Swedish startup wants €1.5BN to build emissions-free steel plant

Swedish startup H2 Green Steel has announced its plans to raise more than €1.5bn in equity funding to build steel plants that emit virtually no emissions.

The startup, backed by high-profile investors such as Mercedes, Maersk, and Spotify’s chief executive, is constructing a ‘green steel’ manufacturing plant in Boden, north Sweden. 

Construction of the plant will be financed through more than €5bn in debt and equity. The startup said in October that it had received support from European financial institutions for €3.5bn in debt financing, making it one of the most capitalised climate tech projects in Europe. 

H2 Green Steel confirmed today that it is now in the process of securing the remaining €1.5bn equity funding and is working with advisers from Morgan Stanley, 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, when the coke burns it produces a lot of CO2. In fact, the steel industry as a whole is responsible for an estimated 8% of global CO2 emissions. 

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H2 Green Steel looks to decarbonise steelmaking by replacing coke with ‘green’ hydrogen (hydrogen produced using renewable energy). Hydrogen reacts with the iron ore to create pig iron — but without the emissions. The only by-product, the startup says, would be water vapour.  

The hydrogen itself would be made in an electrolyser at the Boden site. The electrolyser would be powered by ​​renewable energy, including hydropower from the Lule River and nearby wind farms. Overall, this process is predicted to slash steelmaking emissions by 95%.    

If successful, the Boden plant will be the first large-scale green steel plant in Europe, with its products used to construct everything from cars and cargo ships to buildings and bridges. The startup expects to roll out the first commercial batches of its steel by 2025 and aims to produce five million tonnes of green steel a year by 2030. 

However, global annual steel production is currently around 2,000 million tonnes, according to figures from the World Steel Association. This would make the production capacity of the Boden plant a mere “drop in the sea,” Ms Lund Waagsaether, senior policy advisor at the Brussels-based climate think tank E3G, told the BBC.  

But the Boden plant isn’t the only one of its kind in the pipeline. H2 Green Steel has already signed an agreement with Spanish company Iberdrola to build a plant powered by solar power on the Iberian peninsula. Hybrit, another Swedish company, hopes to open a fossil-free green steel plant by 2026 in a joint venture with mining operator LKAB, Nordic steel company SSAB, and energy company Vattenfall. GravitHy 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 are set to boost Europe’s domestic production of green steel, and could soon have political backing too. The EU is in the process of finalising the Carbon Border Adjustment Mechanism, a strategydesigned to make it more expensive for European companies to import cheaper, non-green steel from other parts of the world.