German economy ministry: approves increase by 322 mln EUR in funding for Salzgitter's Salcos hydrogen project

German economy ministry: approves increase by 322 mln EUR in funding for Salzgitter's Salcos hydrogen project

German Economy Ministry Approves €322 Million Increase in Funding for Salzgitter’s SALCOS Hydrogen Project

The German Federal Ministry for Economic Affairs and Climate Action has approved an additional €322 million in funding for Salzgitter AG’s SALCOS project, bringing total public support to nearly €1 billion under the first Important Project of Common European Interest (IPCEI) for hydrogen. The funding, jointly allocated by the federal government and Lower Saxony (30% state contribution), aims to accelerate the decarbonization of Germany's steel industry, which accounts for 30% of the country's industrial emissions.

Salzgitter AG, a major European steel producer, is investing over €2 billion in new facilities, including a hydrogen-ready direct reduction plant, an electric arc furnace, and a 100 MW electrolyser in Salzgitter. These upgrades are designed to replace conventional coal-based processes with hydrogen-based methods, reducing carbon emissions by approximately 46 million tonnes cumulatively by 2041. The project's first phase, operational by late 2025, will produce 1.9 million tonnes of low-CO2 crude steel annually, with a projected 95% reduction in emissions compared to current levels.

Federal Minister Robert Habeck emphasized the project's role in securing Germany's steel industry and jobs while advancing climate goals. "This is an essential step in the transition to green steel," he stated, noting the project's alignment with EU state aid rules. Lower Saxony's Minister-President Stephan Weil highlighted the region's renewable energy advantages, including wind power and hydrogen import infrastructure, as critical to the project's viability.

The European Commission approved the €1 billion state aid package in December 2022, ensuring compliance with EU competition laws. Salzgitter's CEO Gunnar Groebler described the funding as a "green light" for green steel production, enabling the company to proceed with implementation while maintaining competitiveness during the energy transition.

This initiative underscores Germany's broader strategy to decarbonize energy-intensive industries through programs like IPCEIs and carbon contracts for difference, balancing environmental objectives with industrial stability.