responsible for a estimated 8% of the world CO2 emissions.
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H2 Green Steel aims to decarbonize steel production by replacing coke with ‘green’ hydrogen (hydrogen produced using renewable energy). Hydrogen reacts with the iron ore to make pig iron – but without the emissions. The only by-product, the startup says, is water vapor.
The hydrogen itself would be made in an electrolyser at the Boden site. The electrolyser would be powered byrenewable energy, including hydropower from the River Lule and nearby wind farms. Overall, this process is predicted to reduce emissions from steel production by 95%.
iIf successful, the Boden plant will become Europe’s first large-scale green steel plant, with products used to build everything from cars and freighters to buildings and bridges. The startup expects to roll out and produce the first commercial batches of its steel by 2025 five million tons of green steel per year by 2030.
However, global annual steel production currently stands at about 2,000 million tons, according to figures of the World Steel Association. This would make the Boden plant’s production capacity just a “drop in the sea”, Ms Lund Waagsaether, senior policy adviser at Brussels-based climate think tank E3G, told the BBC.
But the Boden plant is not the only one of its kind in the pipeline. H2 Green Steel has already signed an agreement with a Spanish company Iberdrola to build a plant powered by solar energy in the Iberian Peninsula. Hybridanother Swedish company, hopes to open a fossil-free green steel plant by 2026 in a joint venture with mining operator LKAB, Scandinavian steel company SSAB and energy company Vattenfall. Gravity plans to open a hydrogen-based plant in France in 2027, and German steel giant Thyssenkrupp recently said it aims to introduce carbon-neutral production at all its plants by 2045.
These projects will boost domestic production of green steel in Europe and may soon receive political support as well. TT he EU is finalizing the Carbon Border Adjustment Mechanism, a strategy to make it more expensive for European companies to import cheaper, non-green steel from other parts of the world.